in june 2021 home prices across the
united states surged by
24.8
to a median sales price of 386
888 dollars according to redfit during
the same time period the number of homes
sold increased by 20.6
and the number of homes for sale tumbled
by almost 40 percent just two years ago
right before the pandemic the medium
home price was around
250 000
that is a hundred and thirty six
thousand dollars less than it's today we
have already explained in previous
videos why home prices have been rising
so dramatically but the situation is so
unpredictable that most people can't
wait to decide what they should do
should you buy a house now or wait
another few months will the market crash
this year or next year or maybe it will
never crash and rise forever
but here is what i want to point out
when we talk about crushes about what
could happen some people get mad and say
name the date or you have said it
earlier but it didn't crash you see no
one can tell you anything for sure if
anyone had inside information and knew
for sure what will crush he would have
shorted the entire market and earned a
few hundred billion dollars the next day
or maybe trillions but that's not going
to happen because first of all no one
knows the future and number two if you
use inside information to benefit
yourself that is criminal offense for
which you can get jailed so you won't be
able to enjoy this billions of dollars
when you are stuck in prison that is not
a smart strategy but what we can do is
analyze the markets look at different
factors use historical data to interpret
the current events look at current
trends and find out how similar trends
have ended in the past that will give us
a glimpse into what could happen
so what we are going to do is find out
where the housing market is today there
are certain factors that influence and
drive the market and by looking at them
we can get an idea of where the market
is headed for example if we all pump a
price of a certain asset it is
eventually going to plummet because it
was raised artificially and it doesn't
carries any real value it is sort
because we have decided that we are
going to keep buying until the price
shoots to the moon
some people might argue that unlike the
last crash prices are rising naturally
there is a real shortage of houses in
the market and on top of that material
prices have risen which resulted in a
higher cost of building new houses but
why the cost of materials has risen in
the first place that is a good question
to think about
one of the main reasons is unexpected
demand since the 2008 crash this market
has been heavily regulated so that just
enough houses are being built to keep up
with the demand so when the demand for
houses doubled or tripled suppliers were
not ready for it on top of that the
pandemic slowed down the existing supply
chains which only made the situation
worse so naturally there were not enough
materials to catch up with the demand
based on the basics laws of economics
when demand rises and supply stays the
same prices rise of course we all know
that the main reason why demand grows so
dramatically is because of these juicy
low interest rates i mean getting a
mortgage at two percent rate is a dream
come true it is probably the best
investment you can ever make but the
problem is that the demand pushed prices
to rise so much that these low interest
rates are no longer making sense the
median house price in 2019 was 275
thousand dollars if you had taken a
30-year mortgage at 4 percent interest
back then your total cost of the house
would have been
378 000
that is without taxes insurance or
renovation just the cost of the mortgage
let's compare that to the median
mortgage in 2021 the median house price
in 2021 is
363 thousand dollars let's say you will
get a 30-year mortgage at 2.8
the total cost of your house without
considering taxes and other expenses
would amount to 429
565
in other words buying a house in 2019
where mortgage rates were higher was
cheaper than now with these super low
interest rates so if you think that
you're getting a good deal just because
interest rates are so low you're
mistaken you gotta take a look at the
numbers again on top of that because the
demand is so high and not many are
willing to sell since prices are still
rising good luck finding a good deal
that's why we hear so many stories about
people overpaying by 20 30 or even 50
just to be able to buy a house if you're
a homeowner you're lucky but if you're
planning to buy a house then it's
probably the worst time to buy a house
even though we no longer have predatory
landing practices like we did in the
2000s that is still a clear sign that
the market is overvalued but most people
don't look at that they see home prices
are rising the fear of missing out
pushes them to buy a house but that only
makes the situation worse as it already
did the fear of missing out of fomo as
it's known is a social anxiety stemming
from the belief that others might be
having fun while the person experiencing
the anxiety is not present the fear of
regret which may lead to concerns that
one might miss an opportunity to make
money in this case buying a house that
will appreciate dramatically in value in
the next year or so but that often leads
to disastrous consequences that's what
led many people to invest in bitcoin
when it was trading at sixty four
thousand 000
or in 2017 when it hit over 20 000
but then plummeted to less than four
thousand dollars in less than two years
so never let the fear of missing out
drive your investment decisions yes
you're going to miss a lot of
opportunities and you're not going to
hit them all and if you try to get them
all you will most likely fail as a wise
man once said you only have to be right
once and by the way house prices are
already slowing down for the exact
reasons we have discussed when 10 people
are bidding for one house landlords are
just waiting for the buyers to beat each
other out some homes are selling for 50
higher than they are listed in the
market when you look at it from this
perspective it is very clear that house
prices should crash or at least be
corrected but unfortunately the market
is not as free as many of us are led to
believe it is heavily regulated by the
fed
in 2008 when the economy collapsed yes
the fed intervened and bailed out many
huge corporations but it reacted too
late so it took the economy a really
long time to recover so this time the
fed took an entirely different approach
it decided to react too fast and prevent
a crisis at the expense of inflation
yeah the fed kept saying that inflation
is not an issue
but we all know that it is an issue in
fact the fed already began recognizing
that but it didn't back then because if
the fed would have said that inflation
is coming people would have spent their
money as soon as possible
causing more inflation which would drive
more people to spend causing more
inflation by now it's clear that the fed
has chosen a strategy to inflate the
market until prices correct themselves
and that's exactly what happened
that's all has led to a higher ratio
between house prices and income there is
a correlation between house prices and
people's income the vast majority of
homes in the u.s are purchased through
mortgages for a number of reasons first
of all houses are too expensive and most
people can't afford one without getting
a mortgage secondly you get a lot of tax
advantages if you take a mortgage but
when house prices rise significantly
faster than income people will no longer
be able to afford the house
someone with a 50 000
could afford the 250 000 house assuming
a 20 down payment which was the median
house price in 2019 but at 2021 with a
50 000
you no longer can afford a house let's
be honest income hasn't grown much since
then whenever you see that the gap
between people's income and house prices
widen be careful because that is
unsustainable despite all of these
factors it's impossible to make any
predictions because what's happening now
is unlike anything we have ever seen in
history the fed has never been so easy
to inflate the market with dollars that
it has been in recent years so only time
will tell whether it's going to end with
a crush a correction or something
entirely different but before that
happens go ahead and pick up some free
assets if you use the link in the
description you can get two free stocks
from weibo yes real stocks from real
companies weibull is a commission-free
brokerage so go ahead and give them a
try or check out my course in skillshare
where you can learn how to invest how to
analyze companies and find great
investments the link is in the
description again and now give this
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