hey what's going guys this is Daniel and this is Sam and we are the Kwak Brothers. We've got
a major major issue on our hands according to Wall Street Journal we actually have a what 5.5 million
units that we are in shortage of which is kind of the problem that we've been facing the last 12 to
18 months which is a lack of inventory it's been driving at prices to record highs so sam what is
going on so right now obviously we're in a massive shortage of new construction and remodel homes in
the unit in fact the last 10 years we actually haven't been building enough homes to catch up
compared to what we've been building the last 40 years and yes homebuilder sentiments are higher
historically for the last 10 months mainly due to high cost of wood and also construction materials
to be able to build the homes but looking at the last five years of data we are seeing an increase
in uptake of new starts and new permits being pulled for construction of five plus units and
multi-family so the problem of having 5.5 million units shortage has been more of a problem coming
the last 10 years and it's almost like a perfect storm where now we're just realizing holy smokes
you know there's not enough units but couple that with the fact that the cost of wood is high
and cost of construction is high and the the supply chain that's been shot due to
pandemic that has created a perfect storm well and that kind of leads to sit today saying where you
know people want to lower the prices right people recognize these prices are artificially boosted it
can't stay this way forever but you know what are we going to do when lumber prices are so high the
cost of copper crude oil i mean even paint we're anticipating a lot of these things to continue to
be in shortage as we move forward with 2021 and these aren't going to lower prices any time soon
right i mean all these costs are a lot higher you know builders have to add on that yield and that
margin otherwise they're not going to they're not going to be able to make their money
yeah and there's also an equal problem to where certain homes can be built in certain areas
but the construction of building a home is higher or exceeds that of the market price meaning if it
costs 200 000 to build as soon as the last nail hits the the building now it's worth only 125 000.
sam there's actually a much bigger bigger problem that nobody is addressing in our economy which is
that there are still folks watching this video right now who haven't clicked the like button
so click it wow so with that problem in hand that leads us to another question is why can't builders
and investors and developers build faster and really meet the demands because clearly we're
in shortage and we need to make more housing units well i think one of the reasons sam is because we
haven't seen this much of population migration for a very long time i mean yeah think about this for
the first time in really the history of the united states we're really in the history of the world
right people are able to work remote right people our age the millennials think about we're all
moving we're moving from places like illinois california new york and we're moving to places
like nashville you know south carolina's real carolinas florida texas arizona and i would argue
that a lot of these cities that people are moving into because well the millennials our generation
we're not wanting to move from one major city to another major city and kind of have the same
issues that we had with you know the pandemic we want to move to places that are more weather
friendly you know where we could work remote let's be real and you know a lot of the places
that we're moving to they don't have a lot of that infrastructure just yet for that reason a lot of
times people want to see a lot more stability in population migration before big builders really
start building absolutely and well here's another point that might be a little bit far-fetched but
you know it could actually genuinely be a really good point in about maybe six to 12 months is that
a lot of builders may be hesitant with this whole capital gains tax rate right because think about
this when you're building and you're constructing a home you're taking something from the ground up
that's all capital gains right and if you're talking about capital gains tax rate increasing
i know for me as a developer i'm a little hesitant to be able to go in and build something
especially if i know my tax rates are going to be astronomically huge so again that point a little
bit of a stretch but in about six to 12 months that could genuinely be a real scare for a lot
of real estate absolutely across the country and especially from the fact that we need more housing
unit well stuff like that an increase of taxes would definitely decentralize a lot of builders
wanting to build for you know especially these projects takes one or two years and those are
subject to capital gains taxes exactly so as far as fiscal policies the government needs to
step out of the way and allow these builders and investors to go ahead and build without penalties
and fees and taxes being imposed on so we have fiscal liabilities for the taxes penalties right
we also have market liabilities in terms of well if you're a developer and you don't know how long
this housing market's going to last what's what's kind of the incentive for you to start building
right now especially if your subdivision is not going to be finished for another two three four
years i mean we don't know what the market's gonna be like in three four years but i'm only the bet
the prices are probably gonna be lower than what they are today and last but not least of course we
talked about the population migration that has to yet to be stabilized yeah and one thing we touched
briefly was the price of construction and price of commodities to build these units now as you guys
may have known or heard you know price of wood has gone up significantly but we did see see the price
of wood fall this month of june by 40 percent and a lot of experts believe that this might be
the new low and we may see the price of woods go back up while others say that we may see even more
decreases as sawmills as well as supply chain gets restored back to the pre-pandemic levels
however as we see wood prices fall and trend downward where we're seeing other components of
construction costs go up such as paint costs which is expected to go up anywhere between six to forty
percent increase and that may be also a challenge to new home builders as well as remodelers so at
this point i'm sure some of you guys are saying well daniel and sam you guys are all nifty with
all this research but what's the solution what is your guys's solution on this so here's the
ultimate solution that we believe should happen in order for the housing market to finally be fixed
with affordable housing we believe that a lot of the money that goes towards municipality and
fiscal instead of having it go to stimulus checks or whatnot we actually believe that the government
should fund real estate developers to start building new construction now here's ultimately
why i believe that should be happening because for one a lot of new construction developers
are afraid that if they start construction now the housing market is going to dip in two three
years and for them that's not really much of a comfort level right imagine being able to raise
tens of millions of dollars and being able to go to your investors and say hey uh we don't know
when the housing market's going to dip or rise but please invest 30 million with us and we'll just
roll the dice if you're the investor in that situation you're not going to even talk to a
single individual to wanting to invest into that project and well not only that but you're also
concerned about the cost of construction and where populations migrating you have all these questions
in your mind and well having the government walk alongside you and actually give you some incentive
to be able to do that well it gives you a lot more insurance it gives you a lot more safety and it
actually protects your investments a lot more now guys this is not a way for real estate developers
to get rich and we're not saying all right here in daniel and sam go again you know typical
capitalists wanting the one percent to get richer and the poor to get poor well that's actually not
true because sam wouldn't you agree that the more houses there are in inventory the lower
the value of those houses are going to be and it can be affordable by more people exactly so i mean
it's pretty simple right the more things are right the more supply there is the more it will meet the
demand and the lower the value of that supply gets over time because you're incentivizing the means
of production in our local economy so our opinion is that ultimately the government has to get out
of the way or either help the the development of new projects new uh inventory new constructions
and right now obviously based on our research we're seeing a lot more multi-family in fact we're
seeing a 25 increase in new multi-family apartment building projects which tells us that there's
gonna be a lot more renters that we can expect in the next five to ten years which of course leads
us to say if you're wanting to make money off of what's going on right now well let's think about
it we know that rents are going up and chances are the housing market may dip in the not so
distant future and while a lot of the millennial population are moving towards renting so at this
point i'm sure you're asking well daniel how do i make money off of all this going on well i can
at least be honest in terms of and tell you what we're doing what sam and i are doing is
we actually started a private equity real estate firm that's looking to develop and buy up a lot of
things down south in a particular area in a state that starts with f right let's put it there right
but for the sake of our investors we're going to protect where we're actually building or where
we're buying we're focused on actually building mixed use commercial and residential properties
so think multi-family class a with you know your diner in the bottom your dry cleaners a lot of
developments that have actually everything all in one so really kind of having an area within
you know 0.2 square miles where you pretty much have everything you need so you also have fitness
centers pools and whatnot and we're actually planning on building some storage units some
office complexes and things that an actual growing economy needs yeah absolutely and based on our
research we're seeing a lot of migration to this particular area so obviously we're buying bland uh
daniel mentioned we're building multi-family and there's there's gonna be a lot of demand like this
in not only the area that we're looking at but across the the country uh especially the carolinas
texas we're seeing that in georgia uh we're seeing a lot of that in arizona as well so there's a lot
of opportunities where you could participate uh even if you're out of state you can partner with
certain companies and organizations and of course if you're in those states well hey you know it's
in your backyard so start taking advantage of those and even if you don't end up building you
know things like a 200 unit or 300 unit apartment building that you know obviously that we're we're
working on you know you can participate in things like single family fixing flips right buy these
properties for 100 200 300 000 you know add value to them you know things that are complete you know
homes are outdated and update them with some of the newer appliances newer uh construction
materials and sell them for a higher cost and right now the housing market needs that they want
it again we're 5.5 million units short and out of the 5.5 million it's not just only multi-family
but we're also in short of single-family homes especially millennials with with kids and families
that desperately need uh a single family so and also right and not only that but also if you're
worried that the housing prices are going to dip even after you start building well guess what
travel's coming back i would actually recommend putting that property on something like an airbnb
right vrbo it's a nice little side hustle to be able to self-manage right maybe you can do it with
the family a lot of people are looking for those airbnb spaces that you know they're very cute and
very cozy right very airbnb feel to it so these are some options that you guys can participate and
take advantage of with the next six to 12 months with what we're looking at in terms of the housing
market i honestly think it's actually gonna be more than six to twelve months i think we have
a window of i think five to seven years uh as we see you know you can't possibly have 5.5 million
housing units be billed in one year and another thing that we haven't talked about as well is the
much much bigger issue and the biggest question that i have is well what's going to happen with
inflation all right what is the fed's going to do because well they said they have the tools to be
able to fight inflation but do they want to use it do they want to continue to kick the can down
the road because you're only making the problem much worse but not only that we're also eyeing
the possibilities of the mortgage forbearance programs ending and how that may cause a spiral
of foreclosures and short sales in the beginning of 2022 that may just warrant some opportunities
for investors but i don't necessarily think that's going to cause a massive crash or price
dip as we previously predicted with the new data we're seeing right now we're actually we actually
may see the prices continue to trend up but not as aggressively as we've seen in the last you know 12
to 16 months well i think we got to be careful sam because you know of course with any crash it's not
just one thing right it's always just a flurry of things that kind of create the perfect storm
well i think between that and you know potentially a lot of eviction moratorium displacements right
you know the inflationary issues that's happening i think we got to be careful in terms of what's
going on there's still a lot of questions and things that need to be addressed yeah absolutely
so really we start we still need to talk about this whole federal reserve and how that how that
kicks in and of course we may see interest rates increase uh previously we thought 2023 everyone
was talking about 2023 well now there's you know possibilities of 2022 rate hikes as well that may
have some impact on the housing market activities as well as new builders getting excited to build
i i think it's really weird because you know we printed crap ton of money we're seeing a little
bit of inflation yes we need to see rates increase to offset some of that but we're with we have this
challenge of again 5.5 million housing units the shortage man it's kind of a more like a tug of war
right what do we need to do is do we need to protect our dollar currency or do we need to
make sure that there's enough housing inventory to go around for everybody well that's definitely
a question for another video so with that said guys comment down below what you guys want us to
talk about in the next video yeah you know we're always curious in terms of what you guys want to
hear from us and of course don't forget to like this video subscribe to our youtube channel as
we're looking to put out real estate investing content and also housing market content every
single week so for you guys thank you so much for watching and we'll see you guys in the next one