The last couple of weeks has been catastrophic for the market.
Literally, almost everything is down.
The stock market has crashed as if it's about to reach the bottom.
I mean all the gains that it made during the pandemic literally vanished.
Things went back to what it was to pre-pandemic for many tech companies.
And if you look at crypto, things are so bad that some coins literally went bankrupt.
It's a bit sad that people lost their entire investments overnight.
I mean, it's not like the stock plummeted by 20 or 30 percent and it could potentially
recover.
Some crypto coins now cost nothing.
Take a look at Luna.
In less than a week, it went from around 80 bucks to literally $0.
People believed in this coin and threw their savings and it took a 0.5 increase in interest
rates to destroy the currency.
Even Tether, the most stable coin that's tied to the US dollar for a moment fell by 5 percent.
Ideally, it shouldn't since a single usdt should be worth a dollar.
Unlike stocks or crypto, the housing market is much more stable, it doesn't crash overnight,
although the 2008 crash proved otherwise.
Since then, house prices didn't rise much, that's why the unusual rise that happened
in the last 2 years worried people that we might be heading into another crash.
Home prices rose 18.8% in 2021, according to the US National Home Price Index, the biggest
increase in 34 years of data and substantially ahead of the 2020s 10.4% gain.
So the question that many have in their minds is, should I buy a house now or wait until
the end of the year? or they will finally collapse?
We will answer these questions and many more but before we do that, lets tell you first
about Public.
Public.com is an investing platform that helps people be better investors.
It offers thousands of stocks, ETFs, and over 30 types of crypto from bitcoin to Shiba Inu
to ApeCoin [Screen recording scrolling through the different crypto on the platform].
Instead of having 3 different portfolios, you can have one for all of your investments.
Importantly, they also have a strong social community directly in the app where you can
learn & share ideas with over 3 million investors, creators and analysts [Show screen recording
of the social community feed.
Whether you’re a beginner or seasoned investor, Public’s platform makes investing in crypto
accessible and convenient.
You simply choose from a growing collection of 30 cryptos, select the amount you want
to invest, and that’s it.
You can invest instantly.
Follow news, founders, and financial and crypto experts on the platform to find out where
the market is headed [screen recording of the community feed].
People like Graham Stephan, Cody Ko, Shelby Church and many thousands more are on the
app.
Go to public.com/proactivethinker or link in my bio to get a free stock valued between
$3 to $300 in free stock when you make an account and deposit.
Since the world has embraced globalism, every country tried to specialize in what is good
and import what it cant effectively produce.
That's how the standard of life across the world improved so dramatically since the greatest
war in human history.
But that created a lot of competition for companies since they had to compete not just
with local companies but with the entire world.
So companies like Toyota came up with just-in-time production methods where the company wouldn't
keep excessive inventory and would order only when its need by building efficient supply
chains across the world.
It wouldn't waste any excessive inventory and wouldn't waste time waiting for them.
That's how Toyota became the world's largest car manufacturer by producing over 10 million
cars and conquering even the US market.
This model became so efficient that the entire world started using it.
But not everything is sunshine and rainbows.
The problem with this system is that, what if supply chains get disrupted?
That's when real problems will start since disrupting a single part in a long chain is
going to stop everything.
Back then, most people didn't imagine that happening.
Why would anyone deliberately stop making money?
So we developed ports across the world, with international standards to improve efficiency.
Wealthier countries exported the productions of most of what they consumed to countries
with cheaper labor until 2020 when a mysterious virus shut the world down.
No one expected that the consequences will be so severe except for a small minority.
China first isolated Wuhan but then the world realized that it was too late to isolate just
Wuhan.
So the rest of the China and the world went into a pandemic, closing down factories, and
the efficient supply chain we have built over the last few decades was suddenly useless.
This methodology has led manufacturers to keep just a bare-bones inventory of raw materials
and components, which left them high and dry when the pandemic temporarily shut down their
supply chains and threw the balance between supply and demand into disarray.
The question is - how is that related to the housing market?
The US doesn't just import parts to build cars and planes but also houses.
The U.S. is dependent on imported building materials to build homes.
Up to 40% of a typical American home is made of imported materials.
Now, many of those imported materials, including insulation, lumber, cement, steel, and electrical
equipment are in shortage since the supply chains that we have built are no longer as
efficient as they have been before the pandemic.
On top of that, take the conflict in Ukraine and you have a recipe for a disaster.
It’s not just about raising oil prices but there is also a shortage of materials such
as steel or nickels because of this conflict.
The world today runs on capitalism which means demand and supply determine the price in the
market which means that if there aren't enough materials to build more homes, prices will
keep rising.
And as long as there is a shortage of homes in the market, they will not fall.
The supply of homes was just returning to pre-pandemic levels but now the situation
is different, no one knows when Russia's invasion of Ukraine will end and how.
until there is so much uncertainty, prices will keep rising.
But you may wonder, why isn't there a bigger infrastructure to build homes?
Well, after the 2008 crash, many home builders went bankrupt.
In 2008, house prices fell by over 16 percent.
In some places, prices up to 50 percent.
How do you survive when you cant make a profit on the houses you are building?
You go out of business!
After the crash, the real estate business became unattractive.
Most of the companies that were bankrupted didn't return back to business.
Only in 2013, did house prices recover and began to grow, but the growth was slow and
gradual.
In fact, in 2017, 18, and 19, they didn't grow at all.
How do you expect business to come back to building homes when prices arent growing?
Now even though they are rising so fast, we have supply chai n problems that are making
it really difficult for home builders to build affordable houses.
At its height in 2006, monthly new ho using starts peaked at 2.3 million.
Over the coming years, new home construction kept falling until bottoming out at 478,000
in April 2009.
That period put many homebuilders and subcontractors out of business.
Firms that did survive were humbled and have since adopted more conservative business approaches.
That's why some experts like economists at Zillow expect home values to grow another
14.9% over the next year.
That's a bit optimistic, to be honest.
On the other side, we have experts who are warning us that, it doesn't matter what's
happening there.
supply chain issues are recovering and it's a matter of time before we solve the shortage
of homes in the market, so it's a matter of time before prices cool down.
Especially since average 30-year-fixed mortgage rates have risen from roughly 3.5% to about
5.6% this year, and as the fed keeps raising rates to bring down inflation to 2 percent,
that number will keep rising.
On the other side, Home prices will keep going up because there aren’t enough houses available
to meet demand, but the combination of rising home prices and elevated mortgage rates means
fewer people will be able to afford to buy.
The truth is that the united states can't afford another housing crash in the coming
future.
Especially since it's facing so many other challenges.
Imagine a 2008 crash on top of the supply chain problems and geopolitical challenges
that the country is facing with Russia and China.
It littraly going to drain the country so much that no one knows how long it will take
it to get out.
That's why if there is going to be a decline, it's most likely going to be mild.
If you account the fact that we are facing serious inflation overall, it gets even more
difficult to imagine a crash, since overall inflation will directly impact house prices.
So is it a good time to buy a house?
Well, we can't answer that for you because it's an individual decision for each and every
one of us.
Especially since no matter how many predictions we make, the future still seems unpredictable,
but the facts on the ground today can tell us a lot about what to expect.