Searches for the phrase, "When is the housing market going to crash," are up 2,450% over
the past month.
That's when you know that you have to make another video on the housing crash because
apparently the last video we made on the housing market wasn't enough, and people want to know
more.
They no longer care about Dogecoin going to the moon or bitcoin finally replacing the
dollar.
They want to know whether the price of their house is going to crash this year.
Imagine what happens to all these people who took mortgage only to rent them and create
passive income.
what happens when home prices crash?
Rent prices will definitely fall as well, and that means that rents might not be able
to cover the mortgages, which could push many homeowners to sell their houses to be able
to pay their mortgages, and if they haven't acquired a substantial amount of equity in
the houses, the house might not pay the entire mortgage could drive prices down, which means
there will be an oversupply of houses in the market, which further could push prices to
fall which could result in a nationwide housing crash.
Oh my god, dear federal reserve!
What on earth have you done!
You tried to save the economy, but it seems like you are about to create a much bigger
disaster!
Fortunately, that's not the entire story, and things aren't as bad as they might seem,
so let's try to understand what's happening with the housing market?
Are we on the brink of another housing crash?
Or we shouldn't be worried?
And whether it's the right time to buy a house?
But before we do that, here is a little disclaimer.
This is not financial advice.
Everything that is said in this video is for educational and entertainment purposes and
now, give this video a thumbs and let's get right into it!
What some people haven't realized that home prices are rising at a faster speed since
great recession, since the 2008 crash!
I don't think anyone needs a reminder of how bad that crisis was.
It literally took down with it the entire global economy, and the world doesn't need
another global crisis after a global pandemic that shook the world, to say the least.
Many of you have said that it's unfair to compare current circumstances to 2008 because
we are living in different times, and the factors that are driving the prices today
are very different from what caused the 2008 crash, which is true.
I can't argue against that!
However, in every single crisis, there are always different factors that lead to the
same outcome, which is a market crash.
If every crisis followed a plain step-by-step guide, I think we would have long ago figured
out, and we wouldn't have another crisis.
When home prices are growing faster than incomes, we know that something is wrong, and this
is not sustainable.
When home prices rise by 15 percent, we know that it's not going to end well.
However, many critics say the reason we shouldn't be worried is because this time the rise in
prices is organic.
The strong demand is not driven by predatory lending practices.
Banks aren't loaning money to random people just for the sake of maximizing profits.
The 2008 crash pushed the government to tighten the control over the banks, and now it's much
more difficult to take a mortgage, and lenders are far more careful.
But take a look at this graph.
This chart illustrates the monthly supply of houses in the US.
We can clearly see that there was a huge oversupply of houses which triggered the 2008 crash.
And since April 2020, the number of houses in the market dropped significantly.
And that drop wasn't because there was an oversupply earlier, like in 2008 or because
we had a tornado or a fire that destroyed a great number of houses that caused such
a shortage in the market.
Nothing like that happened!
We have plenty of houses, but they are not listed in the market, and that's what the
driving force behind the tremendous increase in prices which is a problem.
We have a listing shortage, not a housing shortage.
Let's just assume hypothetically, what's going to happen when all these houses are going
back to the market?
I am not saying that's gonna happen but let's just try t think about that for a moment.
As of mid-April, around 2.3 million homeowner were still skipping their mortgage payments,
and we have no idea how many of these homeowners will be able to keep making their monthly
payments once that forbearance period is over.
Literally, the fate of the housing market lies on that number.
If that number isn't high enough, we will definitely experience a significant drop.
How many households will be in trouble when that day comes?
How many of them will sell instantly or foreclose?
How many desperate landlords will walk away from the rental business and sell as soon
as they can to get tenants out to minimize their losses?
The worst thing that could actually happen is a panic.
A panic literally makes any crisis a hundred times worse.
That's the point of having a central bank like the fed to prevent panic.
Because it could push many multi-homeowners to list their houses and get out before prices
drop further.
Once something like that happens, we are screwed.
It happened once last year, and we got out of it by printing an unbelievable amount of
money.
I don't think the economy is ready for another round of printing trillions of dollars.
The forbearance rate is twice bigger than what it was in the last crisis.
Imagine all these houses going to market at once?
that's why Consumer Bureau proposed extending the pause on foreclosures until 2022.
We are simply trying to postpone that scenario and try to at least minimize the damage somehow
by then.
Of course, i could be wrong and the fed can go for another round of pumping trillions
of dollars because government debt is not like personal debt.
When you or I take a debt, we can go bankrupt, the lenders can come after us, after our assets,
so we either pay the debt or declare bankruptcy.
But not in the case of the government because it can't go bankrupt since the government
is the source of dollars.
if you are the one who is issuing that currency and you have to pay back that currency, then
why worry.
Of course, the fed is an independent structure, but it's still part of the government in many
ways.
It just functions in a different way.
But when too many dollars chase too few goods, inflation starts rising faster than it should,
which is going to make the currency worthless, which is what has been happening lately!
Low mortgage rates pushed too many people to buy houses while the number of houses on
the market dropped significantly!
Which is causing house prices to rise too fast, which is what inflation is.
It's impossible to predict anything.
We just don't have enough data to make any accurate predictions.
I think the fed is playing with fire here.
Everything points out to at least a correction in the housing market.
A badly managed correction could lead to a crash, but that's just speculation and nothing
more.
A correction is when the market falls by 10 to 20 percent, which is what most experts
are predicting going to happen to the housing market, but it's very likely that some areas
would witness a much greater drop, maybe even up to 30 percent.
There are, of course, still some good deals in the market, because even during such circumstances,
you can still find a good deal, but it's not going to be east.
but I wouldn't personally risk buying now.
Why buy now when you might get it a huge discount later.
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