fewer young people than ever are going to be able to buy a house in their
lifetime and at the same time homes are getting more expensive every year what
but if nobody can afford to buy a house then how the [ __ ] do they keep getting
more expensive so the idea of being able to save a 20
down payment uh is almost unimaginable yeah rent gets raised you know
a thousand percent with no notice and a family home should be the Bedrock of
your financial life it gives you somewhere to live while building up
equity in a place that you can one day call your own owning a home with a
30-year mortgage is cheaper out of pocket every month in most cities than
renting so if you can buy your own home you will be richer now and richer in the
future you already know this but if you're in the 75 of my audience that
doesn't own a home it's probably because you can't afford one according to a
report by Redfin only 21 of homes that went on sale in 2022 were considered
affordable that's down from 60 percent of homes that went on sale in 2021 that
means in just one year two-thirds of all affordable housing became too expensive
for the average American the team conducting the survey concluded
that housing affordability is at its lowest point in history but what's the
end game here if people can't afford a home then house prices can't go up
anymore right wrong I don't want to make another one
of those stupid finfluencer videos about how the housing market is going to crash
in 3.5 days but there are three reasons why it could get a lot worse before it
gets better the first reason is that houses do not need to be affordable for
you to buy one if you think that can't make sense there is an entire industry
working to make it true you don't save money to buy a house you save money for
a down payment the housing costs are completely out of line with wages wages
have not kept up with house prices but a 20 down payment only grows at one-fifth
the rate in absolute terms so people are still able to get into the market
according to Zillow the average home sold in America in 2020 traded for two
hundred and thirty thousand dollars at the start of 2023 the average home price
was three hundred and thirty thousand dollars a jump of one hundred thousand
dollars in less than three years according to Forbes the average American
makes a salary of fifty nine thousand dollars before tax after federal tax and
FICA that leaves them with a take-home of forty nine thousand dollars if this
average person saved a ridiculous seventy percent of their take-home pay
to buy a house they would be just as far away from their goal after three years
because the price of the average house grew just as fast as their savings the
average home earns as much as the average person but most people only save
for a down payment so seventy percent becomes fourteen percent or seven
percent if it's a dual income household or the other partner also earns the
average salary that's still a major savings commitment when 57 percent of
Americans can't afford a one thousand dollar payment without taking on debt
fourteen percent of your take-home pay should be more manageable than seventy
percent but remember this is only how much you would need to save just to keep
up with price increases this doesn't actually get you any closer to your goal
of buying a home lenders and banks with a vested interest in real estate assets
across the country know that it is still hard for most families who also need to
pay for food rent and other Essentials that are outpacing wages so they have
moved the goal posts report by the National Association of Realtors found
that the average down payment for a first-time homebuyer was just seven
percent and the average down payment for a repeat purchaser that has had time to
build equity in their previous home was only 17 percent if you only need to put
a tiny deposit down house prices can increase to many multiples of your
income before it becomes impossible to buy a house if you only need to save for
a seven percent down payment then just a 10 savings rate over three years from an
average wage would get you into an average house you would be more
disciplined than the average American but it's not impossible with some
sacrifice if that's still too hard for you then Zillow recently announced that
they would be trialing a one percent down payment loan product to help people
that couldn't save any money make the biggest Financial commitment of their
lives here's how it works the buyer pays a down payment of one percent and then
Zillow makes an additional contribution of two percent at closing that is a
grant and doesn't need to be paid back so even though houses are making more
money than you are the price of Entry is being reduced just as fast but that's
only make the down payment you still need to make the repayments and if you
can't put twenty percent down what helped you have of making repayments on
a house well it's time to learn how money Works to find out if this circus
getting more expensive even when nobody can afford to buy them is because nobody
is selling them but we also don't have anyone putting their home on the market
just because they have a 30-year fixed rate below three percent so nobody wants
to sell a home right now and there's still plenty of people who want to move
home sales in America are at their lowest level in a decade despite
population growth according to data from the National Association of Realtors 6
million homes were sold in 2021 but now only 4 million homes are selling at an
annualized rate potential sellers with a home loan don't want to sell because the
rental market is even more unaffordable and if they move into a new home they
will get a new home loan that has a much higher rate than what they are paying
currently and therefore you have more people competing for rental space
because the cooling of housing market has kept people longer in rental rental
tenure so that is the reason why a competition has increased the supply has
been constrained because people are not moving from rental to order many people
already moved during covid and another move so quickly would be too disruptive
on their social and family lives in addition to the significant interest
expense of new home loans the average homeowner spends 13.2 years in their
home after a flurry of home buying activity in the last three years more
Americans than ever are just settling into their new home and they have longer
than ever before they consider selling new buyers are also choosing to wait out
their purchases until interest rates drop the average number of people living
in a household also increased recently for the first time in 160 years after a
long trend of smaller families and people choosing to move out into their
own homes according to Pew research that published this report this was because
more younger adults were choosing to or being forced to live with their parents
for longer to avoid living in an unaffordable housing market the market
is still active but regular buyers and regular sellers are choosing to sit out
until moving into a new home becomes more affordable and it's the people who
are left that are the third reason this can keep going on longer than you think
think there are three groups still in the game the first group are all cash
buyers that have money from selling their old home and want to buy a new one
if you are a boomer that purchased their home in the 1970s for three nickels and
you now want to downsize now is an ideal time to take advantage of the market
when prices are higher the spread between a single family freestanding
home and a smaller property is larger giving you more cash to live off of the
second group are people moving Interstate unaffordable housing is
pushing people out of expensive cities across the country you would probably
prefer to stay in your home City even if you had a job that you could do from
anywhere closeness to friends family and familiar amenities is why people only
live 18 miles from their Hometown on average in defiance of the part-time
hedge fund manager and full-time YouTube comedian Patrick Boyle where should my
friend how money Works live I don't know maybe Dubai he's one of
those flashy YouTuber types he probably wants to live on one of those Palm
Islands hang out at malls buying designer goods and maybe do some indoor
skiing that's just the kind of guy he is I chose to stay in my crappy one bedroom
San Francisco apartment because moving is a pain in the ass but if you're
really struggling to afford a High Cost of Living City you can improve your
lifestyle by moving to cheaper cities with lower rents and property prices if
you move from a city like San Francisco Seattle or New York to any other city in
the country you are going to be able to buy a lot more house for the same money
your higher income from working in these areas will push up local prices and in
the process of avoiding the rising home prices you have just made it worse the
third group are investors investors only care about the return on their assets
prices are high right now and investors using financing to buy property are also
paying higher interest rates but in return they are charging higher rents to
long-term tenants and short-term educationers if they list their
properties on sites like Airbnb make no mistake prices are still too high the
largest increase in home buying has come from this group according to Redfin
year-on-year growth in investment purchases reached 145 percent in 2022
and institutional investors buying up stock for real estate investment trusts
with the fastest growing group of investors real estate investment trusts
or REITs work like index funds for Real Estate they buy a portfolio of
properties using money collected from a large group of investors meats are sold
both over the counter through companies like Blackstone for high net worth
investors or as exchange listed Securities for average people REITs used
to focus on Commercial Real Estate like shopping malls hotels warehouses Office
Buildings and farmland the high cost of these properties made them suitable for
sharing between multiple investors residential REITs have experienced a
sharp rise in popularity though because people that can't afford to buy a home
themselves still want exposure to this Market some people are putting savings
towards a down payment into REITs because they should provide returns
consistent with the residential real estate market so their savings won't be
left behind by Rising house prices the popularity of this asset class has been
caused by unaffordable housing and it's also made housing more unaffordable but
this can't last forever this is the worst and as much as I hate
to say it those stupid [ __ ] influencer thumbnails may be right
things are starting to change this is why the market is largely resisted to
sell off and why it's still possible for home prices to go even higher even
though it kind of makes no sense an updated Redfin report has revealed that
investor purchases have slowed significantly and surveys from local
agents in cities like Las Vegas Austin Miami and Houston revealed that
institutional purchases have stopped completely the private Equity company
Blackstone not to be confused with the investment index company BlackRock had
to block investor withdrawals from its 71 billion dollars earlier this year
sparking concerns that the whole system was overvalued if investors pull their
money from these trusts too quickly the investment managers in this case
Blackstone will be forced to sell one of their properties in their portfolio
BlackRock was accused of overestimating the price of the properties it had in
its portfolio but that's hard to prove until it's forced to sell one of them
but as soon as just one property needs to be sold all other comparable
properties in that trust need to be readjusted to a similar value a short
drop in the value of the trust could trigger more investors to withdraw their
funds causing the manager to sell more properties pushing down prices even
further but don't get your hopes up too much if you own shares in a read the
easiest way for you to liquidate your position would be to sell your shares to
another investor which doesn't require any cash to be liquidated from the
assets themselves the bonus fourth reason is that wealthy families are just
doing a better job of holding on to more properties for themselves in the past
family well struggled to get past the first two generations but now that
investing has become so easy and lucrative we might be starting to live
in a new age of nobility where family dynasties can last centuries one group
of American billionaires is already there so go and watch my new video over
on how history Works to find out why the Rockefeller Fortune isn't likely to
disappear ever and if you want to watch these videos dearly and get articles
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