Today we're going to talk about my two year real estate prediction.
Today we're going to talk about my two year real estate prediction.

So first, we're going to start with somebody
So first, we're going to start with somebody

that I admire that's now passed away since 1983.
that I admire that's now passed away since 1983.

Buckminster Fuller.
Buckminster Fuller.

And he used to talk about generalized principles or universal
And he used to talk about generalized principles or universal

laws, things that you cannot refute.
laws, things that you cannot refute.

Like there is dark, there is light, there is on,
Like there is dark, there is light, there is on,

there is off, there is hot, there is cold, universal loss.
there is off, there is hot, there is cold, universal loss.

And two of those are precession and lag.
And two of those are precession and lag.

And we're going to talk about precession and lag as it relates to real estate.
And we're going to talk about precession and lag as it relates to real estate.

So the first universal law is around precession.
So the first universal law is around precession.

And while I'm going to simplify it here,
And while I'm going to simplify it here,

basically if you drop a pebble in a pond, it has rings.
basically if you drop a pebble in a pond, it has rings.

So in other words, this could be a choice to make something that happens
So in other words, this could be a choice to make something that happens

like an event and it has ripple effects as it moves through a pond
like an event and it has ripple effects as it moves through a pond

or in this case, the economy.
or in this case, the economy.

Lag, of course, is the difference between
Lag, of course, is the difference between

here and here and here and here and here and here
here and here and here and here and here and here

and that is the time frame between one event and another event.
and that is the time frame between one event and another event.

In other words, when something has dropped in upon, when is that first circle?
In other words, when something has dropped in upon, when is that first circle?

The second circle, as you guys know, as it gets further and further out,
The second circle, as you guys know, as it gets further and further out,

they get longer and longer.
they get longer and longer.

So with regarding lag, what's happened, as we all know, the Federal Reserve
So with regarding lag, what's happened, as we all know, the Federal Reserve

raise rates five times so far and they're now going to be meeting again
raise rates five times so far and they're now going to be meeting again

two more times this year for a potential rate increases of seven times.
two more times this year for a potential rate increases of seven times.

Now, let's tie all this together and I'll show you some of my prediction
Now, let's tie all this together and I'll show you some of my prediction

as it results to perception and lag
as it results to perception and lag

with regards to the interest rate increases that we've recently had.
with regards to the interest rate increases that we've recently had.

So let's first take a look at precession and lag.
So let's first take a look at precession and lag.

So we know perception are the rings.
So we know perception are the rings.

So in this case, the dark rings are the federal funds
So in this case, the dark rings are the federal funds

rate hikes since March, May, June, July and September,
rate hikes since March, May, June, July and September,

and of course, November, December, based on my two predictions
and of course, November, December, based on my two predictions

and the dotted lines are, of course, what I think is going to happen
and the dotted lines are, of course, what I think is going to happen

for the Federal Funds Rate increases between now and the end of the year.
for the Federal Funds Rate increases between now and the end of the year.

The green here represents the actual inflation rate,
The green here represents the actual inflation rate,

which of course is the reason for this federal funds rate increases.
which of course is the reason for this federal funds rate increases.

What the Federal Reserve is trying to do, of course, and one of their charters
What the Federal Reserve is trying to do, of course, and one of their charters

is to keep inflation low.
is to keep inflation low.

And as you can see, it hasn't really worked yet,
And as you can see, it hasn't really worked yet,

even though we've had five increases and we have potentially two more.
even though we've had five increases and we have potentially two more.

What that means is the Federal Reserve could wait to see if there's
What that means is the Federal Reserve could wait to see if there's

a better lag effect.
a better lag effect.

It might take a little bit longer or they might raise rates again in 2023.
It might take a little bit longer or they might raise rates again in 2023.

It's anyone's guess as to what's going to happen.
It's anyone's guess as to what's going to happen.

But I'm going to guess that they're going to raise rates
But I'm going to guess that they're going to raise rates

two more times before the end of the year because as you can see, with five rate
two more times before the end of the year because as you can see, with five rate

increases, inflation really hasn't changed.
increases, inflation really hasn't changed.

And lastly, let's not forget that the target inflation rate
And lastly, let's not forget that the target inflation rate

for the Federal Reserve is 2% as admitted on their own website.
for the Federal Reserve is 2% as admitted on their own website.

So the real question is, on October 12, where will the inflation rate be
So the real question is, on October 12, where will the inflation rate be

and will the Federal Reserve increase more rates at the end of this year
and will the Federal Reserve increase more rates at the end of this year

and into next year?
and into next year?

And what will that do to the economy as a whole?
And what will that do to the economy as a whole?

So in this chart, I summarize all five of those increases
So in this chart, I summarize all five of those increases

and potentially the other two right here in this purple dot in the center.
and potentially the other two right here in this purple dot in the center.

And that's now my new perceptual fact for 2022 federal funds increases.
And that's now my new perceptual fact for 2022 federal funds increases.

The real question is, as we start in Q1 2023,
The real question is, as we start in Q1 2023,

what is that now going to do from a lag standpoint
what is that now going to do from a lag standpoint

in the economy and what is happening today for many of you?
in the economy and what is happening today for many of you?

They're paying attention.
They're paying attention.

You realize that these signs are already here today.
You realize that these signs are already here today.

So I believe we're going to have two more federal funds increases
So I believe we're going to have two more federal funds increases

and we're going to have interest rates around 7%, possibly even
and we're going to have interest rates around 7%, possibly even

eight, and Q1 of 2023.
eight, and Q1 of 2023.

That's going to continue to send consumption down.
That's going to continue to send consumption down.

And people are going to buy less because the cost of money is up.
And people are going to buy less because the cost of money is up.

That means less automobiles, less TVs, less homes,
That means less automobiles, less TVs, less homes,

all of the things that people finance, which is right now the majority of things
all of the things that people finance, which is right now the majority of things

people do in a video earlier this year, I said we're moving to a renter nation.
people do in a video earlier this year, I said we're moving to a renter nation.

I really believe that these numbers are interesting for you to watch.
I really believe that these numbers are interesting for you to watch.

And right now, the renter percentage is trending somewhere between 35 and 36%.
And right now, the renter percentage is trending somewhere between 35 and 36%.

And of course, on the other side of that is the homeownership rate, which is what
And of course, on the other side of that is the homeownership rate, which is what

everybody's watching, which is right now somewhere between 65 and 66%.
everybody's watching, which is right now somewhere between 65 and 66%.

I do believe that there's a lag in having the inflation come down.
I do believe that there's a lag in having the inflation come down.

And I do believe that the next two increases,
And I do believe that the next two increases,

because the consumption is going to come down, that we will start
because the consumption is going to come down, that we will start

to see inflation potentially trend down below 7%.
to see inflation potentially trend down below 7%.

However, let's don't forget that
However, let's don't forget that

it's still five percentage points off or what the Fed want.
it's still five percentage points off or what the Fed want.

Real estate listings are going to continue to go up.
Real estate listings are going to continue to go up.

Real estate prices will continue to go down as there's more and more supply.
Real estate prices will continue to go down as there's more and more supply.

And unemployment as of right now is around 3.7.
And unemployment as of right now is around 3.7.

And I believe that's going to stay pretty steady through these midterm elections.
And I believe that's going to stay pretty steady through these midterm elections.

I do believe in the first quarter of 2023, you might see this tick up a little bit.
I do believe in the first quarter of 2023, you might see this tick up a little bit.

But now, of course, we're going to go to Q1 of 2024.
But now, of course, we're going to go to Q1 of 2024.

The one thing I want to point out here, while you think that might be so far away,
The one thing I want to point out here, while you think that might be so far away,

it's only 14 to 15 months from today.
it's only 14 to 15 months from today.

This is not that far away.
This is not that far away.

So the first thing that I believe is I believe that
So the first thing that I believe is I believe that

we're going to be in a recession sometime in 2023
we're going to be in a recession sometime in 2023

and we're going to still be in one and Q1 of 2024.
and we're going to still be in one and Q1 of 2024.

So the one thing I do believe is consumption
So the one thing I do believe is consumption

is going to continue to go down because of the lag effect.
is going to continue to go down because of the lag effect.

Remember, this is only 14, 15 months later.
Remember, this is only 14, 15 months later.

And of course, because of lag and inflation, rates are already at 8.3,
And of course, because of lag and inflation, rates are already at 8.3,

I just don't believe that they're going to be anywhere near their target of 2%.
I just don't believe that they're going to be anywhere near their target of 2%.

And so therefore, I think that actually interest rates
And so therefore, I think that actually interest rates

are going to continue to go up through the remaining 2023 and possibly into 2024.
are going to continue to go up through the remaining 2023 and possibly into 2024.

There could be even higher than we saw one year ago in 2023.
There could be even higher than we saw one year ago in 2023.

What that's going to do, of course, is reduce consumption,
What that's going to do, of course, is reduce consumption,

reduce homeownership, increase renters,
reduce homeownership, increase renters,

and it's also going to temper inflation.
and it's also going to temper inflation.

I hope.
I hope.

Remember, inflation started at 8.3, just 14 or 15 months ago.
Remember, inflation started at 8.3, just 14 or 15 months ago.

And I'm hoping that inflation will be down in the five or 6% range.
And I'm hoping that inflation will be down in the five or 6% range.

I'll tell you why.
I'll tell you why.

I don't think it's going to be more in the very next slide.
I don't think it's going to be more in the very next slide.

But one thing is for sure, real estate prices
But one thing is for sure, real estate prices

are going to continue to go down because they're going to be more listings.
are going to continue to go down because they're going to be more listings.

And I believe that the Fed is prepared
And I believe that the Fed is prepared

to drive up unemployment, which is also not going to be good for a lot.
to drive up unemployment, which is also not going to be good for a lot.

So now let's look
So now let's look

at the individual components over here as I think it's going to be
at the individual components over here as I think it's going to be

as a lot of people think it's going to be in just 14 or 15 months from now.
as a lot of people think it's going to be in just 14 or 15 months from now.

So let's first start with recession.
So let's first start with recession.

There are a lot of people that believe we're in one today
There are a lot of people that believe we're in one today

and there's a lot of people that believe
and there's a lot of people that believe

the Federal Reserve is going to push us into one tomorrow.
the Federal Reserve is going to push us into one tomorrow.

The bigger issue, in my opinion, is that there's a lot of people believe
The bigger issue, in my opinion, is that there's a lot of people believe

that there's a 98% chance of a global recession
that there's a 98% chance of a global recession

if you just take a look at what's going on in other countries as well.
if you just take a look at what's going on in other countries as well.

So I believe that
So I believe that

what's happening domestically and what's happening internationally,
what's happening domestically and what's happening internationally,

it's all going to point to a recession that's going to hit the United States.
it's all going to point to a recession that's going to hit the United States.

So that's why I said that there is going to be a recession in 2023 and in 2024.
So that's why I said that there is going to be a recession in 2023 and in 2024.

The second one is consumption.
The second one is consumption.

And as you all know, we've all changed our consumption behaviors
And as you all know, we've all changed our consumption behaviors

as a result of this high inflation.
as a result of this high inflation.

People are cutting back on gas, food, rent,
People are cutting back on gas, food, rent,

cars, consumption of all kinds of things right now.
cars, consumption of all kinds of things right now.

And as you guys know, I'm still projecting a pretty high inflation rate into 2024.
And as you guys know, I'm still projecting a pretty high inflation rate into 2024.

And so I still believe, as do many people, that a lot of shoppers
And so I still believe, as do many people, that a lot of shoppers

are going to continue to cut back and change their purchasing priorities
are going to continue to cut back and change their purchasing priorities

going on into what is just 14 or 15 months from now.
going on into what is just 14 or 15 months from now.

The next one is interest rates.
The next one is interest rates.

Now, I do believe that interest rates are going to go up even higher in 2023
Now, I do believe that interest rates are going to go up even higher in 2023

and potentially into 2024 as they continue to tamper down inflation
and potentially into 2024 as they continue to tamper down inflation

and bring it down to that 2% level, which there's no possible
and bring it down to that 2% level, which there's no possible

way that they're going to be able to do it in just a 14 or 15 month period.
way that they're going to be able to do it in just a 14 or 15 month period.

And let me show you why.
And let me show you why.

And so for all you naysayers that believe that inflation is going to come down
And so for all you naysayers that believe that inflation is going to come down

rapidly, I went back to the early 1900s to see
rapidly, I went back to the early 1900s to see

how fast has the government actually done this in 100 years?
how fast has the government actually done this in 100 years?

Well, it's very unfortunate, as you can see,
Well, it's very unfortunate, as you can see,

there's really only one time and that was from 2008 to 2010
there's really only one time and that was from 2008 to 2010

that we actually saw a big reduction in inflation in a 24 month period.
that we actually saw a big reduction in inflation in a 24 month period.

That's the only time in this entire chart the Federal Reserve
That's the only time in this entire chart the Federal Reserve

has certainly adjusted the number from month to month and from year to year.
has certainly adjusted the number from month to month and from year to year.

But the biggest decrease has to be from 2008 to 2009.
But the biggest decrease has to be from 2008 to 2009.

We had a massive economic contraction during that time
We had a massive economic contraction during that time

and I'm hoping we don't have that again to get this kind of adjustment.
and I'm hoping we don't have that again to get this kind of adjustment.

So as you can see from just 14 or 15 months later that we're at 8.3 now,
So as you can see from just 14 or 15 months later that we're at 8.3 now,

getting to five or 6%, inflation is pretty reasonable
getting to five or 6%, inflation is pretty reasonable

and possibly even aggressive based on all of this history.
and possibly even aggressive based on all of this history.

So obviously, higher interest rates are going to create more renters, lower
So obviously, higher interest rates are going to create more renters, lower

homeowners, hopefully inflation, it gets tempered a little bit.
homeowners, hopefully inflation, it gets tempered a little bit.

But the and the real estate prices are definitely going to go down.
But the and the real estate prices are definitely going to go down.

But the biggest concern I have is by far the unemployment rate.
But the biggest concern I have is by far the unemployment rate.

This is what I actually believe is going to be
This is what I actually believe is going to be

the biggest shock to this economy in the next 14 to 15 months.
the biggest shock to this economy in the next 14 to 15 months.

Take a look at some headlines that are recent.
Take a look at some headlines that are recent.

This is just a week old. The Fed's tightening.
This is just a week old. The Fed's tightening.

I guess inflation could cost the US 1.2 million jobs.
I guess inflation could cost the US 1.2 million jobs.

That's why I picked 4.4 from 3.7 in the slide prior.
That's why I picked 4.4 from 3.7 in the slide prior.

What's even more alarming is actually the fine print here
What's even more alarming is actually the fine print here

and potentially, if unemployment goes as high as 5.5%
and potentially, if unemployment goes as high as 5.5%

at the high end of the Fed's range, that 5%, that would be
at the high end of the Fed's range, that 5%, that would be

2.2 million more people unemployed.
2.2 million more people unemployed.

This would be disastrous for everything in this category right here.
This would be disastrous for everything in this category right here.

It would most certainly push more people out of homeownership into rentals,
It would most certainly push more people out of homeownership into rentals,

and it would put even more pressure on rental housing.
and it would put even more pressure on rental housing.

This is not a good scenario, and the Fed themselves have said
This is not a good scenario, and the Fed themselves have said

that they're going to keep the interest rate above 4% beyond 2023.
that they're going to keep the interest rate above 4% beyond 2023.

That means this is from the Financial Times.
That means this is from the Financial Times.

That means that the cost of money for everything is going to continue to go up.
That means that the cost of money for everything is going to continue to go up.

So now, of course, let's go out to Q1 of 2025
So now, of course, let's go out to Q1 of 2025

and the math of course, gets a little bit more fuzzy.
and the math of course, gets a little bit more fuzzy.

But like you guys, I'm trying to make some good assumptions for my own
But like you guys, I'm trying to make some good assumptions for my own

purchasing and for my real estate portfolio that I own.
purchasing and for my real estate portfolio that I own.

So once again, we have another lag effect.
So once again, we have another lag effect.

And of course, the first 14 or 15 months might correct a lot of these thing,
And of course, the first 14 or 15 months might correct a lot of these thing,

but if they don't, then of course, we're still
but if they don't, then of course, we're still

in a middle of a recession potentially a global recession.
in a middle of a recession potentially a global recession.

I believe that real estate prices are going to continue to go down.
I believe that real estate prices are going to continue to go down.

And this is actually when you're going to start to see bank owned properties
And this is actually when you're going to start to see bank owned properties

and people losing their real estate investments, those kinds of things.
and people losing their real estate investments, those kinds of things.

Hopefully the Federal Reserve has raised interest rates high enough
Hopefully the Federal Reserve has raised interest rates high enough

to where they're actually coming back down potentially in the 7 to 8%.
to where they're actually coming back down potentially in the 7 to 8%.

At least that's my wish.
At least that's my wish.

Of course I want inflation low, but I just don't think that
Of course I want inflation low, but I just don't think that

they're going to get there in a 27 month period as evidenced by history.
they're going to get there in a 27 month period as evidenced by history.

I think that we could still be in the four or 5% inflation
I think that we could still be in the four or 5% inflation

time frame, and I still don't think that the Federal Reserve
time frame, and I still don't think that the Federal Reserve

will be done by that point.
will be done by that point.

And the unfortunate thing around all of this, there's high unemployment,
And the unfortunate thing around all of this, there's high unemployment,

there's high inflation, and these higher interest rates are
there's high inflation, and these higher interest rates are

that more and more people get pushed out of homeownership and into rentals.
that more and more people get pushed out of homeownership and into rentals.

And as you can see, we're trending even more toward higher renters at 38%.
And as you can see, we're trending even more toward higher renters at 38%.

And homeownership at 62%, which is what
And homeownership at 62%, which is what

we saw right before the last financial crisis.
we saw right before the last financial crisis.

As you all know, I did a prediction video and there's many economists
As you all know, I did a prediction video and there's many economists

that believe for the first time in the US housing history
that believe for the first time in the US housing history

that we actually might see homeownership below
that we actually might see homeownership below

60% for the very first time
60% for the very first time

as a result of all of this collateral damage.
as a result of all of this collateral damage.

So hopefully you guys understand the difference between perception
So hopefully you guys understand the difference between perception

and the lag.
and the lag.

And of course, if this is a scenario here, then I do believe that
And of course, if this is a scenario here, then I do believe that

in 2025, in 2026, you're going to have massive buying opportunities.
in 2025, in 2026, you're going to have massive buying opportunities.

Again, as bad as I believe that this is actually going to be,
Again, as bad as I believe that this is actually going to be,

this is part of a real estate cycle.
this is part of a real estate cycle.