Able to buy their first two-bedroom in Phoenix for $800,000 it finally happened housing prices have started to fall with the latest data pointing to a housing recession as prices soften demand slows down and sales collapse at the fastest Pace in almost two decades not to mentioned Michael bur just shared yet
Another cryptic warning on Twitter just moments before he sold his entire portfolio so let’s explain objectively what’s happening with the housing market how much prices are declining and whether or not you’re living in one of the 123 markets that’s expected to fall over the next year although before we
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You here’s a story about how a seal broke into a house traumatized a cat and hung out on the couch all right now in terms of the overall housing market here’s what you need to know because once you understand this all the rest of
It is going to make a lot of sense when it comes to housing prices almost everything is dictated by four main categories Supply demand interest rates and the economy the first two are fairly self-explanatory if there’s more demand than Supply then prices go up and if there’s more Supply than demand then
Prices go down but to get a true indication of where the market is moving you have to take into account the bigger picture because unlike the stock markets home prices move a lot slower and if you pay close attention the data will tell you exactly what’s beginning to happen
See once a month the National Association of Realtors publishes their data on the latest Market updates home pricing and mortgage Trends to give their insights as to the direction of our economy and this month confirmed what most people thought on the most basic level we have the numbers that
Everyone is talking about mortgage demand fell to a 22-year low is rates almost doubled from a year ago mortgage applications are 18% lower than the same week in 2021 and refinances saw an 83% drop year-over-year but the one piece of data that matters the most is that for
The first time since prior to the pandemic home prices have declined month over month with prices now $10,000 lower than they were just 30 days ago as they explain the ongoing sales decline reflects the impact of higher mortgage rates which peaked at 6% in early June before now declining back to 5% this
Increase severely impacted the number of buyers in the market with total housing inventory having increased 4.8% for the month prior meaning with fewer homes being sold there’s more available in the market for buyers to choose from however even though they admit that we’re witnessing a housing recession in terms
Of declining home sales and Home Building nearly 40% of homes are still selling at full list price and properties were staying on the market for a record low of just 14 days in July suggesting that even though prices are beginning to fall they’re not dropping as fast as people would expect ECT the
Reason you might ask well like I explained before in a previous video there’s a huge difference between what we call nominal housing prices and real housing prices and if that sounds confusing then you really need to understand exactly what this is because this is going to make a huge difference
In terms of what we wind up seeing over these next few years and it all really boils down to this on the surface most people pay attention to nominal housing prices which is simply how much does it cost today relative to how much it was in the past it’s how we track almost
Every everything from stock prices cryptocurrency grocery items used car prices and even the McDonald’s Big Mac but what everybody forgets is that if you want to get an accurate understanding about exactly how much something goes up in price you also have to take into account inflation by taking
A home’s price growth and then subtracting inflation you’re getting a much better understanding in terms of exactly how much your money is growing or apparently not growing depending on which way you look at it even more confusing is that up until 1970 home prices were essentially flat and were
Only driven Higher by the need for larger homes loosened policy changes lower interest rates and the one you’ve all been waiting for a lot of money printing as you’re about to see in an effort to boost the economy after the 2008 great financial crisis the Federal
Reserve began to buy and hold assets to keep interest rates low thereby restoring confidence to the market but there was a problem as soon as they began to reduce their balance sheet in 2018 stock prices dropped 20% and home prices began to fall now initially the balance sheet reduction was likely meant
To line last through 2020 but then the pandemic hit and a record amount of money was then reinjected back into the economy to keep it afloat however since April they’ve been slowly selling off their Holdings once again so what does this mean for the housing markets and could another buying opportunity be
Coming soon to a market near you all right now in terms of the future of housing prices look no further than Zillow who’s identified 123 markets that they believe will see a decline throughout the next year the largest drop so far was San Jose which recently fell 42% month over month month along
With Phoenix Arizona San Francisco Austin Texas Sacramento and San Diego among others while areas like Miami Richmond and Memphis Tennessee actually saw a slight increase however even though this is good news for the stability of the housing market with most areas expected to increase the one
Issue that people need to be made aware of is inventory as Zillow notes cooling competition among buyers has resulted in home spending more time on the market before selling as a result 18.6% of sellers reduced their list price in July which was 7 1 half% higher than a year
Prior and more than double what we saw back in April on top of that Zillow revised their forecast downwards to show home price growth at just 22% throughout the next 12 months which when adjusted for inflation is probably going to mean that real price growth over the next
Year is going to be negative and Zillow is not the only one who believes this either redin noted that sellers backed off with many hesitant to sell for less than they would have gotten at the height of the pandemic Moody’s Analytics also believes that a large portion of
The market is going to see a decline over the next few years with the most atrisk markets being the ones that saw the most appreciation since the start of the pandemic they also estimate that National housing prices are overvalued by 24.7% which means that US housing prices
Are the most detached that they’ve been from fundamentals since the housing bubble although in terms of whether home prices are going to collapse well not exactly according to the bank rate Chief Economist housing prices are likely going to cool down rather than crash because of five factors that are keeping
Prices relatively stable one low inventory will likely continue and even though more homes are coming on the market it still dwarfs in comparison to what we saw prior to the pandemic two material costs have increased and Builders can’t build enough to keep up with demand no sure he acknowledges that
They’re selling off existing inventory but if the market Falls it might not make sense for them to build at the same capacity as they did before three demographics are beginning to change with people valuing more space as they choose to work from home or relocate to other areas while they work remotely for
Lending standards are still strict so there’s very little concern that buyers won’t be able to make their payments at least for the next few years and finally five most homeowners have plenty of equity in their homes so there’s very little risk of them losing it to foreclosure and they’re very likely to
Stay where they are especially if they’ve locked in a low interest rate core logic also agrees with this with the belief that home prices could still go up by another 42% year-over-year however I have to say the best analysis that I could find came from none other than Robert Schiller who correctly
Predicted the 2011.com crash along with the 2008 great financial crisis and recently he said that he believes the housing market is in trouble as he points out home prices haven’t fallen since the 2007 to9 recession existing home sales are down permits are down it might not be catastrophic but prices are
Expected to fall by something a little over 10% by 2024 or five that’s a good estimate now from there he follows up with three factors to keep an eye on the first one is speculation this is seen as investors and developers rushed to buy into property with the assumption that
They’ll be able to sell it for more in the future and as of now we’ve seen a record number of investors enter the market with plenty of new homes under construction next after that we have second overvaluation this is signaled by a price that exceeds what ordinary
Incomes could support and we’ve hit that point According to some of the largest data firms in the US and finally third we have the bursting of the bubble even though Robert Schiller believes that we could see a 10% drop throughout National home prices most experts don’t agree and
Instead they think we’ll see more modest declines to back this up and 2007 Mortgage Debt Service payments accounted for 7.2% of us disposable income now it’s just 3.8% which leads people to believe that even though prices are high it doesn’t necessarily mean that they’re going to crash on top of that you also
Have investors like Michael bur who make the point that doomsday scenarios rarely ever happen because of debt implying that the government has the ability to Simply print their way out of any disaster which causes things to last a lot longer than you would expect so in terms of my own thoughts everything’s
Seems to be pointing in the direction that yes the housing market is slowing down prices are softening and there’s a lot less competition if you’re a buyer but to get a true indication of which direction the housing market is going you have to take into account inflation
And again that’s what so many people forget for example if Zillow predicts that housing prices will increase by 2.4% but inflation is 7% that means that housing prices just fell by 4.6% even though they still end up costing more this is exactly what happened throughout
The 19 70s when real prices fell by 11% over 3 years and that needs to be considered that’s why I believe that unless you live in a highly speculative Market most likely a price decline is going to be healthy and it might be a good opportunity to negotiate a price in
A property that’s otherwise perfect besides that though I probably wouldn’t be worried about a catastrophic housing collapse although I would personally only recommend to buy a property that you intend on keeping for at least 7 to 10 years that way no matter what happens in the short term you’re going to be
Okay and you’re not going to be at the mercy of Drome po so with that said you guys thank you so much for watching as always feel free to add me on Instagram or subscribe and if you want even more information on the housing market feel free to check out my newsletter Down
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