Speculators from February 2019 to June 2022 prices on the national level according to the case Schiller index jumped 51 percent this mass of never before seen leap in values changed everything we know about real estate in some cities like Seattle for example the situation was even worse their values in
The same time frame jumped over 100 percent this era of incredible growth greed and speculation caused millions of Americans to begin questioning the health of the market were we seeing the development of another Super Bubble similar to what we saw in the early 2000s and was this evidence that soon
Another crash is on the horizon these questions are debated daily on YouTube Wall Street and various other platforms there are full of people on both sides we can speak about evidence from each perspective for hours but at the end of the day there is one simple chart that
Tells a story better than anything I have ever seen presented and it’s this the case Schiller index filtered by year over year change this Infamous charge tracks prices nationally going back to 1987 and reveals everything you need to know about real estate in America take
Any point on this line and what it shows is how much higher or lower home prices were compared to one year ago for example in December 1997 home prices were around four percent higher than December 1996. now why is this chart so important well it Paints the history of
The market for the last 35 years and we can divide this story into five distinct parts that tend to repeat themselves the first is the early 90s collapse a period of home value decline this was the infamous Regional crash or as ravager calls it the hidden crash in some
Markets like La prices declined as much as 25 percent it’s not talked about much but the US also had a small recession during this period and it ended sometime around January of 1992. from here the market underwent its golden age for 13 years we had steady growth the economy
Expanded and home prices went higher sometime in the early 2000s greed started pouring into the real estate sector with speculators investors loan officers agents and Builders all jumping on this train that had been printing money for over a decade what we saw was the formation of a bubble massive jumps
In value that raised eyebrows all over the country sometime around September 2005 the Train derailed and the long crash began lasting all the way till May 2012. this seven year period of trouble was called the big one the great financial crisis a period where nobody wanted anything to do with real estate
Then from 2012 till about April 2022 we saw what was the great recovery similar to what happened in the early 90s period we saw home prices slowly go up Dennis things got better and better are more and more people jumped on the bandwagon once again speculators investors loan
Officers agents and even social media trends this time around turn to real estate as a steady foolproof way to get rich led by the events of March 2020 this train found a new gear just as the early 2000s saw price growth jump to record levels the early 20s saw the same
But to an even higher degree at one point reaching 20.7 percent year-over-year growth the market was euphoric there was no way anybody could lose money and buying a house was the easy way to get rich every property from distress to luxury became a printing press it didn’t matter where you were
From Columbus to San Francisco and everywhere in between real estate was rising and nobody was stopping it until May of 2022. that month the market hits first road bump the decline had started in May of 2022 year-over-year growth reversed headed straight down now after seven consecutive months of declines
Experts began to wonder if we are in a new phase of the market another crash phase how is something that looks eerily similar to this not going to result in this that is the question everyone is trying to answer we all know that everything in economics is a cycle and
Right now we look to be in a transition phase similar to what we saw in late 2005. these long cycles of the past have all followed the same exact pattern a crash followed by a slow recovery followed by yet another round of greed and then back to a crash a cycle that
Has been accelerated by various forms of Leverage however many claim that this time it’s different and I understand their point the main argument is inventory from their perspective there just aren’t enough homes for sale to cause declines like the ones we saw in 2008. if you listen to the Bulls their
Story is that following the demand shock of 2020 there just isn’t enough for sale signs to produce falling prices and besides that Landing standards have improved along with the fact that most people are sitting on homes with mortgage rates under three percent and those people aren’t moving anytime soon
So why do I think otherwise well besides this Cycle Theory that I just showed you there is another story one that isn’t being reported on the news in the media or by any expert but before I reveal it please take a moment to hit that like And subscribe button if you enjoyed the
Content thus far as I make this video I’m sitting at 149 000 subscribers and I would love to hit that 150 Mark before the end of the month now back to what I was saying you see right now if you look at National statistics they show you that inventory
Is indeed low but with an asterisk it is low but rapidly rising in my last video I explained how if we continue to have the same type of growth in the inventory that we saw last year we will end 2023 close to 2019 numbers which was commonly
Accepted as a normal inventory level now if you watch my channel you already knew this but there is something else that isn’t being discussed that is changing the way experts look at these National inventory numbers on the surface there is no denying that right now active listings do appear rather tight but what
Is actually happening on the ground is very different but before I explain we need a quick history lesson if we go back to the last crash the crash of 08 you can see that there is always a few cities that get hit extra hard in the last crash it was cities like Phoenix
And Las Vegas now besides the fact that the values in these areas went down further than the national average it also meant that the decline started earlier that is to say that these hyped up areas act as the canary in a coal mine for the rest of the country they’re
Often hit first before the trouble spreads elsewhere and when the trouble ends they find themselves with more damage than elsewhere now let’s apply this concept to what is happening right now today in 2023 while the national case Schiller index is down there are plenty of cities where prices are flat
Barely budging from the 2022 highs and these cities are almost exclusively found on the east coast and Midwest look at any of the Countrywide price graphs and you see that price drops have already begun on most of the West West Coast but in the East and Midwest things
Look no different than in 2022 what we have is a story of two sides East versus West and this difference may explain why San Francisco has seen price drops already over 10 percent while Cleveland has only Fallen one percent to try and understand why this is happening I did a
Small experiment I took data from realtor.com and combined the active listing Counts from five of the biggest cities in the west and five of the biggest cities in the East and compared the two what I found is wild there is a massive Divergence happening with inventory surging in the west while it
Lags in the East you can see that from this chart that while the West Coast which is the orange line has seen inventory fall over 34 since January 2020 the blue line which is the East Coast has seen inventory fall over 63 percent in that same period that is a
Massive Divergence that isn’t being reflected well in the national average you can tell from this graph that these numbers for the past seven years have almost always followed each other are in their perfect fashion Divergence is rare and when it does happen what we tend to
See is that the East Coast catches up to the West Coast this was the case in 2018 and 2019 when the West Coast inventory was nearly 20 percent higher my belief is that the inventory rise will now begin to spread from these hyped up West Coast cities to the rest of the country
And when we see that we’re going to get the blue line catching up to the Orange Line in fact if the West Coast follows the same trajectory as 2022 what we’re gonna see is this by the end of this summer inventory in the west will rise above 2020 numbers matching even
Exceeding pre-pandemic inventory now if my theory about Divergence is correct and the East Coast Springs up and follows we’re gonna quickly see a supply glove forcing prices that were already on their way down to spiral out of control right now you can zoom in and see the inventory levels are coming down
On both sides but that is a matter of seasonality the moment of truth comes later this spring specifically in the months that follow April these are of months where inventory typically begins to rise and judging by those numbers we will get a true sense of how bad things
Will get last year in April the West Coast saw an increase of nine percent in active listings while the East only a one percent increase if these April numbers come in high we can almost certainly predict that prices will be coming down in the next phase of the
Crash is beginning so in summary housing crashes have always followed long cycles for the past 35 years and judging by the past we are almost certainly in a dangerous phase heading into 2023 the common argument is that inventory levels are too low but new data is suggesting that this will rapidly change Supply
Numbers in the west are already showing signs of a crash and this summer will prove to be a pivotal point in understanding just how bad things will get thank you guys for watching as always please make sure you hit that like And subscribe button if you enjoyed
It and let me know in the comments below if you agree with my split Coast Theory
