 So there's a lot of buzz on the internet right now about the housing market crashing worse than 2008. And I watch a lot of these videos because I really want to understand the perspective of someone who really believes that the housing market is going to crash worse than 2008. And most of these videos are clickbait. There's not a lot of value in them and it's just a lot of, you know, huff and puff. There's really, you know, nothing solid and substantial about it. But there are a couple of videos with some pretty valid points. But it's more so leaning towards very, very worst case scenarios, which are highly unlikely. So I want to go through that. I want to tell you what those worst case scenarios are, but I also want to share with you some data to try to help you understand where we're going and what history is telling us in terms of where we are in the cycle and what's liable, what's the highest probability of a prediction to happen. And listen, take all the, you know, predictions with a grain of salt because it does not matter if you understand cycles. And that's the main point in my channel. That's why I started doing this, to share everything that I know about what I went through in not only 2008, but all the many recessions between here and there. And that's really helped me understand how to not only crush it, you know, as a real estate agent and investor, but also to, you know, in a normal market, but also during a crash. And so I kind of want to cover that stuff. But there's a lot of YouTube videos out there, not as many, but there are some out there that are preaching optimism into the housing market. And I'm included in that group. And the reason being is because I'm optimistic about the market at all times. There's going to be somebody in the comments that says, rookie, of course, you're a real estate agent. You're definitely going to say it's time to buy. It's always a good time to buy, right? And I see those comments and I think, you know, the thing about it is, is that, you know, when real estate agents say that, they're not just saying it to try to get you to buy a house. Real estate agents, just so you know, they don't care if you buy a house or not. Because they know that you're eventually going to buy a house and they just want to build their relationship with you. They're actually giving you sage advice. They're actually telling you exactly what they think. And because most, a lot of agents are experienced and, you know, they understand how cycles work, that every moment that they're in, they see the optimism behind the market. And so therefore they tell you at any given time that it's a good time to buy because that's what they actually believe. It's not just a sales ploy or something to try to get you to buy a house. But nevertheless, what I'm getting at here is that I want you to take the mistakes that I made and hopefully not make the same mistakes moving forward, but the biggest thing is understanding perspective behind how these cycles work. If you're always prepared for worst case scenarios, then nothing ever scares you. If you can visualize, okay, if prices go down 50%, what then? How do I capitalize? How do I continue to crush it during that moment? Oh, well prices are down 50%, well that'll be easy to find buyers at half price. Will there be less buyers? Sure, because when you think about the mechanics of that, there's going to be way more supply than demand. If prices go down that much, that means there's way more supply and far few demand. So there will be few buyers, however, there will be plenty of buyers that want to buy properties at half price. Listen, that's what happened in 2008. Prices went down 50%. And guess what? They were easy to sell. There were a lot of them. My buyers had plenty of choices. They got to pick the exact property they wanted and they got an amazing deal. So that market wouldn't be bad at all for real estate agents, for investors, for buyers and even sellers because a seller wants to buy, they want to upgrade. So if they can get out of the house they're in now, buy something half off in their current house, if they want to rent that until the market comes back up, great. There's a lot of different scenarios here in which that is an optimistic situation. Most people want to look at the pessimistic side. Oh, the sky is falling, everything is going to zero. It's never going to go to zero and closings are going to continue to happen every day for the rest of your life, no matter what the market does. Look at 2000, look at dot com crash, 9-11, 2008, pandemic, closings, closings, closings, closings, closings. It never stopped. So be incredibly optimistic at all times, look at it for what it is with the true data. Agents reach out to me and say, nothing's happening in my market. And then I literally Google their market real estate stats and click the very first link and it tells me right there, inventory up, prices up from last year, 1,000 closings in the last month. Every single time. Guys, ladies and gentlemen, look at the data, go in your MLS and look and see what's going on in your market. Don't just say nothing's happening because what you're doing there is you're lying to yourself, you're starting to believe that lie, and you're using it to justify the fact that you're not doing anything, you're not working at all. So with that, let's dive into some data here. I've shown you some of these slides, but I want to show you more of this data to try to illustrate the picture. And I also want to play devil's advocate. I want to tell you the negatives and the worst case scenarios in case that does happen. And I want to give you two things to really look at that could turn the market negative next year. I say next year. It's 2023. We're here. Ricky, it's not next year. Now it's this year. I want to share with you two things that we need to watch out for in 2023. So let's dive in here. The first one is inflation drives mortgage rates and you can see the correlation between inflation and mortgage rates. They're directly correlated. There's not a guru on earth that tells me that inflation is going to stay the same or even go up this year. Everyone believes that inflation is coming down. And we know that 30 year fix are tied to inflation. One of my points of devil's advocate is going to dive into that interest rates not coming down. So stay tuned. The next slide here is the correlation between the 30 year fixed and the 10 year treasury. That spreads always around 2%. And we know that's tied to inflation. If we look at recessions and mortgage rates through recessions, everyone says we're heading into a recession. Every single recessionary period we've had, which are right here in the dark areas, we see that mortgage rates went down during the recessions and most of these recessions, they went down not only during but also after the recessionary periods. So if we're heading to a recession, history tells us that mortgage rates are going to come down with that. If we look at prices during recessionary times in our history, we see that prices went up, up, up during all these times except for 2008 and the early 90s during that recession, they dipped just a little bit almost insignificantly, but traditionally speaking generally prices go up during these times. This is a very interesting chart that shows supply and demand. The orange is new construction completions. The blue is demand. And so we see back during the great recession that there was way more supply than demand. It was way out of whack. As you go move forward, you see that it started to balance out there in 2010, 11, 12. And then we see demand take off. And we come all the way to the place we are now, which is we have way more demand than we have supply and builders have, they've stopped building as much. They're down 30 to 40% right now as we speak. And we're also moving into a place where inventory is fixing a plummet. So if we look at this chart, we see, yeah, inventory is up from last year, you know, okay, but look at the trend from August is trending down in terms of active listings. So that's very interesting because every single year, here's the normal cycle of inventory of houses for selling the US. We see it skyrocket to the moon and then plummet, skyrocket plummet, skyrocket plummet, and it's stair stepped all the way down to where right now we have about a third of the inventory as we had back in 2007. We're about half of where we were pre-pandemic and look at the trend, right? It's shot to the moon and what do you think is going to happen next? Plummet. It happens every year. This is another illustration of the inventory story going back to 2000, but 2007 we had four million listings. Right now we're at 1.2. And if you take out the pending deals, we only have 750,000 listings in a country full of 330 million people, right? And if you look at this chart, even going back to 2017 there, we're half of the inventory that we were in 2017 and it's about to nosedive if our predictions are correct and history repeats itself, but that is literally what we are seeing since August has been coming down and we don't see a flood of inventory coming from anywhere, buyers from traditional sellers anywhere. If we look at the foreclosure activity, we see that we are historically low and we're up from last year because there were moratoriums on foreclosures last year, but we're not even half of where we were pre-pandemic. We got a long way to go there. And this is one of the most interesting stats right here is that on average homes in America have 58% equity, which means on average an American owes 42% of the overall home value. Now this is averages. Of course there's people out there with 95% loan to value, 80%, 70%, all that stuff. This is an average, but this is a very interesting stat because if short sales are going to come into play, that means that we're going to have to lose 58% of our value. Short sales means you sold short of the loan. You sold because your house is worth less than what you owe. And if we on average have 58% equity in our houses, it's got to basically crash and burn and then burn again to get to a point where we're going to have short sales on the market and this is also going to be foreclosures and everything else. There's just so much equity. So when you look at all this data, you realize that we're in really good shape. But what do you think is going to happen? As inventory comes down and as interest rates come down with inflation, all the buyers are sitting on the fence and they're waiting on interest rates to come down as inventory comes down. And once interest rates hits the point where all the buyers say, okay, this is the level where we're comfortable, they're all going to come out at once and fight over the same house. That's what we're going to see, ladies and gentlemen, is we're going to get back to multiple offers on houses. That's where we're headed right this second. Let me play devil's advocate for just a moment and give you a couple of things to watch for moving forward. The first thing is iBuyers. The amount of houses that iBuyers own right now, a lot of these doom and gloom videos say that the inventory that iBuyers are sitting on, if they were to release that inventory and unload that into the market, that would create a problem in the market because they have so much inventory. I mean, there are markets where they picked up 29, 30% of total sales were bought by iBuyers in certain markets. They say that one in five houses were bought by an institution last year. So if that's the case, that doesn't mean 20% of all houses in America means 20% of the five million houses that sold, which is such a small percentage, guys, of houses in America. It's like a microscopic dot number one. But I don't know if they were to all unload their houses at once, how that would affect the market. Would it be positive? Would it be negative? Let me know what you think in the comments. But I believe that it would be a positive thing for the market. This is just my opinion because we have so little inventory. If we added inventory to the market, I think it would be a breath of fresh air. I think agents would be happy they have inventory to sell. I think buyers would be happy to have a few more choices and I even think sellers would be happy because it wouldn't really affect price much because there's so much demand that would eat up all that inventory and they would actually be able to get a house that they want and upgrade or whatever they're trying to do. I think it would be great for all parties if that happened. So I'm playing devil's advocate of devil's advocate here. The second thing to watch out for is wage growth. Wage growth is over 5% right now and with inventory coming down, if it comes down low enough and there's a big enough spread between inflation and wage growth, let's say inflation gets down to 3.5 and we're at 5.5 wage growth, that could cause a situation where people are spending more money again which could cause a second wave of inflation and this guys is the reason why the feds are now increasing rates and saying they're going to keep rates high because they're not in a battle necessarily with inflation anymore although they're still fighting that battle but they're winning that battle but now they're really focused on wage growth and the reason wage growth is so high is because there's so much demand from consumers to the companies that the companies need to hire employees to service all the demand but they have to pay more to entice employees to get off the couch to come to work because they're making more money on the couch than they would if they actually went and got a job. So you know this is a ring around the rosy situation that we're keeping an eye on but again prepare for worst case scenarios. It's never going to go to zero. That's the really incredible thing about this market. Closings will always happen and so you pay attention to this stuff but you take it with a grain of salt and it doesn't affect your day to day. What you want to do is pay attention so that you could be three steps ahead of your competition and hopefully being a student of the game can put you in position to become that top 10 real estate agent in your MLS. Top real estate agent in your MLS whatever it is you're trying to achieve this could be the difference maker right so on the surface level it doesn't affect your day to day but it could affect your long-term prospects of always being three steps ahead. That's how I became number one in my MLS was paying attention to the foreclosure situation and I said hey let me represent buyers who will hold and then sell those assets for a profit in three years and then upgrade to something else and refer me eight people. That's the way I thought and that's what I jumped on and committed to and guess what it worked out for me. So paying attention to the trends and looking for the opportunities are massive and there's always ladies and gentlemen opportunities. So I hope this video helped you tremendously. Shoot me a comment let me know what you think and if there's anything in the world I can do for you and we'll see you guys on the next video. Take care.