 Hello everybody, Ricky Karuth here and welcome to the wonderful world of real estate today. We're going to be talking about the debt-silling deal that's happening right now. We're inching closer and closer. I want to talk about the effects that it has had on real estate up to this point for the past couple of weeks, what's going to happen moving forward throughout the rest of the year. So this is going to be a very interesting video. If you're in real estate, if you're thinking about getting into real estate, if you own property, whatever the case may be, this is going to be the video for you. Before we get into that, let's hear from House Speaker Kevin McCarthy and what he said Saturday. So we worked through the night last night. We're finalizing the language on an agreement with the president that I believe is worthy of the American people. Just to take you back to where we all started. Back to February 1st, sat down with the president and said let's work together to be able to raise the debt ceiling, but curve the amount of spending, to let America be able to work again, cut red tape, get some work requirements to help people get back into work. I think this agreement frames all that from limit to save, grow. It doesn't get everything everybody wanted, but that's in divided government. That's where we end up. I think it's a very positive bill. So by the sounds of that, we're getting closer and closer to a deal. It sounds like each party understands we have to make a deal happen. There's members of each party that feels like they gave up too much to make this happen. This is going in front of Congress Wednesday to vote. The votes will last through Friday, most likely. And they definitely have a deadline of Monday, which is June 5th, which is the day that the Treasury says that the U.S. is going to run out of money if we default on our debt for the first time in history, which is not going to happen. So I'm going to keep an eye on this and let you know as things develop throughout the deal, and I don't want to get into the details of the deal itself right here on this video. I want to talk about the effects that this is having on real estate. It's affected real estate for the past 30 days or so. It's going to affect real estate when this deal is cemented, and it's also going to affect real estate moving forward throughout the rest of the year. So let's dive into all of this. Let's start with 30-year fixed mortgages because 30-year fixed mortgages really affect the ebbs and flows of the market. Even though we have about 28% cash buyers out there, transactions, and so on and so forth, it's the mortgages that really drives the entire market. It's really going to be a good indicator of when we're going to see less transactions, more transactions, prices, et cetera. So it's really one of the best metrics to really watch. And then we have to watch the metrics that move the needle for the 30-year fixed mortgage. And the best indicator of the 30-year fixed mortgage is going to be 10-year treasuries, which is really highly correlated to inflation. So you've got inflation, 10-year treasuries, and 30-year fixed that are all very closely correlated. So let's take a look at 10-year treasuries. If we look at a chart here, we'll see that May 10th was the low. And ever since May 10th, for the last, let's say, 20 days, it's been inching up. Why has it been inching up for the last 20 days or so? Well, the closer and closer that we get to this debt-sealing default and the uncertainty and the fact that we haven't reached a deal yet, the 10-year treasuries have been rising. Until we reach a deal, the 10-year treasuries just going to continue to rise. That's all it's going to do. And so right now, 30-year fixed mortgages are at 7.14% as of the day that I'm filming this video, right, which is May 29th, Monday. It's Memorial Day. Happy Memorial Day, everyone. Thank you for your service if you served. So if we look at mortgages here and we go back to May 10th, which is when 10-year treasuries started to come up, we'll see that right here, May 11th was actually the low, okay, and then it's been rising ever since, right there along with 10-year treasuries. So you see guys, right here, here's the charts, here's the data, okay? 10-year treasuries and inflation drive the mortgage rates. And we can see that ever since May 10th, 10-year treasuries have been rising, you know, the closer and closer we get and not having a deal, as far as the debt ceiling goes. And mortgages, what are they going to do? They're going to follow right in line. So that's why we're seeing 7.1, which is massively, massively high. So Zilla wrote an article that said that the debt ceiling default would send the U.S. housing market back into a deep freeze, okay? So they kind of went through and they actually created some data around what would happen if U.S. actually defaulted on their debt, which they admit is a very, very highly unlikely scenario. They say right here, a debt default is very unlikely. But a few scenarios, projects from Zilla shows that it would decrease sales sharply at mortgage cost balloon. And so basically in essence, what the projections show that if we did hit a default, home sale volume will likely decline sharply with the projected defects of up to 23% fewer sales in the hardest hitting months. So they're saying that we're going to have way less sales. I absolutely agree with that. If we did hit a default, then we would have much less sales. They also say home values could be 5% lower than their baseline in a no default forecast by the end of 2024, okay? And so they just kind of talk about what's happening here, interest rates. They think interest rates would hit 8%, 8.24 I think it was by September 10th or something like that. And the reason being is because if that happened, what would happen? Well, 10-year treasuries would increase just like they are right now. What's happening right now with 10-year treasuries is an absolute proof that what they're saying is true, okay? The 10-year treasuries are going up just on the fact that they hadn't got to a deal yet, okay? There's no telling what they would do if we actually defaulted, right? And nobody really knows. It would be catastrophic. They also call for unemployment to really skyrocket, okay? And so if you look right here, this is interest rates. And this is their projection if we did get into a default scenario where right now we're around 6.5 and they say a default scenario bumps us into the 8th and then it slowly kind of comes down and gets around a little over 6 by the end of 2024, okay? This is unemployment. Right now we're around 3.5%. This is what they project would happen if we got into a default scenario. Boom, it would go to 8, a lot like mortgage rates. And then it would slowly come down over the next year and a half. This is number of sales. So this is the scary one right here. If we defaulted, Zillow projects that we would dip into the under 3.4 million sales on an annualized basis, right? Now that's a crazy number because 2008 we had 4 million sales. So to dip down into the under 3.4 range would be absolutely insane. But then look, it comes back and then we get back to the 4.2 range, which is not too far from where we are now really. We're right there in that 4.3-ish range right now by the end of 2024. So all these scenarios kind of have us getting back a little back to normal by the end of next year if this were to happen. And this is the price differences. They're showing prices increasing here in a no default and then the orange here shows in the default situation, which is not devastating, right? As far as prices go, they're not showing anything devastating here. So this is something to watch. It's 10-year treasuries. It's 30-year fix. If you're, you know, if you really want to pay attention and try to really stay on top of this stuff, these are the kind of things we need to look out for and keep an eye on. We also need to keep an eye on how this debt deal actually works out, how the vote goes in Congress moving in through the rest of the week and making sure that something is cemented by Monday, which I feel, you know, 99.9999% confident that that's going to happen, but we still want to keep an eye on it because when it happens, we're going to see things get a little better. We're going to see 10-year treasuries start to come down, right? That's how this is going to affect us. Immediately, day one, I believe we'll start to see 10-year treasuries. Ease off, we'll see 30-year fixed. Ease down, and we'll kind of get right back where we were maybe three weeks ago, where we had mortgage rates in the, you know, 6.25 to 6.3, 6.4 range. 10-year treasuries will be back down where they were, and we'll be in a more comfortable place. Not really where we want to end up, but we'll be back in a comfortable place. And then what? Okay, and this is very interesting when you look at this data. Now, I've been calling the whole time for prices to go positive year over year in July. Why? Because right here, this is July, right here. Uh-oh, let's see. Let me get back to prices, medium price. So, this is the beginning of July, right here, 2022. You see how there's this wall right here? I just think that we're going to bust through that wall, but you see what we're doing here in 2023? It's still ticking up. It's inching up. Like, we may go positive year over year before July. It may happen in June at some point at this rate. We'll just kind of see what happens, but we know that when we get over here in this area, July, August, September, October, November, my opinion, we're definitely going to end up in a hugely positive year over year price scenario. Now, look at active listings, okay? Right now, as we speak, we're 0.86% under 2022, okay? Now, 22 was under at this point in the year, right? We're talking about today, this point in the year over the last couple of weeks. We're under 2022 right now, inventory-wise, but we were already well under 2021, you know? The year of the boom, we're under 2022, which means that for this point in the year, we're the lowest that we've ever been in history. Now, if you go back to January, February of 2022, we were lower than we are right this second, but I'm saying for this time of year, we're the lowest we've ever been. We just crossed the line of 2022 and we're 0.86% under where we were in 2022. That is absolutely incredible to see this happen. So, we're looking for prices to go positive year over year. We're looking for mortgage rates to continue to dwindle down, and this debt-silling deal will immediately alleviate a lot of that pressure on 30-year fixed. And then this is our big date that we're looking out for June 13th. This is going to be the next CPI report. So, all the CPI reports, we're watching incredibly closely right now. And what's been happening every report is, is inflation has been dwindling down and it's been rocky. There's been parts of the report that are good. There's been parts of the report that are okay. There's been parts of the report that are not so great. But what we're going to see is that continue to level out. It's definitely heading in the right direction. So, June 13th, mark your calendar for that. That's going to be another big date. So, all in all, here's where we are. Debt-silling is on its way to getting worked out, which is going to alleviate 30-year fixed, 10-year treasuries. June 13th is going to come along with some better inflation numbers. This is going to replace last year's numbers. And we're going to move into this place where we have lower mortgage rates and we're going to unleash the beast of buyers that are out there waiting to buy. We've got millennials who want to own 98%, want to become homeowners. We've got record amount of them, 33-year-olds entering into the market right now this year. It's going to continue for another 16 years. We've got existing homeowners who are dying to move that they feel trapped because they're sitting on 4% interest rates. We also have people coming from different countries who are coming into the country and they need a place to live. So, that's going to put upward pressure on price, on home prices. That's going to put pressure on demand of rental units and housing and everything. So, we've got so much happening right now when it comes to demand. You've also got rocket mortgages coming out with 1% mortgage rates. United Mortgage is doing the same thing. We've got 40-year mortgages now. So, there's a lot happening to try to help affordability because here's the thing. I don't think the government has realized, and I think mortgage companies, I think everyone's realized that, listen, prices aren't going down. It's simple economics, supply and demand. So, what am I doing? Buying houses closed on one a couple of weeks ago. I've got three more under contract set to close on the second one next week, and then I've got two new constructions closing at the end of June. So, I'm excited about those. Close them out, get renters in there, let inflation do its thing. If rent goes up just 2% to 3% a year for the next five years, not to mention 10%, what does that return on my investment look like on the prices I'm buying the houses for today? These houses are all $250,000 to $350,000, and anything that's in that price range, I'm snatching. So, it's really a no-brainer to me. Anyway, I hope this kind of gets you up to date on where we are in the market. I'll have another video for you really, really soon. Let me know in the comments if you have any questions whatsoever, and we'll see you on the next video.