 Good day, film investors! One of the questions many ask themselves is whether the housing market is in a bubble, the American and the global European also housing market. Let's look first at prices. We can see here that now prices, home prices, the U.S. National Home Price Index shows that they are above prices in 2007. So from that perspective, also the spike is pretty straight forward up from 2012 and someone could say ok prices are again exaggerated, ridiculous, crazy and this is a bubble. Just to make things sweeter, a recent Wall Street Journal article described how house flipping is very hot and Wall Street is investing more and more in the business and KKR invested in short-term house flipping loan products, so-called flip bonds, where the yield is between 8% and 12%. And funnier is that the risk of these bonds is estimated by the flippers previous success. So if you constantly flip houses and you do well, then the risk is lower and you get a lower interest rate and the risk estimated risk is better for you. So again a very crazy situation where the risk is estimated not by the level of house prices but by house prices can only go up and down and they estimate low risk for those who can buy and flip a house very quickly. So the risks are there but they will only materialize if house prices dropped but who has ever seen house prices drop, it's impossible right? So house prices have dropped in the past especially in the last from 2007 till 2012-13 but let's look whether this is a bubble. A bubble is usually a bubble only when it bursts until it doesn't burst it's not a bubble. So let's look at some more data that will probably help you a little bit in making your decision and what lies ahead. Whether it is a bubble you should wait with purchasing or you should sell your home or you should do nothing or you should purchase a home no matter the price. Let's see. The key with real estate is of course demand, demographics, hot places, location, location, location, that's the first rule. But another thing that impacts real estate are interest rates and we can see here that interest rates went from 7.5% in the 1960s, they went up to above 20 in the 1980, beginning 1980s and then went straight down to 3.5 lows. This is the 30 year fixed mortgage rate to 3.5 just a year and something ago. Now the level is a little bit higher at 4.55 which is already significant. It's interesting to see that in the 1990s the mortgage rates were above 8% and that was normal. Now let me give you an example how interest rates work. An average household income in the States is 60,000 without any kind of debt and available down payment of 50,000 according to bank rate the affordable home amount is 253,000. The loan is then 203,000. If I calculate the affordable home amount with an interest rate of 8.5% the affordable home amount declines to 184,000 thus a 34% decline. Consequently it's logical that home prices alongside inflation doubled since 1999 as interest rates dropped so much. Now interest rates are going up so we expect home prices to go down but it's not happening because there are some other factors. In fact, when is rising, more employment, more demand for homes, inventories are low so there are good factors still pushing home prices up, up and up. And you can see the trend going up and then people rush into those trends. This means that higher interest rates won't correlate with lower home prices but home prices will go up until they inflect and then they will go down sharply if something doesn't happen but more about that later. Just about the situation in Europe interest rates are still very very low. You can see here 30 year home without down payment rates fixed mortgages are around 3%, Aegon it's my mortgage insurer, my mortgage provider and I have financed my home with 103%. So also home prices in Europe have spiked thanks to extremely low interest rates and the money ECB is printing day by day. The question remains is the housing market in the bubble or not? The home builders say no because their confidence level is back to pre-crisis levels. High employment, lower taxes, that brings more money and higher demand is one way of looking at it and there is no bubble inside if you look at from that perspective. However, if we take an opposite perspective where interest rates increase, normal recession comes along and home prices return to inflation growth levels then we might say housing is in a bubble. As we can see here inflation growth steadily over the past 20 years but again housing prices have diverged from inflation growth. If mortgage rates go to 8% again then we'll see a drop in housing at least 25-40% when the trend inflects even more. But there is something that I want to discuss so there is always the risk that housing is in a bubble but there is something else I want to discuss. Here are a few things to think about when discussing home prices and the housing bubble market. My home mortgage is financed by Aegon, a global insurer. Pension funds invest in securitized mortgage bonds in order to get some kind of return in this low interest rate environment. Governments that have high debt ratio collect taxes based on home values. Home prices have surpassed their probably 2007 level already which was the goal of central banks of politicians. Inflation is around 2% per year, government debt levels are extremely high from a historical perspective and don't allow for much higher interest rates. All of that indicates that nobody, nobody would like higher interest rates which means that stocks and housing prices might even do well. The difference between housing and stocks is that stocks have some other risks as earnings. When earnings go down, which might happen then housing stays because it protects against inflation and it's a safe haven. So stocks housing, I would say that stocks are in a bubble, housing yes and no. Very likely that the governments and central banks will do whatever it takes to save the housing bubble. That's even stocks as they are doing in Japan already. So it's a rigged market and we have to see how to invest the best way, how to do, make financial decisions for our life, for our betterment in this rigged financial market. So I hope I have given you a different perspective than the doom and gloom perspective. I'm long real estate, what can I say? So it is an interesting perspective. What will happen? Nobody knows. Again, the key is diversification across asset classes, rebalancing when something is overpriced, underpriced, etc. Keep smart, think long term and you will do well. Thank you for watching. Looking forward to your comments. Check my research platform in, if you're interested in detailed research analysis on stocks and sectors, check my book if you want to learn more about investing and I'll see you in the next video.