 Cool off. Yes. A crash totally something different In today's episode, we're going to talk about the housing market for reasons why the housing market Not crash maybe cool off and slow down like the federal reserve said But ladies and gentlemen, if you haven't done so already, please go ahead and make sure you hit that like subscribe Comment and share button and as always And as always this is your gracious host welcome to the princess prince of investment Which it holds prince dice coming to you guys and girls live all the way from the beautiful city and state of denver, carato Via hallelujah. I am So the first thing I want to talk about today is the housing market crash, right? Everybody's saying oh my god, how's the market in the last two three years? It's been a tremendous bubble and now after the bubble we're going to have a crash I'm going to give you four reasons why The number one reason thing is post dramatic stress syndrome PTSD. You heard me right prince What are you talking about post dramatic stress syndrome? Isn't it like a people who experience dramatic things and how they think about them? Yes This generation has been one generation that has sat back and watched a housing crash happen throughout the world in 2007 2008 2009, right? So back when the housing market happened back in 2009 Wow myself I was stationed in I was overseas in Iraq in 08 Some of Iraq and I was in San Diego and I was it intimidated me from then on from buying a house I saw so many people lose their houses I saw many people lose their jobs lose their clearances I saw the worst of the worst It made it made the renters look like smart people and it made the people who went out there and brought houses look like Not idiots, but not so smart The thing is especially in my in my career military the big thing that people do They would get stationed somewhere in San Diego They will buy a house hold it for two or three years turn around and sell it Rent it walk away at the year two with a hundred thousand dollars fifty thousand sixty seven thousand dollars a profit from a house Sometimes they walk away a little bit more They go into the next house and they continue to flip houses by the first house second house third house Everything was great That is until like everything else the bubble burst the bubble burst a lot of people got left holding the bag They intimidated me And that made me scared of seeing the housing market when it was doing well Prince what does it have to do now in 2022 now we fast for today? We're 14 years later from 2008 and everybody in the last five years every time we see the housing markets start to do Well, we automatically think hold on wait wait wait. It's about to do bad. It's about to do bad It's about to do bad, right? There's no in between We know we think it's going to be a boom or it's going to be a bust. There could be no in between Just like we know we have a bullish market. We have a bearish market But we also have a market called a consolidated market meaning the market is moving sideways Now prince, why do you say this a lot of people since we've seen those bad times we think they're going to happen again Now you go back before 2008 and ask yourself when did we see a last housing market correction and crash like we saw in 08 Ladies and gentlemen that goes all the way back to 1929, you know, that's known as a great depression when we saw traumatic housing prices drop We saw a little bit in the 80s, but not like we saw in 29 or in 2008 You look at how far apart is that 70 almost 80 years apart, right? But the thing about it is why do we continuously wait on a bus? Because we've just seen one we saw the stock market crash in 2008 And we sort of we saw a pandemic come along and we have also seen the housing market crash. So that makes people a lot Very weary when we look at the housing market just doubling and tripling and just shooting up all across the nation I agree. Ladies and gentlemen, it's definitely a seller's market But as you if you compare attention to the housing market, you can see the cool down Look at that cool down. Why the cool down is happening two things that are happening We have interest rates, you know, just about two years ago The average interest rate was in the low twos even you can catch the on the high ones 1.8 most people got a 2.5 Or 2.25 or 275 that I've seen back in 2000 I mean back in 2020 now you fast forward to 2022 the average market rate is four to five percent What does that mean? That's a lot anybody that has purchased homes and no homes That's a lot when you're talking about adding up into a mortgage that makes a house more affordable I will tell you this When I purchased my home if it was at five percent, they'd probably be unaffordable for me Right, but at the time interest rates are very low when interest rates are very low It allows it allows you to purchase more home for your money when interest rates go up It allows you to purchase purchase less home for your money because a lot of your mortgage is going to interest Now this is cooling off the market two things is happening. You take my neighborhood for example When I moved into the neighborhood, it was probably about a $400,000 neighborhood Almost a half a million at the time. Now you look at it today. It's over 600,000, right? So not only is the housing market that houses is 600,000 But the mortgage rate is about five percent when you look at a 30 year fixed mortgage rate, right? So when you look at this the house is now way way more unaffordable two things is happening We all know as the value of a home a home goes up So does the taxes so the taxes away higher because the value, you know, you get you have to pay your property tax The property taxes are higher because you no longer have a 400,000 mile home. You got a 600,000 mile home So one the taxes are higher when the taxes are higher, you know, that pushes that pushes up the mortgage When the interest rates have doubled that also pushes up the mortgage and then not to mention The house is worth more and costs more that itself makes the house more unaffordable And when something is more unaffordable, it is less desirable When something is less desirable, you're going to have less people in the buying pot Which is in turn going to cool off the market. So when I go to sell my home, the buyer is going to We're going to go from a seller's market into a buyer's market. We know this is going to happen Now the buyer may turn around and say, hey prince, you know what? No I want these walls repainted and I want this bathroom upgraded and you got a leaking shower and your toilet has a little Shower makes a little noise and your toilet makes a little noise when you flush it. I want all those things fixed So when I purchased my home people was buying anything. They were over bidding Now people are going to underbid you and they're going to demand more for you in order to sell your home So home's not going to be easier to sell and that's not a bad thing That's kind of bouncing out the market a little bit. You kind of want a little bit of tug of war And when you're buying and selling that's called a good old supply and demand And we're trying to find that equilibrium But it won't be a crash. I don't think we're going to turn around and say, oh man, this house said it was worth 600,000 Now it's only worth 300 I don't see that like a lot of people assume Now let's go into a couple things that I've written down here Number one thing is inventory. We're still ladies and gentlemen in a short inventory supply Where you look at the market across the board. You still see inventory is very low Right, we look at the latest housing report put out the bank by the markets bankers association The consumer building when you look at consumer building inventory still remains low So right now you still have a good bit of buyers that are there and supply has not meant the buyers demand So with that, uh, inventory been a little bit low. You can tell right there that is not going to Be a crash into the market Another thing is number two Um, no one wants to sell You kind of see in the housing market not a lot of people who already have homes are looking to sell homes Number one reason being is like, oh, look, I made $200,000 in equity But if you sell your home and take the $200,000 in equity, all you're going to do is turn around and go buy another home That's overvalued, right? So for prime example, let's take someone who lives up here in Denver, Colorado If you sell your house and make $100,000 150 maybe $200,000 and then you go off to San Diego, california Now you're going to buy a house for a million dollars To get the same thing the same thing that you had in Denver It doesn't make it seem like it was all that great of a deal when you go to the next market, right? So that's the first thing that we notice when we look at the housing market A lot of people don't want to sell because the people who have how who have houses who have nice equity You're not going to get the biggest bang for your buck as you go shop around currently In a seller's market. So you don't want to be on the buying side in a seller's market, right? So the second, um, so that's one big reason people are not willing to sell when people are not willing to sell that makes inventory Um, that hurts inventory because there's not as many houses on the market So people are willing to keep their houses not that many people are trying to sell their houses. Um, you don't see a crash What happens is when we saw an 08 when you have a lopsided effect Where you have a high inventory and a low amount of buyers That's what drives down the market. That's what causes us to have a crash When you go into a neighborhood and all the houses are foreclosed on and not that many people want to buy the houses That itself ladies and gentlemen, we have that's when you get into a crash or a bear market Because people just start selling the house for anything I live back in 08, but I wasn't as a Uh, a stoop investor back then I didn't understand really what was going on I come from the south from the country where people didn't purchase their first home till it was in their Late 40s and 50s. That's if they even purchased a home Um, that's when people kind of purchased home. I didn't really see too many 20 and 30 years old 30-year-olds buying homes You know in my little small town Right, so that goes back to my that goes back to number three number three The biggest buyer base for homes last year in 2021 was millennials Back in 2008. It had this notion That millennials wouldn't be afforded houses and nor would they buy houses that that american dream dream of eating an apple pie behind a White picket fence and that nice suburban home with a dog and a wife and two kids That american dream had changed and millennial was no longer interested According to the data in 2021. That's no longer true millennials still want houses And they are still buying houses and they are a big consumer base As our baby boomer market starts to die off not starts down, but it's not dying off But it becomes more elderly. Now we have this millennial market That's out looking to purchase homes like we didn't expect a lot of them not buying homes downtown But they are moving out to the suburbs in purchase homes So you have that consumer base When the purchase homes it makes it has a buyer market Now the other thing I wanted to put into play as well Is we have companies out there, you know, there's been on the show here called roof stock Now Prince, what does roof stock mean roof stock is a company? Where people who live in san francisco, of course the average everyday person who lives in san francisco cannot afford a home Let's look at the average millennial that live in Denver. You probably cannot afford a home Let's say if you do something this basic is like, hey, I'm a college student and I work at Chipotle and I drive uber You're probably not going to afford a single family home in Denver, Colorado Which the average home price is 600 thousand dollars a little bit over 600 thousand dollars And also the average mortgage 30 year mortgage Interest rate is about four or five percent That means on average your mortgage is going to be north of three thousand dollars a month And if you're doing a job like a working at Chipotle in uber, that's going to be a little bit stringy was to do So a lot of people College graduates are walking out of school They're getting salaries like 30 40 50 60 thousand dollars Maybe something like that If you have a family it's hard to support a family on 50 60 thousand dollars when Half or over half of your income is going to just to have a mortgage, you know, 75 percent of the income, right? So houses are now becoming a little bit less affordable But it still doesn't take away from the fact that millennials still want houses And also people who live in high-cost areas like new york la But anywhere in california But when you live in high-cost areas like new york la chicago Some of the high-cost areas Now Millennials have a new technology to where they don't have to buy houses. You know, are they buying houses where they live? They are going to lower cost areas for prime example They purchase their houses in places like michigan where you can purchase a home for a hundred thousand dollars or less Places like alabama, especially in the southern region region where you have alabama, south catalana, georgia um Louisiana some of the small areas that are not as populated not as popular You're able to buy homes and rent them out and have tenants Uh for a hundred thousand dollars or less Which comes out to be maybe three four hundred bucks a month if you're purchasing a house, right? So with that being said people can purchase a home for a hundred thousand dollars And with a hundred thousand dollars they can purchase a home and not only purchase a home But also have a renter So people are renting where they live and they're purchasing where they rent if that makes sense Hopefully it's not a tongue twister. So for example, I live in san francisco I can't afford a home in san francisco But I do make enough money to afford afford rent in san francisco And I can purchase a rental property in the south somewhere like mississippi alabama florida south catalana things like that So those are things you have to pay attention to uh, that's awful right now People can go online right now and purchase homes in places that they don't live in for a significantly lower price Than their current area. Hey, I can't afford a six hundred thousand dollar house But I sure can afford a hundred thousand dollar house. What a renter or a tenant that's in it Great investment property and a great way to purchase home. So you talk about doing this people had the opportunities to do this Um 10 15 20 30 40 50 years ago, but it wasn't as popular nor do we have the technology to reach out to anyone Now the next thing um as we wrap up the show today Um, we said millenniums. We talked about millennials We talked about people not wanting to purchase their house And we talked about low inventory low inventory still remains People don't want to purchase uh sell their homes millennials are still buying homes Making them the biggest percent percentage of the consumer base. And also we're looking at the consumer balance sheet That's another reason we look at the consumer balance sheet people are still When you look at the consumer debt and balance sheets that people have The balance sheets are still in good favor to where people can go out and purchase homes So you look at these factors that are in there Yes, the housing market is doing supposed to do interest rates are going up It's going to cool off the market just like we just saw today. Jerome power came out and said, yeah, we can sell We can see ourselves, um raising the interest rates by 0.5 And the market continued to go down after that news broke even though we had tesla that had great earnings today The market continued to tank due off of the news that Interest rates are going up. So interest rates are they crashing the market? No, they're cooling off the market and when you're cooled off the market, um When you close the market doesn't mean you're going to have a crash means that you're trying to even things out You know, you don't want to extremely high sellers market eventually you want to kind of cool it off where it can be balanced out when you can have a sellers market and A buyer's buyer's market to meet that equilibrium But ladies and gentlemen Those are my points right there. Those are my four points right there while we won't see a housing market crash Maybe a cool off maybe a little bit stabilizing because real estate don't impose a move at 3% a year Now that 40% a year that's been moving at these last couple years. That's extremely high But what interest rates are going up is drying up the uh buyers market a little bit cooling off a little bit Houses are not jumping up just because your house go up 10 in 2022 Doesn't mean a housing market crash happens. It means that hey things are kind of becoming back down. Um Evaluations are coming back down to reality. You know, I mean it's unreal to purchase a home for $400,000 And a year and a half later is worth $600,000. That's pretty unrealistic If you keep up on that rate, that means that the interest rate is probably the house is compounding at like 30% a year, which is crazy That mean in a 10 year run the house will be worth about 1.5 million. This is just me Using the guesstimate, but that's not unrealistic and unsustainable So interest rates drying just because we're sitting in the housing market Um, we're going to see less people want to buy houses doesn't mean we're going to have a crash We're trying to correct. That's why the Federal Reserve raised interest rates for the first time in 10 15 years About 0.25 a month ago. Now he's talking about doing by 50 base points again and as these interest rates go up It's going to make assets more and more less desirable Like we all know when interest rates are low assets, that's how we create bubbles Right when interest rates are high, this is when we can see assets of price low All right. Well, ladies and gentlemen, that's my time I hope you guys and girls enjoyed it the four reasons why we won't see a housing market crash Put a cool down maybe Um, hope you guys and girls got some out of this until the next video podcast cartoon or whatever it's crazy You see do see us do around the globe make sure you hit that like subscribe comment share button Share this with a friend and a family member And my name is prince dykes. I'm the prince of investment. Peace. Be safe. I'm out and thank you Thank you so much for watching think tech hawaii If you like what we do, please like us and click the subscribe button on youtube and the follow button on vimeo You can also follow us on facebook instagram twitter and linked in and donate to us at think tech hawaii dot com Mahalo