Real Estate Housing Crash Q4 2021

Real Estate Housing Crash Q4 2021

hey guys it's ken so i get lots of information 
from a lot of you guys what do you guys think   of Graham Stephan what do you guys think of meet 
Kevin they have different information on when the   housing's gonna bust us you know i know it's super 
confusing guys and we're all trying to figure this   out but the one thing that i want to talk to you 
guys today about is primarily inventory and really   what i want you to do is follow the math so i just 
got done watching graham's video which i really   liked he goes into a lot of detail on housing 
inventory and prices and rents and all those   kinds of things but what i'm trying to do here is 
actually bring it down to math so we can follow it   logically and make some assumptions just for you 
so stay tuned and hey guys as you know there's a   ton of information in this video you don't need to 
write anything down we're going to have it below   just click the link and you can go to the show 
notes and have all this stuff so the number one   question is is what do i think's gonna happen in 
2021 so let me just jump right in guys as you guys   know the inventory is at an all-time low and if 
you want to track this month to month i recommend   that you go to the federal reserve of st louis 
and just type that in and you can get you can   get an idea of like the active listing counts in 
the united states as you guys can see they've been   down and we're all obviously an all-time low and 
then another one that i really want you guys to   take a look at is this housing inventory right 
now these are new listing counts in the united   states as you can see they've actually gone up 
from december this is a very important point i'm   going to come back to this later but you can see 
here the new listing count in the united states   actually went up from december or january that's 
actually voting well so what this really means   is that inventory comes back on the market that 
prices will then stabilize so let's take a look at   the existing inventory right now what we can see 
here from the federal reserve is that the housing   inventory right now in december was right around a 
million houses and as you can see guys this is 1.4   it's bounced around from march april may june so 
it spiked somewhere about in here right after the   pandemic started and it obviously just started to 
go down right now we're basically at one million   seventy thousand so the real question is what's 
a normal market because that's the first thing   you gotta solve too what do people think a normal 
market is when prices are not going up like crazy   and there's not too much inventory so that's what 
we're going to solve to next so what i decided to   do was just jump over to the national association 
of realtors and see what do they consider to be a   balanced market and what the national association 
of realtors says is that a six-month supply   is associated with moderate price appreciation so 
basically the national association of realtors is   saying six months supply is about right not too 
much inventory and not too much sales so that   prices generally go up but they don't necessarily 
go down or they don't go up too quickly so we're   gonna put in here that the ballast market is about 
six months this is going to be very important for   you guys to come back to later a balanced market 
according to the national association of realtors   is six months of inventory now here's 
where it really starts getting interesting   so we know that the national association of 
realtors says that six months inventory is   a balanced market so now we got to take a look at 
the month's supply so we knew that in december of   2019 in this period of time there were three 
months of supply and right now in december of   2020 just one year later there's 1.9 months 
of supply so basically supply has gone from   three months to about two months in one year so 
when they had three months of supply in december   of 2019 they were saying that that was 1 million 
390 000 listings what we already talked about   is that the supply is sitting around two 
months is one million seventy thousand   listings so the difference between december of 
2019 to december of 2020 is right around 300   000.

graham stephan

So as you guys can see this is about two 
months and this is about three months so you can   reasonably say that about 300 000 listings equals 
about one month supply three minus two one million   three ninety minus one million seventy so i know 
it's not exact math but it's pretty darn close   so here's where it gets a little confusing so 
we know that right now we got a million seventy   thousand of homes that are listed and according 
to the national association of realtors it's about   two months worth of inventory so we'll say two 
months equals one million of inventory or listings   right now that's two months of inventory per 
their data but here's where the twist comes in   if you take a look at where they were in december 
of 2019 the 1 million 390 minus the 1 million 170   so we can conclude that a 300 house inventory 
declined so we'll go 300k inventory decline equals   one month inventory based on the three all the way 
to two so the real question then is how many homes   is it gonna take for us to get to six months and 
all you need to do is take the six months minus   the two months equals four months of inventory 
times it times the 300 000 or 1.2 million we need   1.2 million houses in order to get the inventory 
back to balance so it'd be 1.21 million which is   about 2.2 million is about six months of inventory 
so we'll put that right here 2.2 million is about   six months of inventory so now let's take those 
inventory numbers and see where we're going to go   next we know that we're basically a million houses 
and we know that the six-month number is about 2.2   so what i decided to do was dig in a little deeper 
on some of these forbearance issues and some of   these issues on who's seriously delinquent because 
i personally think that's going to be a big issue   in 2021 so let's first go back to forbearance 
and what we know is that we have 600 000 people   in three of 2021 coming to the end of their 
forbearance and we know that there's another 400   in april so basically in about a two-month 
period we have a million people that are   going to have to deal with their forbearance so 
where is all this heading so we need to go to   the data once more so in black night which 
hopefully a lot of you guys are following   this is very very very interesting and it's down 
in the fine print but basically they're saying   that they've got 3 million 557 people that are 
now over 30 days delinquent on their mortgages   that's a big number so we're going to put that 
right here that's 3 million 557 000 people that   are in some kind of forbearance at least 30 days 
or delinquent and we also know that we have at   least 2.2 million seriously delinquent according 
to black knight and we're going to put that 2.2   million right here so we have 3.57 million people 
that are 30 days delinquent and we have 2.2   million people that are over 90 days delinquent or 
considered seriously delinquent we know that 600   000 of those are going to come due in basically 
just a little bit over a month and then the other   400 000 plus or minus are actually going to come 
due right after that so the real question guys is when we are only looking at forbearance just 
forbearance how many defaults and the reason   the faults are low is because the president's 
making them low the president is making them low   the stimulus packages and everything are kicking 
these things down the road the real question is   how many of these folks are going to list their 
homes or go into foreclosure that's actually what   you should be asking yourself so we know that 
we have at least 2.2 million people seriously   delinquent my belief is that these people they're 
probably not going to be able to come up with the   money to fix their problems unless the lender 
allows that so if we just split this number   by half let's say that 50 of these people 
cannot pay now we're looking at 1.75 million   now is this a guess of course it's a guest but 
you can't tell me that a lot of these people are   not going to sell their homes a lot of these 
people are not going to lose their homes and   i'm only using 50 so let's just take this number 
forward we know that six months equals 2.2 million   balanced housing units we know that right now we 
have 1 million which equals 2 months of supply   so if we add the inventory of about 1.75 million 
people to the 1 million that we have already   we're now at 2.75 to 3 million of inventory so 
this number is going to go way up way past the   six months of balanced housing which is 2.2 
so my prediction is by the end of this year   and into next year we're going to have at 
least this many defaults and it's going to   add to the inventory which is currently at about 1 
million houses so for those of you that are upset   just be upset at the numbers the numbers are 
what they are there's 3.5 million people that   are delinquent there's 2.2 million people that 
are seriously delinquent and i'm only using   1.75 million as my estimate so now let's take 
a look at where we're all heading with all this   i already went through the forbearance but this 
is what i think is going to happen to inventory   and this is where you guys need to be watching 
this year and it's going to be different from   market to market in other words florida is going 
to be drastically different than new york which is   going to be drastically different than california 
so this is all a local issue a sub-market issue   and you can drill down and find all the specific 
information in your individual market if you like   but forbearance is definitely going to grow the 
inventory there's no way around it the government   can't keep kicking the can down the road on 
this issue this is real money that people owe   and at some point just like in 2008 they're 
going to have to pay it or default interest rates   should probably stay low and you're going to see 
a rash of refinances just like you saw in 2020   but the interest rates are going to actually help 
inventory keep it down not that we want it down   because that's why prices are up but people are 
basically home they're refinancing their houses   with lower rates they're lowering their payments 
they're getting some cash out they're even doing   renovations so i predict that interest rates are 
going to stay low and that it's going to actually   help keep inventory low the work from home is 
also going to keep people in their houses and keep   inventory low i think we saw a lot of migration 
already in 2020 we'll probably see some more   but for now i think that it's probably only going 
to contribute to people staying home and working   from home as opposed to going to the office the 
unemployment is still an issue and a lot of people   aren't talking about this this is way up there 
well over 10 million people the economy still   is not on track unemployment is definitely 
tracking the wrong way some of these people   could be up here in the forbearance obviously i 
predict that unemployment is going to continue   even though people like janet yellen believe that 
it's going to be all back to normal very soon   i completely disagree i don't see how we have 
interest rates at the lowest they've ever been   and businesses are absolutely hurting there 
are businesses that are doing just fine but   the majority of businesses are not doing that 
well and they're struggling they're cutting   back on their people they're cutting back on 
making them part-time they're using ai they're   using technology all those things are happening 
right now and i think what's going to happen is   people are going to either list their houses 
or potentially fall into this category up here   the renters we haven't really talked about renters 
there's millions and millions and millions of   people and the government's going to kick that 
can down the road again but i believe that a   lot of those people are in occupied houses so they 
might even be up here in this particular category   but this renter issue is going to be a real 
mess next year again we're going to have to   pop the lid off and i believe that that's gonna 
be an issue next year as well possibly even   2022 and then the last thing that not a lot of 
people are talking about is the new supply we   all know that we need it you can't have prices 
go up like this when prices go up that high   what it does is actually helps the builder because 
now they can build homes even though they're more   expensive but so are the prices that people 
are paying so when the margins go up you're   going to start to see these inventory numbers go 
up right now they're projected to deliver about   somewhere between eight and nine hundred 
thousand new housing units in 2021 that's   definitely going to increase the inventory so we 
only talked about the inventory on forbearance   which i projected to be 1.7 we know that this is 
going to be about 800 000 we don't know exactly   what's going to happen with the renters of the 
unemployment and we're not sure what's going to   happen in these categories but between this 
category and this category i can assure you   we're going to have a lot more inventory 
next year and you're going to start to see   all kinds of things change in all the individual 
markets in the sub market so in summary i already   talked to you guys i believe that we're going to 
have at least a 2 million increase in inventory   sometime in late 4th quarter 2021 that's what i 
believe that i'll start to see these prices drop   once all this inventory starts to creep up and 
hit the market you'll see the days on the market   longer you'll see the prices longer which is 
unfortunately going to make people list more homes   so once we start to click this over let's say 
about summertime my estimation is people are going   to try to stack on by listing their houses and 
what's going to happen is this inventory is going   to grow even more and then you start to throw on 
the new builds and all of a sudden your inventory   is significantly higher in the fourth quarter of 
this year and then 2022 i think you're going to   start to see most of this stuff unravel also what 
i'm projecting is rentals are going to be flat in   2021 but they're going to be increased in 2022 
because just like in 2008 when we went through   this already and i personally went through this 
when people are falling out of their houses here   then they default back into rentals it's going to 
push pressure back on those rentals so it's going   to be a fine balance between where they move what 
the prices are what the rents are going to be and   how much supply and how much demand there's going 
to be in those particular areas those sub markets   those cities those counties those states etc so 
as you guys move forward pay very close attention   to what's happening on the forbearance and the 
inventory levels in your particular state in your   particular city so lastly what can throw all of 
this sideways as already has happened through the   year it's the wizard of oz biden what will biden 
do will he throw more money at forbearance will   he kick the can down the road on that issue if he 
does obviously these numbers are not going to be   what they are is he going to throw more money at 
the renter community if he does obviously we're   not going to have as much disruption in those 
particular areas one thing is for sure all this is   going to cost a lot of money the latest stimulus 
package is right around 2 trillion and we're i   can tell you for sure that we're probably going 
to have some inflation so if you guys haven't   watched that inflation video my suggestion if you 
go over and take a look at that because you can't   dump that much money onto economy i'm not saying 
we don't need it because these people need it 100   but you can't dump that kind of money on an 
economy and expect the dollar to be strong   over the long term with all that extra money 
chasing all those goods so again thank you guys   thanks for watching if you like this just hit the 
like button and subscribe button and send this to   your friends it takes a lot of work to put these 
together as always i appreciate you all thank you

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