For newbies, be aware that this is a grossly oversimplified scenario. For one thing, you can't get a mortgage on an investment property without at least 25% down payment. Two, it's easy to see comps for house purchase prices, but it takes a lot of research to understand the comps on rent prices. The trick is to find a place where renting is more expensive than buying, but those places are less common because of this very type of scenario. Three, you have to remember that rent number he's using is supposed to be net income, not gross. So you have to think about costs for taxes, insurance, maintenance and vacancy when you're researching investments. All that said, real estate investing is a good tool for wealth accumulation. But it isn't foolproof.
Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Due to my demanding job, I lack the time to thoroughly assess my investments and analyze individual stocks. Consequently, for the past seven years, I have enlisted the services of a fiduciary who actively manages my portfolio to adapt to the current market conditions. This strategy has allowed me to navigate the financial landscape successfully, making informed decisions on when to buy and sell. Perhaps you should consider a similar approach.
Recently, I have been exploring the possibility of consulting with advisors. As a mature individual, I am in need of guidance, but I am curious to know how truly impactful their services can be?
Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I’m in Ohio and the housing market here over the last 7-8 years is unlike anything I’ve ever seen. Homes that were bought for $130K in 2015 are now being sold for $590k. I’m talking about tiny, disgusting, poorly built 950 square foot shit boxes in quiet mediocre neighbourhoods. Then you’ve got Better, average sized homes in nicer neighbourhoods that were $300K+ 10 years ago selling for $750k+ now. Wild times.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Personally, I can connect to that. When I began working with a fiduciary financial counsellor, my advantages were certain. I got into the market early 2019 and the constant downtrends and losses discouraged me so I sold off, got back in Dec 2021 this time with guidance, Long story short, its been 2years now and I’ve gained over a million dollars following guidance from my investment adviser.
This is huge! think you can point me towards the direction of your advisor? been looking at advisory management myself.. seeking ways to invest and make more money with the uncertainty in the economy.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market
The stock market is no different, to maintain profit you need to have some in-depth knowledge on the market. I mostly just buy and hold stocks, but my portfolio has been mostly in the red for quite awhile now. Unfortunately to be able to make good gains, you’ll need to be consistent and restructure your portfolio frequently.
In my opinion, it was much easier investing back in the 80s but it’s a lot trickier now, those making consistent profit in these times are professionals reason I’ve been using an advisor for the past 5 years to consistently build my portfolio in preparations for retirement.
Finding financial advisors like Sharon Ann Meny who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
She appears to be a true authority in her profession with over two decades of experience. I looked her up on the internet and skimmed through her site, very professional. already sent her an inquiry hoping for a response soon.
On the ground level it’s scary that houses are worth more and more, when they’re being built extremely poorly. I’ve seen many home inspection videos showing how low quality these homes are. Sellers in this market are blatantly extorting and scamming buyers. Supply is so tight buyers seem to have no choice but to accept this.
Great video! For 2024, it’s hard to nail down specific predictions for the housing market is because it’s not yet clear how quickly or how much the Federal Reserve can bring down inflation and borrowing costs without tanking buyer demand for everything from homes to cars.
I suggest you offset your real estate and get into stocks, A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time!
You are right! I’ve diversified my $450K portfolio across various market with the aid of an investment coach, I have been able to generate a little bit above $830k in net profit across high dividend yield stocks, ETF and bonds.
Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I grew up in an area of Miami that is mostly made up of * middle-class Cuban Americans where just five years ago a house would cost 250-350k for the most part. Now the cheapest one goes for 600k. Forget working class being able to afford them. A professional lawyer, engineer, etc. would now struggle to buy a home in that same neighborhood. Something needs to change and it will change.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Rhe market has been crazy lately, a few surprises here and there.. with all the global happenings taking place I think it’s safe to say that a severe global recession is looming
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
The problem is that people don't have the knowledge needed to succeed in a challenging market. Only highly qualified professionals who had to experience the 2008 financial crisis could help to earn a high in these challenging conditions.
Recently, I've been considering the possibility of speaking with consultants. I need guidance because I'm an adult, but I'm not sure if their services would be all that helpful.
Cause they're all on the outskirts of towns and they want premiums or more for them despite the location being worse. I live in a low cost of living area and my house isn't huge, maybe about 2000 sqft -> 2300 sqft and it's in the center of literally everything driving distance wise it costs about 250-300k. There's larger houses on the outskirts around 2600 sqft that sell for like 200k.
Yep - this is the most sensible answer. The places that people want to live already have homes with people living there. New homes are just furthering the suburban sprawl that nearly no one wants anymore. The solution here won't be simple.
Yes and the market is so distorted that these homes in these less desirable areas aren’t priced accordingly- they’ll be listed at only a slight discount of a home the same size in a high demand area. The prices need to reflect the location and in many areas that still isn’t happening.
Agreed. I think the takeway is new home supply and possibly areas around them have vulnerability. I also think a lot of these new homes are not high quality, and have high supply. I also agree the location is often lower as you suggested.
In other words, the high interest rate is actually keeping the existing house prices higher as nobody will move out of their existing house and take a mortgage at the current rates, so the supply stays low. So paradoxically high interest rate is now driving home price inflation.
Not exactly. The high interest rates are causing a lockin effect causing people to not want to buy or sell. And lowering interest rates would help here. However it will increase the cost of a home that someone can afford due to lower payments. This will increase demand faster causing prices to shoot way up given that there is a demand for houses at higher prices. What the fed is going for is to make it harder to do business on the hopes that large companies start to lay off their workers and for small businesses to collapse. This will cause deflationary pressure on the jobs market by decreasing jobs. It will also force people to sell their homes of foreclose due to being unable to make payments increasing supply and decreasing demand. Fed had chosen the route that will hurt a lot of people to reduce inflation.
@@zackeryhardy9504 Isn't that what the Fed is supposed to do? There's no way to maintain our current economic structure without hurting *someone*. The question is who do the Fed Reserve and our elected leaders choose to hurt?
@@bobriquardo5317 It is what they are supposed to do. They have to combat inflation somehow. Unfortunately they can only affect interest rates meaning we all are paying massive taxes through interest to pay for the government's out of control spending.
@@bobriquardo5317 In Canada its always the savers and retirees who get decimated by low interest rates. Many Canadians are leaving for Mexico after the Bank of Canada cut our interest rates.
That’s because the existing homes have a loan on a non bank entity’s or non-government enterprises balance sheet . They lever up with that equity. A brand new loan can be subsidized by inflated prices and home values without crushing the existing loan books. The system is so fragile that if home prices went down even a little it can bring down the house of cards.
People don't understand that mortgage payment is only one of the costs of owning a house. Insurance, maintenance, tax, ... are all going up so many cannot afford their house even though they are still locked in a low mortgage !
Mortgage is PITI: principal, interest, taxes, insurance. I don't own yet but at least do the bare minimum and take a FTHB course before spouting nonsense.
You can’t compare new homes and existing homes like fruit. New homes have better building codes, more energy efficient but usually are smaller but come with garages. The homes themselves are better but are usually in communities with strict HOA rules, little to no privacy and the builders finance your loan at a lower rate in order to be able to sell their homes. Resale/exisiting homes are usually older designs but remodeled, no HOA, and the best part is in the BEST LOCATIONS. That is one huge thing resale’s have on new homes because the best locations are usually taken up already. Now, all that said the result of what is best for you depends on you not on everyone else’s factors.
Low supply situation isn't going to be cured by unemployment. If/when builders stop delivering product due to a recession, it will only exasperate the situation. Population isn't decreasing, thereby, demand for shelter is growing, not shrinking. Households may be doubling up with generations or accepting smaller housing units due to affordability, but demand isn't being destructed in the US (yet).
I guess you don't see it by looking at the charts but in short nobody wants to buy and nobody wants to sell. It totally makes sense too in this environment.
I like the stalemate and this will force a recession if money doesn’t move. Then the sellers will be forced to come to the level of buyers as buyers have no room at all
Good video. One thing not covered is the difference in existing homes vs. newly built homes, both in home quality and location. Many of the newly constructed, "spec", housing... is simply not as well built as it was over the past 20 years. (Look up any videos on home quality issues from the major housing builders, especially the largest one.) Then, there is location. Many existing homes are simply better located, closer to city cores, "people's jobs", etc. New homes... built on former farmland, filled in land (with potential settlement issues... do your research), etc. And, these locations usually have poorer transportation access and government amenities such as parks and schools. Good land is getting hard to come by, and well built houses (for a good price) generally can't be. Sure, you can find distant land and pay more money to custom build a home, but now you don't have the good location... or the good price. And, all of this... is at the local level, not even covering entire city markets.
Hi, towards the end of the video you mentioned higher unemployment from QT will overpower the low supply situation. Can you expand on that? What does that mean? Awesome video!
Thorough video. Maybe the most important factor here is that 85% of the housing market in discussion is existing home sales which you mention after over 10 minutes. I would include that upfront so viewers will better understand housing price stubbornness now and going forward. I am a new subscriber...thanks
I wonder if there's a data-driven way to explain this 'old houses are more expensive than new' as a function of building quality and location. Two cases studies: where I live in the MN twin cities, there is a rare, major redevelopment in the middle of town, where new empty lots start at $500k, and new 1800 sqft town homes start at $800k (the townhome lot is smaller). A few blocks away, old homes are$400-700k, depending on size and quality. All these prices are nuts, but I bring it up bc the majority of empty lots and new homes are in the 20 miles away in the suburbs, where they're generally mcmansions or townhomes for roughly half the price per ft2. My point is this: I almost don't care how cheap those suburban houses are, I'm never moving there. I refuse to commute for hours every day, and I don't want a huge house or a town house, so I've resigned myself to likely never living in a new home, but look forward to living in a location I like. Perhaps many others are making the same decision
Nice video EPB. The New vs. Old homes comparison is meaningless right now because this global real estate crash has just started and real estate prices across Australia, New Zealand, Canada, USA, China and Europe will crash down to their 2012 levels within the next few years. Caveat Emptor!!!
one of the major reasons for the new homes being cheaper than the old homes is location location location. The older housing stock is closer to the urban core, and those properties are getting a boost. Those interior properties have rising property and land values. Meanwhile the newer less established neighborhoods are the ones with the new homes, and those are further away from the city centers. Thus they cost less. The extra cost is in travel and time expenses. However, as these outskirt area get larger, they inevitably become their own nodes and centers for commerce - or they just SUBURBANIZE to death.
I live in St Louis and bought my 3 bed 2 bath home for 168k in November 2022. One of the best cost of living cities but also statistically a very dangerous place to live.
For this kind of analysis, it's important to take the first through third rules in real estate into account: 1. Location 2. Location 3. Location New housing starts are being built in less desirable locales far from city centers. You can build a new house, but you can't build a new prime location. It's nature that these new homes are going to sell for less than established homes on more desirous plots.
In some of the cities with price declines, there is also net outbound migration In some cities, like Atlanta, part of the issue is net inbound migration -- specifically of people from other states with high incomes
I feel like a graph showing average price per square foot versus just total cost might be more accurate? Lots of tiny home communities being built might be dragging that average new home cost down.
The issues that caused the 2008 housing crises aren’t in place today. Predatory lending practices with variable rate loans to people who couldn’t afford them is what caused the record foreclosures and the subsequent collapse in MBS’ values which of course threatened the solvency of the entire US banking system. Even though housing prices are sky lending practices are much tighter and the likelihood of a 2008 style housing crash is very low. Not impossible but the conditions are quite different.
It seems like this situation is eventually going to normalize, it's just a question of when. Could be several years... Does anyone remember during the peak of the pandemic dealerships trying to sell new cars with huge mark-ups over MSRP? That didn't last forever.
The Fed has raised interest rates, but also raised liquidity provided to banks. This has stagnated or moved housing prices sideways for almost 2 years. Had the Fed not provided this extra liquidity to the market for the last few years, we'd be in a recession. The extra Fed liquidity is pushing housing prices sideways. The most important aspect to all prices is Fed liquidity provided to the markets. This can stagnate markets and prevent a bad recession and is the new Fed tactic to prodding the economy. Do a video on the Fed increasing short-term liquidity and how it pushes prices up.
The other problem is this is an income growth economy, not a credit growth economy. Higher rates won't have the same effect to slow things down as credit isn't the driving force.
This is why it is critical that we hit 10% unemployment for a least a year or 6% unemployment for 3 years to balance out the economy and housing market. 2011-2023 was the easiest economy and job market in all of human history thanks to low interest rates and money printing. The next decade needs to be filled with hardship to correct this mess.
Old houses are still close to the central business district and new houses are further and further out. So difference between exurb economics & inner suburb economics probably explains the gap. And your comment about some regions having no new housing at all probably makes the national average look weird.
This economic cycle it is taking a longer time for home prices to fall. It will happen as unemployment has started to rise and prices will fall by at least by 25% with significant number of foreclosures.
In 2005 when I was 21 there were houses I could buy after working 1 year. Today it would take me 20-40 years to buy a house. The houses have gotten bigger, more expensive, and only people my age of 41 or older can possibly buy one. Good luck to young people. They aren’t even trying to build 1 to 2 bedroom homes of modest quality anymore.
Ben Bernanke: "To the extent that home prices begin to rise, consumers will feel wealthier, they’ll feel more disposed to spend. If house prices are rising, people may be more willing to buy homes because they think that they’ll, you know, make a better return on that purchase. So house prices is one vehicle. Stock prices-many people own stocks directly or indirectly. The issue here is whether or not improving asset prices generally will make people more willing to spend."
I think the reason why existing homes are more expensive than new builds is because of location. At least in my city new builds are being built further and further away from the city.
Supply???? New homes are poor substitutes because they’re NEWER??? how can that be… must be some other factor: size, location, zoning, amenities, taxes etc etc
inventory != MLS listings. There is plenty of inventory but people are pricing according to number of MLS listings. The era of the MLS being the only way to sell a house is over.
For perspective, inflation is a lie. Look up the 2002 mcdoanlds ad with trump, where a burger was 1$. Now that same burger is 7$. Per inflation calculators, it should be between 1.75$ and 2$.
New construction isn't "undervalued" and existing homes aren't "overvalued". They have high prices because the government inflates the money supply every single minute, foreign investors/governments are buying American assets with the cash from our lopsided trade deals, many millions of people have moved into the country (driving up demand), and investors are buying all the homes they can. Existing homes are preferred by buyers because they are in established neighborhoods and have more than 1/15th of an acre of land and a driveway long enough to hold more than two cars. New construction homes are energy efficient garbage (lack beauty, character, space, or anything approaching uniqueness - they feel like apartments).
Your analysis of new vs. existing home prices completely misses the entire reason for the phenomenon: location, which is the single most important factor of a home’s price. In the past, you could choose between new and existing homes in similar locations. However, all those previously new homes in great locations were bought, so even if they’re put up for sale again, they’re now existing homes. Today, buying a new home usually means you are buying a sub-par location. The absolute value of new homes today is worse than it’s ever been given that you’re getting crap build quality in a crap location with barely any discount for the impaired location, let alone the crap build. That the new home is cheaper than the comparable existing home is a function of neither newness nor size, but location. The location differential is most of the explanation. The far second place reason is crap build quality, which simply disguises cut corners in the form of a lower price.
Concerning the left chart at 2:09 Can someone ELI5 why we don't see deflation instead of just disinflation when M4 decreases? Does it have to do with velocity of money lagging behind? Or maybe the flight to real assets? Other factors like supply chain issues?
Inflation is an increase in the money supply and/or the credit supply. Credit actually has been increasing meaning that there is still inflation or at least no deflation. The biggest lie is that inflation is the increase of prices. That lie gets the government and the Federal Reserve off the hook for the real inflation they create. Government just wants the people to blame "greedy" business and property owners for jacking up the price.
@@shotelco I understand that but that isn't what I asked. Using your definitions, I'm essentially asking why we only see a slowdown in the rate at which prices are rising, while not seeing a decrease in prices.
@@snakyjake9the rich are still buying, propping up the market... anyone with cash is still bidding... there is two separate economies and gap is getting bigger and bigger
are you guys enjoying socialism? just when you think your misery is over they're gonna print a bunch more money and the currency you save in will be worth less than confetti. that's why home prices seem high, we're using confetti money.
The national average for home prices has gone down at least 20% over the last year. Much more in some areas. To find the true value, you need to divide the current prices of homes with the price of gold, then do the same for a year earlier. A year ago, gold was about 1800 an oz. Today, gold sits around 2300 per oz.
Gold is a good comparitor only in the long run, but not in the short run IMHO. In the short term it's easy to prove anything by picking dates when gold was up or down.
You bring valuable insights but they lead to a bearish sentiment that has been brought forward for so long, eventually you'll be right but it's worth mentioning that although your data might be correct it can take years for it to unravel and trying to time the market is a dangerous endeavor. These videos are like candy for market timers. I feel bad for those that sold all their stocks on 2022 because of videos like this one.
All you have to do is look and see how the average consumer is doing to see if we’re headed for a crash. I’m an engineer in Dallas and can’t afford a home. Not unless I want to live paycheck to paycheck. That’s all the information you should need to know everything is way too hot right now. Credit card debt is climbing. Unemployment is starting to climb, which is historically when it starts to climb a huge spike upwards will follow. I’m not a bear, just a realist. We are maybe 5-10% from the top. Another indicator is the buffet indicator. The stock valuations using that model were around 130% in 1929, today that number is over 190%. If you thought the crash in 2008 was bad you haven’t seen anything yet. I have no clue why people are acting so greedy right now. You’re getting 5%+ on cash that’s risk free return. But you choose to take all that risk for what? Just look around dude, everyone is broke. The only people doing okay are those who owned assets prior to the pandemic. Everyone else I know can’t afford to start the American dream.
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
The best course of action if you lack market knowledge is to ask a consultant or investing coach for guidance or assistance. Speaking with a consultant helped me stay afloat in the market and grow my portfolio to about 65% since January, even though I know it sounds obvious or generic. I believe that is the most effective way to enter the business at the moment.
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
Where are these cheap new homes at? I’m not seeing anything here in the Atlanta suburbs that’s under $300K beside bombed out buildings that look like they were transported here from Beirut.
I took the data you guys presented about new vs used homes a few months ago in another video. So we went new build shopping and secured a new build with them buying down my rate to 5% fixed, closing cost covered and 30k off price tag. Thank you for sharing the data!
I was just looking at a house that sold at the end of 2019 for $484,000 when you could financed for 3.75%. It's now on the market for $780,000 and would need to be financed for around 7%. In 2019 with 20% down that is a $2,218 monthly payment. Now it's $4,551 and your downpayment cost you an extra $75,000. This is absurd. A 63% increase in sale price and a 100%+ increase in the monthly payment.. in FOUR years. And I bet it sells for full ask too... I do understand how this keeps going.
It won't. The US economy will follow the rest of the world into recession soon (my guess is that it will be after the election because the government will do anything it can to make that happen) and the stock market will have a huge correction. There's approximately 1½ times as much debt as 2008, so I guess that the markets will drop by 1½ times as much as in 2008. A similar correction is coming in real estate, but slower (after 2008 it took about 8 years) and a lot of people are going to be gigantically underwater with their mortgages. Hold onto your hat, it's going to be a rough ride.
@@ivancho5854 agreed. and we are in the minority here. most people i talk to think home prices will continue to rise. impossible. for the simple reason that wages are not going up. headed for a huge crash in 2025.
@@Unfluencer Exactly. 1929 was almost 100 years ago and there's no one still alive who witnessed it and can say, "Hang on, I've seen this movie." Although it will be a very deep recession, I don't think that it will last as long though. Maybe between 3 and 5 years. The ultimate driver of any economy is demographics. The retirement of the Baby Boomers is what is causing this recession and the next demographic wave should lift us up in about that timeframe, everything else being roughly equal. I think, but I've been wrong before. I foresaw this a year and a half ago, so I've missed out some, but I'm cautious by nature and this will serve me extremely well this time I hope. After the crash when everyone else is shell shocked I'm going to be mega bullish. All the best. 👍
I'm in the exact same boat. There are houses here being listed for $100-150k higher than even the peak just a couple years ago. Realtors and sellers are still on a high thinking they're going to make crazy money on real estate. Low inventory and people moving into my area has kept the prices dropping much, it at all.
Much better than most housing market stuff on YT. Only thing missing is the severe underbuilding from 2008-2018 leaving us at a structural deficit of available housing relative to population growth.
AFAIK: Almost all New Construction comes with an HOA, because the local governments will not issue development permits for subdivisions without an HOA in place to protect income tax revenue. Can you look into / report on whether HOAs are a factor at all? Personally, the main reason I don't buy a new home is the HOA.
New homes are too far away from city centers nowadays. I'd rather buy an existing home in an interesting area with things to do nearby than in a new suburb in the middle of nowhere. This is becoming especially important as US population stops growing and even begins contracting, potentially leading to a Detroit-style collapse of the suburbs.
US population isn't projected to peak until 2080. Even if the bearest of demographers are accurate and the population peaks in 2050 that's way too far from now timewise for it to have an affect on pricing today.
@@nicolasgirard2808 And when the whole country is depopulating its going to be like Detroit where a few areas hold value and everything else effectively goes to 0.
@@rathelmmc3194just like Italy and Japan. They literally have homes in 2nd tier cities and suburbs that sell for $1. They’re desperate to get people moved in to keep their population from hitting 0.
One of the key contributors for inventories levels of existing homes being so low is the historically low mortgage rates those home owners have. A recent report (Alto Research I believe) states over 78% of existing US mortgages have 4% or lower rates. the combination of buying and refinancing has put us in a tough spot as far as normal market buying and selling activities. A really good data point to understand is the % of existing homes on the market that are non-primary residence (vacation or investment properties). I suspect we are seeing a significantly higher number of non-primary residence homes on the market which means less people are actually moving. We are in a home price stall period and will need 18-24 months of continued downward pressure to bring home prices back to normal historical trend alignment. Very frustrating to see existing homes listing for 40% higher then they should be. Additionally this downward trend of sales activity is putting pressure on the new home as both permits and new build starts are trending lower. Architect billings for multi-family residence is also trending down which means we have to get inventory increases from existing homes to help. Not sure how we will get out of this mess, but I blame the 2020-2022 bubble and the continued resistance of existing home prices falling back in line with historical trends. Best of luck for those that need to buy and sell in the next couple of years.
Very true, but people eventually get fed up and want to move and will lose money to do it. If we were completely economically rational beings we wouldn't be in this mess. So the way out is that people aren't completely economically rationale.
If you really think about it, those with interest rates around 2% (my family has a couple homes in California at those rates) even THE LOAN can be thought of as an ASSET in a way because you can pass-on the existing loan to the buyer of the home (which in turn increases the value of the deal when considering home price of an existing home with fixed low interest rate comparing 2% to 7% LOL).
@@RandomRabbit007I'm not sure if your statement is accurate. I do not recall the proposition this is tied to, so if you know it please pass it along. My understanding is there is a law that allows the seller who turns around and buys another home in California can transfer their property tax basis from one property to another resulting in potential decreased property taxes. I'm not familiar with any law allowing one to transfer their mortgage or rate to another party. I could be wrong but this would be a huge surprise to many.
@@michaelsd284 I dont believe you can pass-on “property tax basis” unless you’re elderly (I think 60 years+). What you CAN do is do a 1031 exchange and avoid paying “capital gains” taxes all together on the sale. You can pass tax basis when you inherit property from the death of a relative.
For newbies, be aware that this is a grossly oversimplified scenario. For one thing, you can't get a mortgage on an investment property without at least 25% down payment. Two, it's easy to see comps for house purchase prices, but it takes a lot of research to understand the comps on rent prices. The trick is to find a place where renting is more expensive than buying, but those places are less common because of this very type of scenario. Three, you have to remember that rent number he's using is supposed to be net income, not gross. So you have to think about costs for taxes, insurance, maintenance and vacancy when you're researching investments. All that said, real estate investing is a good tool for wealth accumulation. But it isn't foolproof.
Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Due to my demanding job, I lack the time to thoroughly assess my investments and analyze individual stocks. Consequently, for the past seven years, I have enlisted the services of a fiduciary who actively manages my portfolio to adapt to the current market conditions. This strategy has allowed me to navigate the financial landscape successfully, making informed decisions on when to buy and sell. Perhaps you should consider a similar approach.
Recently, I have been exploring the possibility of consulting with advisors. As a mature individual, I am in need of guidance, but I am curious to know how truly impactful their services can be?
Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I’m in Ohio and the housing market here over the last 7-8 years is unlike anything I’ve ever seen. Homes that were bought for $130K in 2015 are now being sold for $590k. I’m talking about tiny, disgusting, poorly built 950 square foot shit boxes in quiet mediocre neighbourhoods. Then you’ve got Better, average sized homes in nicer neighbourhoods that were $300K+ 10 years ago selling for $750k+ now. Wild times.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Personally, I can connect to that. When I began working with a fiduciary financial counsellor, my advantages were certain. I got into the market early 2019 and the constant downtrends and losses discouraged me so I sold off, got back in Dec 2021 this time with guidance, Long story short, its been 2years now and I’ve gained over a million dollars following guidance from my investment adviser.
This is huge! think you can point me towards the direction of your advisor? been looking at advisory management myself.. seeking ways to invest and make more money with the uncertainty in the economy.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
Impressive can you share more info?
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market
The stock market is no different, to maintain profit you need to have some in-depth knowledge on the market. I mostly just buy and hold stocks, but my portfolio has been mostly in the red for quite awhile now. Unfortunately to be able to make good gains, you’ll need to be consistent and restructure your portfolio frequently.
In my opinion, it was much easier investing back in the 80s but it’s a lot trickier now, those making consistent profit in these times are professionals reason I’ve been using an advisor for the past 5 years to consistently build my portfolio in preparations for retirement.
My partner’s been considering going the same route, could you share more info please on the advisor that guides you
Finding financial advisors like Sharon Ann Meny who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
She appears to be a true authority in her profession with over two decades of experience. I looked her up on the internet and skimmed through her site, very professional. already sent her an inquiry hoping for a response soon.
On the ground level it’s scary that houses are worth more and more, when they’re being built extremely poorly. I’ve seen many home inspection videos showing how low quality these homes are. Sellers in this market are blatantly extorting and scamming buyers. Supply is so tight buyers seem to have no choice but to accept this.
Nothing a winter coat can't fix if all the walls fall over in the winter.
Supply is not tight at all.
Great video! For 2024, it’s hard to nail down specific predictions for the housing market is because it’s not yet clear how quickly or how much the Federal Reserve can bring down inflation and borrowing costs without tanking buyer demand for everything from homes to cars.
I suggest you offset your real estate and get into stocks, A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time!
You are right! I’ve diversified my $450K portfolio across various market with the aid of an investment coach, I have been able to generate a little bit above $830k in net profit across high dividend yield stocks, ETF and bonds.
Do you mind sharing info on the adviser who assisted you?
Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
Scam bait comments, buyer beware!
I grew up in an area of Miami that is mostly made up of * middle-class Cuban Americans where just five years ago a house would cost 250-350k for the most part.
Now the cheapest one goes for 600k. Forget working class being able to afford them. A professional lawyer, engineer, etc. would now struggle to buy a home in that same neighborhood. Something needs to change and it will change.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Rhe market has been crazy lately, a few surprises here and there.. with all the global happenings taking place I think it’s safe to say that a severe global recession is looming
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult.
Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
The problem is that people don't have the knowledge needed to succeed in a challenging market. Only highly qualified professionals who had to experience the 2008 financial crisis could help to earn a high in these challenging conditions.
Recently, I've been considering the possibility of speaking with consultants. I need guidance because I'm an adult, but I'm not sure if their services would be all that helpful.
The problem is that much of the new homes are in areas that people no longer want to move to.
Cause they're all on the outskirts of towns and they want premiums or more for them despite the location being worse.
I live in a low cost of living area and my house isn't huge, maybe about 2000 sqft -> 2300 sqft and it's in the center of literally everything driving distance wise it costs about 250-300k.
There's larger houses on the outskirts around 2600 sqft that sell for like 200k.
Yep - this is the most sensible answer. The places that people want to live already have homes with people living there. New homes are just furthering the suburban sprawl that nearly no one wants anymore. The solution here won't be simple.
Yes and the market is so distorted that these homes in these less desirable areas aren’t priced accordingly- they’ll be listed at only a slight discount of a home the same size in a high demand area. The prices need to reflect the location and in many areas that still isn’t happening.
Agreed. I think the takeway is new home supply and possibly areas around them have vulnerability. I also think a lot of these new homes are not high quality, and have high supply. I also agree the location is often lower as you suggested.
Yep. We need to look at zoning laws. But NIMBY's won't allow it for obvious reasons.
Sometimes blue is new construction and blue was existing homes- so confusing. Make it the same through the whole video
I was going to comment about it!
Sorry about that! We’ll correct it on the next one. My misstep.
@@EPBResearch you do outstanding work Eric, and you take feedback very well. Kudos
Using brain hard. Make easy, me dumb.
I came here to say this.
In other words, the high interest rate is actually keeping the existing house prices higher as nobody will move out of their existing house and take a mortgage at the current rates, so the supply stays low. So paradoxically high interest rate is now driving home price inflation.
Not exactly. The high interest rates are causing a lockin effect causing people to not want to buy or sell. And lowering interest rates would help here. However it will increase the cost of a home that someone can afford due to lower payments. This will increase demand faster causing prices to shoot way up given that there is a demand for houses at higher prices.
What the fed is going for is to make it harder to do business on the hopes that large companies start to lay off their workers and for small businesses to collapse. This will cause deflationary pressure on the jobs market by decreasing jobs. It will also force people to sell their homes of foreclose due to being unable to make payments increasing supply and decreasing demand.
Fed had chosen the route that will hurt a lot of people to reduce inflation.
@@zackeryhardy9504 Isn't that what the Fed is supposed to do? There's no way to maintain our current economic structure without hurting *someone*. The question is who do the Fed Reserve and our elected leaders choose to hurt?
@@bobriquardo5317 It is what they are supposed to do. They have to combat inflation somehow. Unfortunately they can only affect interest rates meaning we all are paying massive taxes through interest to pay for the government's out of control spending.
Interest rates are low not high.
@@bobriquardo5317 In Canada its always the savers and retirees who get decimated by low interest rates. Many Canadians are leaving for Mexico after the Bank of Canada cut our interest rates.
That’s because the existing homes have a loan on a non bank entity’s or non-government enterprises balance sheet . They lever up with that equity. A brand new loan can be subsidized by inflated prices and home values without crushing the existing loan books. The system is so fragile that if home prices went down even a little it can bring down the house of cards.
Thank you. Your videos are so informative, unbiased, and clear.
New and existing homes in my neighborhood have sat unsold for 6 months. Nothing over $350k or so sells.
It's very regional. Where I live homes sell in 10 days or less.
@@jonathantaylor6926 Depends on price, not region. Any house in any region in any market can sell in 10 days or less if it's priced to do so.
What location?
@@jonathantaylor6926I’m seeing houses sit for months now in Texas. Won’t be long before you see this across the nation.
@@RichardBurke-qd7vi medium sized town less than a mile off I40 in central US
Best economics channel in TH-cam, thanks
People don't understand that mortgage payment is only one of the costs of owning a house. Insurance, maintenance, tax, ... are all going up so many cannot afford their house even though they are still locked in a low mortgage !
If you didn't know about tax, maintenance, and insurance, then you deserve to fail. Same as a car.
except all of those are accounted for outside of maintenance in your mortgage
Wow if you can’t afford your home at a 3% or lower rate you bought way beyond your means.
@@fabioj- they are not accounted. Even if they didn’t , they wouldn’t be adjusted for inflation
Mortgage is PITI: principal, interest, taxes, insurance. I don't own yet but at least do the bare minimum and take a FTHB course before spouting nonsense.
It doesn't matter. They're gonna keep going up.
Another outstanding market summary. Thank you.
You can’t compare new homes and existing homes like fruit. New homes have better building codes, more energy efficient but usually are smaller but come with garages. The homes themselves are better but are usually in communities with strict HOA rules, little to no privacy and the builders finance your loan at a lower rate in order to be able to sell their homes. Resale/exisiting homes are usually older designs but remodeled, no HOA, and the best part is in the BEST LOCATIONS. That is one huge thing resale’s have on new homes because the best locations are usually taken up already.
Now, all that said the result of what is best for you depends on you not on everyone else’s factors.
I love your videos! I'm an engineer and appreciate a data driven approach to understanding current trends. Thank you and please keep it going!
Low supply situation isn't going to be cured by unemployment. If/when builders stop delivering product due to a recession, it will only exasperate the situation. Population isn't decreasing, thereby, demand for shelter is growing, not shrinking. Households may be doubling up with generations or accepting smaller housing units due to affordability, but demand isn't being destructed in the US (yet).
In Canada the gap is about 300 percent higher than in 2008. Everyone except the richest is shut out of our housing market forever.
I guess you don't see it by looking at the charts but in short nobody wants to buy and nobody wants to sell. It totally makes sense too in this environment.
I like the stalemate and this will force a recession if money doesn’t move. Then the sellers will be forced to come to the level of buyers as buyers have no room at all
Good video. One thing not covered is the difference in existing homes vs. newly built homes, both in home quality and location. Many of the newly constructed, "spec", housing... is simply not as well built as it was over the past 20 years. (Look up any videos on home quality issues from the major housing builders, especially the largest one.) Then, there is location. Many existing homes are simply better located, closer to city cores, "people's jobs", etc. New homes... built on former farmland, filled in land (with potential settlement issues... do your research), etc. And, these locations usually have poorer transportation access and government amenities such as parks and schools.
Good land is getting hard to come by, and well built houses (for a good price) generally can't be. Sure, you can find distant land and pay more money to custom build a home, but now you don't have the good location... or the good price. And, all of this... is at the local level, not even covering entire city markets.
Hi, towards the end of the video you mentioned higher unemployment from QT will overpower the low supply situation. Can you expand on that? What does that mean? Awesome video!
Thorough video. Maybe the most important factor here is that 85% of the housing market in discussion is existing home sales which you mention after over 10 minutes. I would include that upfront so viewers will better understand housing price stubbornness now and going forward. I am a new subscriber...thanks
I wonder if there's a data-driven way to explain this 'old houses are more expensive than new' as a function of building quality and location.
Two cases studies: where I live in the MN twin cities, there is a rare, major redevelopment in the middle of town, where new empty lots start at $500k, and new 1800 sqft town homes start at $800k (the townhome lot is smaller). A few blocks away, old homes are$400-700k, depending on size and quality. All these prices are nuts, but I bring it up bc the majority of empty lots and new homes are in the 20 miles away in the suburbs, where they're generally mcmansions or townhomes for roughly half the price per ft2.
My point is this: I almost don't care how cheap those suburban houses are, I'm never moving there. I refuse to commute for hours every day, and I don't want a huge house or a town house, so I've resigned myself to likely never living in a new home, but look forward to living in a location I like. Perhaps many others are making the same decision
Nice video EPB. The New vs. Old homes comparison is meaningless right now because this global real estate crash has just started and real estate prices across Australia, New Zealand, Canada, USA, China and Europe will crash down to their 2012 levels within the next few years. Caveat Emptor!!!
one of the major reasons for the new homes being cheaper than the old homes is location location location. The older housing stock is closer to the urban core, and those properties are getting a boost. Those interior properties have rising property and land values. Meanwhile the newer less established neighborhoods are the ones with the new homes, and those are further away from the city centers. Thus they cost less. The extra cost is in travel and time expenses. However, as these outskirt area get larger, they inevitably become their own nodes and centers for commerce - or they just SUBURBANIZE to death.
I live in St Louis and bought my 3 bed 2 bath home for 168k in November 2022. One of the best cost of living cities but also statistically a very dangerous place to live.
For this kind of analysis, it's important to take the first through third rules in real estate into account:
1. Location
2. Location
3. Location
New housing starts are being built in less desirable locales far from city centers. You can build a new house, but you can't build a new prime location. It's nature that these new homes are going to sell for less than established homes on more desirous plots.
Contractors and architects still quoting in the $400/sqft range in my area. I would love $200/sqft lol.
In some of the cities with price declines, there is also net outbound migration
In some cities, like Atlanta, part of the issue is net inbound migration -- specifically of people from other states with high incomes
I feel like a graph showing average price per square foot versus just total cost might be more accurate? Lots of tiny home communities being built might be dragging that average new home cost down.
ur videos r amazing, the animations r crisp!
new homes and existing homes are in generally different areas as well.
The issues that caused the 2008 housing crises aren’t in place today. Predatory lending practices with variable rate loans to people who couldn’t afford them is what caused the record foreclosures and the subsequent collapse in MBS’ values which of course threatened the solvency of the entire US banking system.
Even though housing prices are sky lending practices are much tighter and the likelihood of a 2008 style housing crash is very low. Not impossible but the conditions are quite different.
It seems like this situation is eventually going to normalize, it's just a question of when. Could be several years...
Does anyone remember during the peak of the pandemic dealerships trying to sell new cars with huge mark-ups over MSRP? That didn't last forever.
The Fed has raised interest rates, but also raised liquidity provided to banks. This has stagnated or moved housing prices sideways for almost 2 years. Had the Fed not provided this extra liquidity to the market for the last few years, we'd be in a recession. The extra Fed liquidity is pushing housing prices sideways. The most important aspect to all prices is Fed liquidity provided to the markets. This can stagnate markets and prevent a bad recession and is the new Fed tactic to prodding the economy.
Do a video on the Fed increasing short-term liquidity and how it pushes prices up.
This is telling me the new homes are being built in low value locations or with poor planning strategies. Stack houses are no longer sufficient.
The other problem is this is an income growth economy, not a credit growth economy. Higher rates won't have the same effect to slow things down as credit isn't the driving force.
So essentially in the next year or two it will be a better buyer’s market if the current trend follows historical trends.
This is why it is critical that we hit 10% unemployment for a least a year or 6% unemployment for 3 years to balance out the economy and housing market. 2011-2023 was the easiest economy and job market in all of human history thanks to low interest rates and money printing. The next decade needs to be filled with hardship to correct this mess.
Agree.
Old houses are still close to the central business district and new houses are further and further out. So difference between exurb economics & inner suburb economics probably explains the gap. And your comment about some regions having no new housing at all probably makes the national average look weird.
This economic cycle it is taking a longer time for home prices to fall. It will happen as unemployment has started to rise and prices will fall by at least by 25% with significant number of foreclosures.
New homes are also in less desirable sprawl while existing homes tend to be closer to amenities and higher political representation in city centers.
In 2005 when I was 21 there were houses I could buy after working 1 year. Today it would take me 20-40 years to buy a house. The houses have gotten bigger, more expensive, and only people my age of 41 or older can possibly buy one. Good luck to young people. They aren’t even trying to build 1 to 2 bedroom homes of modest quality anymore.
Ben Bernanke: "To the extent that home prices begin to rise, consumers will feel wealthier, they’ll feel more disposed to spend. If house prices are rising, people may be more willing to buy homes because they think that they’ll, you know, make a better return on that purchase. So house prices is one vehicle. Stock prices-many people own stocks directly or indirectly. The issue here is whether or not improving asset prices generally will make people more willing to spend."
Subscribed. Upvoted.
I think the reason why existing homes are more expensive than new builds is because of location. At least in my city new builds are being built further and further away from the city.
Supply???? New homes are poor substitutes because they’re NEWER??? how can that be… must be some other factor: size, location, zoning, amenities, taxes etc etc
thats a big ask though, the FED won't be holding restrictive rates much longer as they are very pro employment.
but is it also possible that the difference is due to the geographical locations of the new builds, given that location matters in the home valuation?
Great research. It was really informative
inventory != MLS listings. There is plenty of inventory but people are pricing according to number of MLS listings. The era of the MLS being the only way to sell a house is over.
I wish they'd build more brick townhouses.
@EPBResearch I would love to see how you modify your analysis after conferring with Nick Gerli at Reventure (if you haven't already).
New homes are just particle board & cheap materials, where as old homes were crafted using much better materials.
how did you make this? after effects?
Top shelf content
Great great info.
Would be much more interested in a more nuanced discussion on rural areas vs metropolitan areas instead of a generalization over the entire country
I have a good job and I can afford a home. this is ridiculous, people keep telling me houses are going to keep rising. I’m getting desperate now
There isn’t a shortage of homes it’s just homes that sold for 40k a few years ago are now listed for 150k
For perspective, inflation is a lie. Look up the 2002 mcdoanlds ad with trump, where a burger was 1$.
Now that same burger is 7$.
Per inflation calculators, it should be between 1.75$ and 2$.
I'd sell and buy a new one, except the new one's build quality is just horribad, and the locations they build them aren't much better.
Never ending cycle of people thinking value is the same for everyone.
Because nobody wants to sell their existing home due to the low mortgage rate they have.
New construction isn't "undervalued" and existing homes aren't "overvalued". They have high prices because the government inflates the money supply every single minute, foreign investors/governments are buying American assets with the cash from our lopsided trade deals, many millions of people have moved into the country (driving up demand), and investors are buying all the homes they can. Existing homes are preferred by buyers because they are in established neighborhoods and have more than 1/15th of an acre of land and a driveway long enough to hold more than two cars. New construction homes are energy efficient garbage (lack beauty, character, space, or anything approaching uniqueness - they feel like apartments).
Did you account inflation and the cash bump to the rich during pandemic?
Your analysis of new vs. existing home prices completely misses the entire reason for the phenomenon: location, which is the single most important factor of a home’s price.
In the past, you could choose between new and existing homes in similar locations. However, all those previously new homes in great locations were bought, so even if they’re put up for sale again, they’re now existing homes.
Today, buying a new home usually means you are buying a sub-par location. The absolute value of new homes today is worse than it’s ever been given that you’re getting crap build quality in a crap location with barely any discount for the impaired location, let alone the crap build. That the new home is cheaper than the comparable existing home is a function of neither newness nor size, but location. The location differential is most of the explanation. The far second place reason is crap build quality, which simply disguises cut corners in the form of a lower price.
Concerning the left chart at 2:09
Can someone ELI5 why we don't see deflation instead of just disinflation when M4 decreases? Does it have to do with velocity of money lagging behind? Or maybe the flight to real assets? Other factors like supply chain issues?
Disinflation is a _Slowdown_ in the *Rate* at which prices are rising, while deflation is a decrease in prices.
It's simply because M4 hasn't been negative for long enough.
Inflation is an increase in the money supply and/or the credit supply. Credit actually has been increasing meaning that there is still inflation or at least no deflation. The biggest lie is that inflation is the increase of prices. That lie gets the government and the Federal Reserve off the hook for the real inflation they create. Government just wants the people to blame "greedy" business and property owners for jacking up the price.
@@shotelco I understand that but that isn't what I asked. Using your definitions, I'm essentially asking why we only see a slowdown in the rate at which prices are rising, while not seeing a decrease in prices.
@@snakyjake9the rich are still buying, propping up the market... anyone with cash is still bidding... there is two separate economies and gap is getting bigger and bigger
The house pricing are still fucking climbing prices are too high people are always complaining about it
Garcia Timothy Martin Melissa Taylor Cynthia
Comparing to 2008 is fighting the last war.
It’s called inflation. Homes don’t appreciate the land does
Taylor Christopher Perez Christopher Anderson Jessica
Hall Patricia Wilson Susan Miller Thomas
Great
Davis Jose Anderson Barbara Taylor Jeffrey
New homes are bad quality in bad places
Closing on a house on June 6th…
Wow talk about poor timing of the market
@@brendancurtin770 time will tell
Good luck, but I'm going to wait it out to buy our first rental property
@@bansheezs totally understand, I waited for a long time but finally got to the point where I need a home and rentals aren’t an option in my market.
congrats, you paid twice what its worth.
New homes are built like 08 homes. Make the chart for existing just blue. Don’t do this again. It’s awful.
LAND, ALL THE NEW HOMES HAVE NO LAND OR THEYRE TOWNHOMES oops caps lock was on
are you guys enjoying socialism? just when you think your misery is over they're gonna print a bunch more money and the currency you save in will be worth less than confetti. that's why home prices seem high, we're using confetti money.
The national average for home prices has gone down at least 20% over the last year. Much more in some areas. To find the true value, you need to divide the current prices of homes with the price of gold, then do the same for a year earlier. A year ago, gold was about 1800 an oz. Today, gold sits around 2300 per oz.
Gold is a good comparitor only in the long run, but not in the short run IMHO. In the short term it's easy to prove anything by picking dates when gold was up or down.
Videos haven't aged well because it's just your own marketing
You bring valuable insights but they lead to a bearish sentiment that has been brought forward for so long, eventually you'll be right but it's worth mentioning that although your data might be correct it can take years for it to unravel and trying to time the market is a dangerous endeavor. These videos are like candy for market timers. I feel bad for those that sold all their stocks on 2022 because of videos like this one.
All you have to do is look and see how the average consumer is doing to see if we’re headed for a crash. I’m an engineer in Dallas and can’t afford a home. Not unless I want to live paycheck to paycheck. That’s all the information you should need to know everything is way too hot right now. Credit card debt is climbing. Unemployment is starting to climb, which is historically when it starts to climb a huge spike upwards will follow. I’m not a bear, just a realist. We are maybe 5-10% from the top.
Another indicator is the buffet indicator. The stock valuations using that model were around 130% in 1929, today that number is over 190%. If you thought the crash in 2008 was bad you haven’t seen anything yet. I have no clue why people are acting so greedy right now. You’re getting 5%+ on cash that’s risk free return. But you choose to take all that risk for what? Just look around dude, everyone is broke. The only people doing okay are those who owned assets prior to the pandemic. Everyone else I know can’t afford to start the American dream.
This channel has been so wrong for so many years, why does it still have listeners? Anyone can just be a perma bear and eventually be right
Can you give one statement or fact they were wrong about?
2 layers of socks to bed = drug addiction curing level sleep🟣
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
The best course of action if you lack market knowledge is to ask a consultant or investing coach for guidance or assistance. Speaking with a consultant helped me stay afloat in the market and grow my portfolio to about 65% since January, even though I know it sounds obvious or generic. I believe that is the most effective way to enter the business at the moment.
please who is the consultant that assist you with your investment and if you don't mind, how do I get in touch with them?
'Carol Vivian Constable, a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
The problem with these new homes are those horrible HOA Karens.
Where are these cheap new homes at? I’m not seeing anything here in the Atlanta suburbs that’s under $300K beside bombed out buildings that look like they were transported here from Beirut.
I took the data you guys presented about new vs used homes a few months ago in another video. So we went new build shopping and secured a new build with them buying down my rate to 5% fixed, closing cost covered and 30k off price tag. Thank you for sharing the data!
I was just looking at a house that sold at the end of 2019 for $484,000 when you could financed for 3.75%. It's now on the market for $780,000 and would need to be financed for around 7%. In 2019 with 20% down that is a $2,218 monthly payment. Now it's $4,551 and your downpayment cost you an extra $75,000. This is absurd. A 63% increase in sale price and a 100%+ increase in the monthly payment.. in FOUR years. And I bet it sells for full ask too... I do understand how this keeps going.
It won't. The US economy will follow the rest of the world into recession soon (my guess is that it will be after the election because the government will do anything it can to make that happen) and the stock market will have a huge correction. There's approximately 1½ times as much debt as 2008, so I guess that the markets will drop by 1½ times as much as in 2008. A similar correction is coming in real estate, but slower (after 2008 it took about 8 years) and a lot of people are going to be gigantically underwater with their mortgages.
Hold onto your hat, it's going to be a rough ride.
@@ivancho5854 agreed. and we are in the minority here. most people i talk to think home prices will continue to rise. impossible. for the simple reason that wages are not going up. headed for a huge crash in 2025.
@@Unfluencer Exactly. 1929 was almost 100 years ago and there's no one still alive who witnessed it and can say, "Hang on, I've seen this movie." Although it will be a very deep recession, I don't think that it will last as long though. Maybe between 3 and 5 years. The ultimate driver of any economy is demographics. The retirement of the Baby Boomers is what is causing this recession and the next demographic wave should lift us up in about that timeframe, everything else being roughly equal. I think, but I've been wrong before.
I foresaw this a year and a half ago, so I've missed out some, but I'm cautious by nature and this will serve me extremely well this time I hope. After the crash when everyone else is shell shocked I'm going to be mega bullish.
All the best. 👍
I'm in the exact same boat. There are houses here being listed for $100-150k higher than even the peak just a couple years ago. Realtors and sellers are still on a high thinking they're going to make crazy money on real estate. Low inventory and people moving into my area has kept the prices dropping much, it at all.
Many Americans will suffer if there is an economic crash and that is the last thing anyone should want.
yeah. savvy developers trying to get these houses off before a big ass crash and less savvy home owners trying to wait for a peak
Much better than most housing market stuff on YT. Only thing missing is the severe underbuilding from 2008-2018 leaving us at a structural deficit of available housing relative to population growth.
Illegal aliens are creating a massive upward pressure on housing prices that nobody seems to want to mention.
AFAIK: Almost all New Construction comes with an HOA, because the local governments will not issue development permits for subdivisions without an HOA in place to protect income tax revenue. Can you look into / report on whether HOAs are a factor at all? Personally, the main reason I don't buy a new home is the HOA.
HOA are the worst
If Santa Clarita, CA, the homes without HOAs were typically about $200k more. Given the average HOA fees, it was probably worth it.
New homes are too far away from city centers nowadays. I'd rather buy an existing home in an interesting area with things to do nearby than in a new suburb in the middle of nowhere. This is becoming especially important as US population stops growing and even begins contracting, potentially leading to a Detroit-style collapse of the suburbs.
US population isn't projected to peak until 2080. Even if the bearest of demographers are accurate and the population peaks in 2050 that's way too far from now timewise for it to have an affect on pricing today.
@@rathelmmc3194 Real estate is all about location and there are plenty of places in the US that already have declining population
@@nicolasgirard2808 And when the whole country is depopulating its going to be like Detroit where a few areas hold value and everything else effectively goes to 0.
@@rathelmmc3194just like Italy and Japan. They literally have homes in 2nd tier cities and suburbs that sell for $1. They’re desperate to get people moved in to keep their population from hitting 0.
If you are ready to pay the inflated price for it then do it. Rest of us are not.
One of the key contributors for inventories levels of existing homes being so low is the historically low mortgage rates those home owners have. A recent report (Alto Research I believe) states over 78% of existing US mortgages have 4% or lower rates. the combination of buying and refinancing has put us in a tough spot as far as normal market buying and selling activities. A really good data point to understand is the % of existing homes on the market that are non-primary residence (vacation or investment properties). I suspect we are seeing a significantly higher number of non-primary residence homes on the market which means less people are actually moving. We are in a home price stall period and will need 18-24 months of continued downward pressure to bring home prices back to normal historical trend alignment. Very frustrating to see existing homes listing for 40% higher then they should be. Additionally this downward trend of sales activity is putting pressure on the new home as both permits and new build starts are trending lower. Architect billings for multi-family residence is also trending down which means we have to get inventory increases from existing homes to help. Not sure how we will get out of this mess, but I blame the 2020-2022 bubble and the continued resistance of existing home prices falling back in line with historical trends. Best of luck for those that need to buy and sell in the next couple of years.
Very true, but people eventually get fed up and want to move and will lose money to do it. If we were completely economically rational beings we wouldn't be in this mess. So the way out is that people aren't completely economically rationale.
If you really think about it, those with interest rates around 2% (my family has a couple homes in California at those rates) even THE LOAN can be thought of as an ASSET in a way because you can pass-on the existing loan to the buyer of the home (which in turn increases the value of the deal when considering home price of an existing home with fixed low interest rate comparing 2% to 7% LOL).
@@RandomRabbit007I'm not sure if your statement is accurate. I do not recall the proposition this is tied to, so if you know it please pass it along. My understanding is there is a law that allows the seller who turns around and buys another home in California can transfer their property tax basis from one property to another resulting in potential decreased property taxes. I'm not familiar with any law allowing one to transfer their mortgage or rate to another party. I could be wrong but this would be a huge surprise to many.
@@michaelsd284 I dont believe you can pass-on “property tax basis” unless you’re elderly (I think 60 years+). What you CAN do is do a 1031 exchange and avoid paying “capital gains” taxes all together on the sale. You can pass tax basis when you inherit property from the death of a relative.
@@RandomRabbit007 OK, so the idea from your prior comment that "one can passing-on the loan to the buyer" is not correct.
This is absolutely a lowered price discovery situation. Sellers are legit delulu in CRE and residential