Housing Market Crash: It’s Coming & This is WHY!!

Asset markets around the world have been Crashing ever since central banks Started raising interest rates and it Looks like the last domino is finally Starting to fall I am of course referring to the housing Market where prices have been through The roof until recently and this has Many prospective homeowners wondering if A buying opportunity is approaching at Last So today i’m going to take you through a Few of the indicators that suggest the Housing market is starting to soften Tell you why prices could still go Higher in some places and when the big Crash could come [Music] Now i hate to interrupt but there’s some Due diligence i need to conduct if you Came for financial advice tough luck Education and entertainment are my only Products please contact a financial Advisor if you need that kind of consult If this is your first time in my midst My name is guy and crypto is typically What i spit from time to time however i Like to cover other important topics Like this so if this sounds legit Subscribe to the channel and give that Notification bell a hit okay that’s Enough of the intro let’s get into The housing bit Over the last two years the cost of

Housing has been accelerating at an Unprecedented pace In most countries housing has been Increasing by double-digit percentages On an annual basis with the united States seeing an almost 40 percent Increase in median house prices since 2020. This is for a few reasons for starters Many central banks around the world Dropped interest rates to zero and in Some cases below zero when the markets Collapsed at the beginning of the Pandemic in march 2020 this made Mortgages more affordable in most places Which made it easier for people to buy Homes Not only that but many existing Homeowners took these low mortgage rates As an opportunity to buy a second Property for investment purposes with Redfin finding that the demand for Second homes doubled in 2021 compared to Pre-pandemic levels in the united states Asset managers like blackrock and Megabanks like jp morgan also Accelerated their acquisitions of Single-family homes but it’s important To note the involvement of institutional Investors in the housing market is still At historical lows and these investors Only own around three percent of Single-family homes in the u.s Now in regions where interest rates had

Already been at or below zero prior to The pandemic such as in europe you can Clearly see that housing prices had Already been rapidly rising for years Starting from when interest rates had Hit those low levels The pandemic rate cuts just made this Trend much worse The pandemic lockdowns also increased The cost of housing because of how many People started working from home According to pew research around 60 Percent of jobs that can be done from Home are still being done from home in The united states not far off from the 71 percent peak in late 2020 It didn’t take long for the people Working these remote jobs to realize That they didn’t have to live in a small Apartment in the city and many of them Decided to move to less populated areas Where they could afford a much larger Apartment or even a house Logically such moves caused prices there To go up At the same time pandemic restrictions Supply chain issues labor shortages and High commodity prices caused home Builders to hit the brakes limiting the Supply of new homes coming onto the Market until fairly recently more on That in a moment Now another housing demand driver is one I mentioned in my previous video about

The housing market and that’s that Millennials those born between 1981 and 1996 are entering their peak home buying Age basically the period of their life When they’re all looking for a place to Settle down So in some low interest rates changes in Living and working habits supply chain Issues and the emergence of a Well-capitalized demographic looking to Buy homes is why the cost of housing has Been off the charts However this is slowly starting to Change both on the supply and the demand Side Because of the insane demand for housing Home builders around the world have been Putting up new units as quickly as they Can as you can see the monthly supply of New houses in the united states looks Like a meme stock and it’s at the Highest level it’s been since the Housing bubble back in 2008. now i can Already hear all the real estate agents Coping in the comments but guy the Supply of single-family homes hasn’t Been rising as quickly and there’s still A shortage of single-family homes Well to that i say the supply of Single-family homes has also been rising Rapidly and if you need more proof Consider this Back in september media outlets were Reporting that the united states is

Short over 5.1 million single-family Homes The same media outlets reported just Last month that the u.s is now short Just 3.8 million single-family homes That’s 1.3 million homes built in less Than a year and that’s not all Some of you may recall that the price of Lumber had exploded during the pandemic Due to the demand for housing in case You didn’t know most houses are made of Wood at least in the united states This is why many analysts see lumber Prices as a leading indicator of what’s Coming for housing Over the last few months the price of Lumber has plummeted which tells us two Things First that the demand for housing is Starting to slow down and that the Profit margin for builders has gone up Which means that they’re likely to Continue building even if the sticker Price of the house is going down As it so happens the median price of Newly built homes in the united states Recently fell off a cliff and by a cliff I mean more than 10 This downward trend is more than likely To continue and that’s because of the Primary demand driver we identified Earlier which is of course interest Rates As some of you may have seen mortgage

Rates in the united states recently hit A 14-year high of almost 6 The last time mortgage rates were at This level was during the 2008 financial Crisis which was again caused by the Housing bubble I’ll explain why we may not see the pop Just yet in a moment now if you’ve Watched any of our recent videos about The federal reserve you’ll know that Mortgage rates are strongly correlated To longer-term types of government debt Specifically the 10-year treasury You’ll also know that the fed holds Trillions of dollars of treasuries and Mortgage-backed securities This is extremely important because the Fed is slowly shrinking its massive Balance sheet by selling these assets And will apparently be accelerating this Sell-off come september as per chairman Jerome powell’s recent comments Because the interest rates on treasuries And mortgage-backed securities increase When their prices decline the fed cell Pressure should theoretically cause Interest rates for both treasuries and Mortgage-backed securities to rise which Should cause mortgage rates to rise and Housing prices to fall It’s a similar story in europe where the European central bank is expected to Raise interest rates into positive Territory for the first time in over a

Decade It’s safe to say that all the Over-leveraged investors in that market Expanding their airbnb empires are about To get wrecked and Good riddance Now there’s just one problem with this Narrative and that’s that housing costs Continue to climb in many places despite An increase in interest rates and even Despite the ongoing inflation asset Market crashes and general economic Weakness which should be sucking all Investors dry So What gives Well to understand why housing costs Haven’t come down in some countries and Cities we need to take a step back and Ask a simple question why do people buy Houses Well the first reason should be obvious To everyone and that’s for living in Obviously everyone needs somewhere to Live and according to wikipedia Homeownership rates are higher than 70 Percent in most of the world with Romania taking the top spot at over 96 Now as amazing as these statistics are They’re also a double-edged sword in the Context of the housing market you’d Think that rising housing costs would Create a huge incentive for existing Homeowners to sell and in some cases it

Certainly does such as with older folks Who want to retire somewhere else In most cases however rising housing Costs actually create an incentive for Existing homeowners to hold especially If there’s not enough supply of new Houses coming onto the market as was the Case in the earlier part of the pandemic That’s because every person who’s Selling a house still needs a house to Live in and if they can’t find a new House to live in that’s affordable then They’re not going to sell their existing House no matter how high prices go Logically this further restricts supply Which causes housing prices to rise even Further This is consistent with the relatively Low trading volume of houses which Accompanied the pandemic price pump and It’s also consistent with the much Longer trend to huddle homes The average home ownership duration is Almost triple what it was in the early 2000s and currently sits at 10 to 13 Years Now the second reason why people buy Houses should be equally obvious and That’s investment purposes this can Include anything from renting out to Long-term tenants turning the house into An airbnb and even turning the house Into a hotel hostel or restaurant This is where things get interesting

Because even though housing costs are Starting to come down the cost of rent Continues to increase in many places the Most notable being the new york city Borough of manhattan where average rents Recently hit a record high of 5 000 Per month Totally worth it Jokes aside the answer to this mystery Lies in the second reason why people buy Houses which is again for investment Purposes Although we’re still technically in a Pandemic leisure travel has reportedly Returned to pre-pandemic levels and it Looks like we won’t be seeing any more Lockdowns we hope As such there are probably many real Estate investors who continue to acquire Properties to convert into airbnbs for All the folks who are finally able to Use their holiday days after being sat At home for two summers on the bounce These acquisitions are probably well Worth it even with much higher interest Rates Now the issue is that this mass Acquisition of investment properties is Probably starting to squeeze the supply Of housing especially in those cities Which see the most tourists This housing shortage not only makes Regular rents in these places more Expensive but it also makes housing

Prices more expensive Now you’d think that this housing Problem would be contained to the cities That see the most tourists but i suspect This is not the case in many countries Indeed here in the uk the explosion of The holiday rental sector has turned Some of the more picturesque parts of The country notably large parts of the West country and many seaside towns into Tourist-only enclaves with locals priced Out and often forced to rent elsewhere Come the off season when the tourists go Home these hotspots become virtual ghost Towns Now all this is because anyone who owns A property in the city or tourist Honeypot is probably seeing the value of Their property increase and Simultaneously seeing that housing Prices are starting to slide elsewhere Due to the fundamental factors i Mentioned a few moments ago you know Mortgage rates lumber prices Any rational actor in this situation Would sell their city home and buy a Bigger home outside the city This in turn causes the price of housing Outside the city to increase which Prolongs the housing price pump It’s literally the exact same effect as All the remote workers relocating just a Different reason Now the final factor in this equation is

One that seems to have been overlooked And that’s demographics Populations have been on the decline in Most developed countries and you’d think That this would eventually translate to Cheaper home prices as the boomers well Shall we say retire from life and all Their houses go up for sale besides the Fact that the populations in these Places are just growing at a much slower Pace official population statistics Don’t count all the undocumented Migration that’s been occurring in many Countries nor do they count all the Refugees that have been fleeing from Places like ukraine Consider this it’s estimated that there Are between 10 and 12 million Undocumented migrants in the united States but this figure is probably much Higher given that u.s border authorities Have encountered over 4 million Undocumented migrants since january 2021. 800 000 of whom were not Apprehended Meanwhile in europe it’s estimated that Over 6.4 million ukrainian refugees have Fled the country since russia invaded in February with poland alone taking in Over 1.2 million this is not to mention All the refugees and migrants that have Entered the eu since 2015. Now regardless of your political views On immigration the fact of the matter is

That migrants and refugees need some Place to live and because most of them Can’t buy or can’t afford to buy the Only option is to rent and in some Countries the government has even been Subsidizing these rents As basic economics dictates if demand For something increases while its supply Stays the same then its price goes up In this case the demand for rent coming From migrants and refugees gives real Estate investors the cash flow they need To continue acquiring properties Regardless of rising interest rates Now even with all the factors that are Continuing to force housing costs higher In some places it’s only a matter of Time before that big crash comes and Even though it probably won’t happen Everywhere at once it will almost Certainly be a global phenomenon and This is for a few reasons For starters central banks around the World have started aggressively raising Interest rates in a response to Inflation and some of them have been Explicit in their intentions to raise Rates until inflation comes down Regardless of the economic consequences This list includes the federal reserve Which put the u.s economy into a Technical recession with its rate hikes Which it plans to continue until it’s Confident that inflation is headed for

The institution’s two percent target and Let’s just say this means the recession Is about to get a lot less technical If you watched our video about how to Beat inflation you’ll know that there’s Only so much central banks can do Because in many places most of the Inflation is coming from supply side Factors that are completely outside of Their control To be blunt it looks like inflation is Going to stick around for a while Especially in regions like europe where Most countries are expected to see Energy prices triple as winter Approaches This will force the ecb and other Central banks in similar situations to Raise interest rates to try and minimize The demand As interest rates continue to rise so Too will the cost of most debts This means asset markets will continue To crash as people sell off their assets To meet their debt obligations Mortgage rates will continue to climb Too and this will cause the cost of new Housing to continue its current fall At some point all the people who Purchased extra properties for Investment purposes will start to wonder Whether it makes more sense to sell and Some of them probably will if the value Of their other assets has collapsed

Note that pension funds have lots of Money in the stock market Now as quarterly earnings reports Continue to come in short companies will Accelerate the rate at which they’re Laying off employees and likely begin Cutting salaries starting with top Executives This will result in less leisure and Business travel which will mean lower Profits for all those airbnb owners Many companies will also probably ditch Their office spaces to cut costs if they Know their employees can work from home And this will lead to a huge increase in Available real estate in you guessed it The busiest parts of the busiest cities Some of these commercial units will Probably be purchased and turned into Long-term rental properties which will Cause rents to drop squeezing more Conservative real estate investors who Prefer to rent to long-term tenants Rather than temporary tourists Many of these investors will probably Sell Some of these commercial units will Probably be purchased and turned into Short-term rental properties that will Compete with airbnbs causing short-term Rental costs to collapse squeezing all Those airbnb owners who took on too much Leverage Many of these investors will probably

Sell At the same time populism will continue To grow as the recession deepens which Will leave the average citizen looking For someone to blame Fingers will be pointed at the rich and Taxes will be raised on the kinds of Individuals and institutions that buy up Properties for investment purposes In some cities laws will be put in place To prevent excessive ownership of Properties that are left vacant for too Long or not used as a primary residence Some cities have already begun putting Limits on airbnbs namely amsterdam which Put a limit of 30 days per year per Airbnb property in 2018. Unfortunately fingers will also be Pointed at migrants and refugees which Will result in stricter immigration Policies and more border controls this Will further dampen the overlooked Factor on the demand side of the Equation for better or for worse With some luck conflicts like the war in Ukraine will be resolved which will Result in many migrants and refugees Returning to their homes further Reducing demand for rents in the areas They stayed in during the conflict And last but not least all the houses That home builders are working on will Hit the market which will increase Housing supply even more right as the

Demand for housing is falling through The floor In some we’ll see the same process That’s causing housing costs to continue To rise in some places completely Reverse in the coming months and Depending on the depth of the recession The housing crash could be as Unprecedented as the appreciation of Housing during the pandemic now i must Stress that all this assumes that Central banks won’t change course and Drop interest rates again which is a Very real possibility However i don’t see it happening and That’s because blackrock is getting its Billions ready to buy the housing dip as The saying goes follow the money And that’s all for today’s video about The housing market so if you found it Informative smash that like button to Let me know If you want to make sure you don’t miss The next one subscribe to the channel And ping that notification bell While you wait you can check out coin Bureau eclipse for last minute crypto Market updates and tune in to the coin Bureau podcast to explore crypto rabbit Holes with two crypto bros You can also follow me on twitter tiktok And instagram to get my thoughts about The crypto market in real time and join My telegram channel for crypto info that

Will blow your mind If you want to find out what cryptos i Hold as part of my portfolio my weekly Newsletter is the place to go it’s also Packed with tips and tricks that will Turn you into a crypto pro And last but not least consider Supporting the channel by getting one of These the coin bureau merch store has All sorts of cool crypto tees long Sleeves and hoodies The links to all these resources are Down in the description if you please Thank you all so much for watching and I’ll see you in the next one my name is Guy and i bid you Goodbye [Music] You

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