But here’s the thing. That end is just the beginning of another cycle. You see, every time we go through a recessionary cycle, anywhere between seven and ten years, it resets. It starts over. So the beginning of phase one is the recovery from the last crash, alright? Well now, going into the recovery, you’ll notice that there’s no new construction. Why? Because contractors aren’t out there building apartment complexes, single-family homes, any duplexes, things like that, because they’re still just now recovering from the last real estate downturn, alright? Now during this time, we go into phase two, which is the expansion phase.

And the reason why is because inventory or vacancies start to dry up. Interest rates dive down during the recovery phase, and after a certain amount of time of low interest rates, people start to slowly buy up units, start to buy up inventory. And as they’re slowly buying up inventory, what you see is that vacancy declines. But at the same time as vacancy is declining, you also notice that interest rates start slowly creeping up. That’s where we are today. And to say they’ve been slowly creeping up is an understatement. But where are we right now? Well, we have just moved into phase three, and that is the hyper supply.

I don’t know if you’ve been paying attention to the news lately, but it’s all over the news. Because contractors and builders have built so many homes that they can’t sell them. Not only because the cost of the home has gone up exponentially since phase two of the housing bubble or the housing cycle, but also because there’s other added costs, like the cost of financing that home, the cost of insuring the home, the taxes on that home. And what happens is now there’s so much supply and so few buyers, we’ve now tipped into that phase three. Now, something I want you to note and take a look again at that cycle is as we go into the hyper supply, which we are in now, we start to see increasing vacancies.

Well, so what is an increasing vacancy? Well, simply put, it’s a home that’s empty. It’s not sold to someone. It’s either still in the hands of the prior owner of the home, the prior occupant of the home, or it’s in the home, the owners, the hands of the builder, the big contractors, things like that. Well, then as you see this slippery slope and it starts, we see more and more inventory increasing around the nation. Like we’re seeing, we’re seeing price reductions. We’re seeing more and more concessions from home sellers, right? Both new homes and used homes.

We start to get down into that slippery slope going into phase four or the recession. And the point being is that we are not in a recession yet because the government simply changed the metrics on that, but we’re moving into that. And it becomes a very, very slippery slope. Now, we’ve recently seen companies like Redfin come out and admit that not only are homes dropping around the nation, but that during right now, the peak between spring and summer selling season, the best time of the year to buy and sell a home, they’re actually admitting that it’s going to get worse.

And so those are the things you need to get ready for. But you know, the one thing that nobody really gets ready for is figuring out how you’re going to get the money to buy a home. And what people don’t realize is during this phase three and phase four, in the phase four, in the phase three part of this cycle, banks tighten up their standards and they start preparing for that downturn. So they start charging points. A point is simply an amount of money based off of the purchase price of the home or the loan amount of the home.

I apologize. Let’s say you have one point, a one percentage point, and you’re trying to finance $400,000. That’s a $4,000 fee that you have to come up with hard earned cash in the middle of escrow before it closes. I don’t want you in that position. How do you get away from points? Well, you become a prime borrower, a borrower that banks are begging for, that have an amazing credit score, their debt to equity income ratios, and all their ratios are looking amazing to where an underwriter goes, we want to give this person the loan to buy this property.

And so I teach that in the Mortgage Master Course. I’m going to put a link right up here in a QR code. If you want to scan it, 80% off for you to check this out because most people don’t prepare for this. And then once banks really start to tighten, another reason for the downturn and where we are right now in the cycle is banks give out fewer loans, even though they have to give out loans, they become risk adverse and they are freaking out. They don’t want to just give everybody a loan like they did in phase one and phase two.

They get very picky. And that’s why it’s important to plan ahead and be ready ahead. So you don’t have to race to get ready and miss the boat during phase three and phase four. So I hope this answers some questions. It’s pretty easy once you put a graphic to it and see where we are to say that we’re in a hyper supply of homes right now in our nation, even though the media would like to tell you different. The fact of the matter is there are tens of thousands of homes nationwide right now that big funds aren’t buying and big builders like D.R.

Horton, Syntex, Toll Brothers are out there frantically giving $50,000 discounts, free upgrades. We’ll buy down your mortgage because nobody is showing up. And once you start to see the reality, the facts, you start to be able to see the opportunities. I hope you got something out of this. I hope you guys crush it. Let me know down in the comments what you’re doing to get ready for this next real estate cycle. With that being said, the economic ninja is out. [tr:trw].

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