Summary
➡ Real estate market trends are influenced by factors like interest rates, market speculation, and more. When prices surge due to speculation, profit margins slim, interest rates later rise causing a panic among buyers, and inventory dries up. Other elements impacting the market can include rising insurance costs, expensive oil, and restrictions in the vacation rental sector. This can lead to a market crash and an oversupply in inventory. Observing these factors and shifts can help to predict and potentially take advantage of future market trends.
➡ The text discusses the importance of understanding larger economic cycles, transitioning to an update about banking news and some banks closing this month. It then advertising a Black Friday deal for various real estate courses by the Economic Ninja.
Transcript
But I’m also going to share a story about the last house I flipped in 2007 and why I knew it was the last house. All right, so let’s dive into this real quick. Last day for the Black Friday sale, where you get how to prepare for the real estate crash course, plus two bonus courses home Seller Pro and Real Estate Media Master. All right, I’m out of it.
That’s all three of those courses for two eightyn links down below. All right, here we go. Out of Yahoo finances. House prices are poised to stall and possibly fall, y’all. Sorry. I’d have been a horrible rapper. The house price spurt of 2023. I guess that’s it. Spurt? Spurt? That’s all you got is running out of Puff? Who writes this? Oh, here, this is from Stephen. Stephen Holatanovos. Is this whole story going to be like this? You guys know that I never read these stories ahead of time.
I just see a title and I’m like, go. The house price spurt of 2023 is running out of Puff. Not that a house price crash is likely. Far from it. Of course, this time it’s totally different. Let’s just say how different it is, actually, because people keep talking about a housing crisis, how there’s just not enough houses. Let me just let you know, there are almost twice as many homes well, sorry, there’s twice as many multifamily as there were in 2008 in America.
It’s absolutely insane. You go look at the data on the Fred and you see the charts for the permits that starts for multifamily. Absolutely insane. As a matter of fact, those have blown up. When you look at single families, yeah, there weren’t as many single families started between 2015 and now as we saw from 2003 to 2008. But remember, a fire didn’t just rip through all of America and burn all those homes down.
Those ones that were built back then are still there, and all the ones that are built since then are still there, are here now. What we have is an affordability crisis because the sheeple are racing in at the last minute going, Ah. And it’s just the top. So it is different this time, and it is going to crash. We’re already seeing price drops across the country. There has not been one person that’s tried to challenge me and say, well, not in my town.
Like, okay. Copy. It’s called realtor. com. First page. Price drop. Price drop. Price drop. It’s like, seriously, we’ve already begun. It’s only just begun. Sorry, I can’t help myself. Many of these key issues that drive house prices are changing from being positive for prices to a point where the resurgence in demand for housing and with that house prices is petering out. This guy uses some really neat verbiage.
Hey, the truth is, in the last few weeks, you’ve seen the ten year bond drop, right? And all these people are like, the market’s surging, real estate is going to go do great, and mortgage rates are dropping. Yeah, copy. They dropped from 8% to seven and a quarter. Still, you’re now back in the same spot as you were in September. Nothing’s changed. And you look at the long term outlook for rates.
Long term, it’s going to be much higher than it is now. I know it sounds crazy, but we have just exited a time of fantasy land. Now, the other thing that blows me away is most people, they sit there and they say, well, but my broker says that rates are going to come down. They have to come down. You’re right, they’re going to come down. There will be a day when the Fed lowers rates.
But here’s the point that I want people to understand when that day comes that the Fed goes, okay, we’re going to lower rates. It’s because everything is obliterated. Most of the credit scores of the nation are obliterated. People are so deep, so in despair, they have to lower rates. And the reason why they’re lowering rates is because they’re going to try and spur lending. But you don’t understand, if you’re not ready for that, and you’re like all the rest of people, the Fed just doesn’t decide, you know, let’s make less money today.
Yeah, let’s drop rates. See, what they do is they do it after. Nobody can take advantage of those low rates, at least not for some time while they repair their credit. So they lower rates when stocks are crashing, when real estate’s crashing. That’s how they’ve always done it. It blows me away. People, I swear, they have this idea, like, no, just one day, the Fed wakes up and goes, yeah, sick and tired of making all that rate of return.
Let’s lower rates. Yeah, it looks sunny. Sunny outside. Let’s just lower rates. It’ll make everyone happy. No, they don’t do it that way. All right. It says, it’s been clear for the past month that in big cities, the auction clearance rates are off their highs and are now sluggish. Buyers are no longer bidding extreme prices just to get into the market. The prior boost to housing demand from the reopening of the international borders in mid to late 2022, and the surge in population numbers that accompanied that has been largely satisfied.
It’s very actually very sad right now. We are in a moment where the government is paying to house people that do not add to our GDP. You want to talk crisis? And here’s the other thing. I want people to understand this. This can’t go on forever. Wise people, billionaires right now, are pulling back. I’ve talked to some of them. One. Just one. But my point being is that they get it.
He talks to others. They’re in a club. We’re not in it. But the point being is that just because we’re not in it doesn’t mean we don’t think the same thing. But we definitely act differently. The middle class acts a lot on emotion when it comes to investing. It’s not investing. It’s speculating when emotion is involved. And so taking that step back and not worrying about these day to day swings in the rates and getting all excited about clickbaity titles, I use them all the time to try and get people woke up just to get them to click on the video and go, okay, look, here’s the deal.
Because there’s something coming in 2024 where they’re going to swing those rates down just a little bit, and they’re going to tell you it’s because it’s good. And I’ve already recorded all my videos. I’ve got all the proof, just like the other things they did. I heard a billionaire, actually, the other day talk about how he had no idea, no clue, and he was being genuine. I don’t want to say his name.
He’s a very genuine guy. Told me out of left field that rates were going to go this high this fast. I’ve got the videos that said, and this isn’t like at a certain point, you got to pay attention to the people that were actually warning and saying, hey, this is going to come. This is going to happen. Because if you don’t listen to those people, then you listen to the people that are just trying to sell you something fancy mean, I got to be honest with you, you’re going to go down that weird road.
And he said, there’s no way we could have seen that it was going to go this high, this hard, this fast. And he even said to someone I was interviewing, he goes, look, rates are exactly where they were in 2007, right before the crash. I’m like, well, how did you not think that he’s been invested in real estate since the late 80s? How did he not think that rates could go back up to just where they were in the 2007? Looking at a long term Fed Funds rate, looking at a long term 30 year mortgage rate chart.
You go, this is how it happens. So it says here, it’s never completely clear what drives the change in the number of dwellings for sale at any particular time. That’s insanity that the author could write this, and it inevitably depends on a range of economic and demographic factors. No, that’s actually not true, all right? This is what drives demand or sorry, the increase or decrease. And I wish I had people asking me questions.
I do so much better. When people ask me questions, I don’t have anyone to ask me questions. There’s been a few times I’ve been interviewed and the interview is really good and stuff comes out, but it’s really hard to just talk to a camera and just tell you all this stuff on my way to work. I’m still doing other things in my life and it’s hard to come up with this, but I’m going to explain this because even the author of this has no concept.
He’s writing about real estate trends has no concept. So I’m going to repeat this again. It is never completely clear what drives the change in the number of dwellings for sale at a particular time. Let me explain this. It’s very easy. Interest rates are one factor. When interest rates are low people, it spurs buying and speculation. But it only does that for a certain amount of time. Once the prices, because of rampant speculation and people giving up less and less profit on the deal, right, they’re buying the deals.
Wrong, they start putting more down payment down. They’re searching for alternative loans going from fixed rates to adjustable rates. What happens is the margin, their profit margin is slimming, right? Their monthly cash flow gets tighter and tighter. And what happens is eventually the Federal Reserve starts raising rates very clearly like they did in 2003. And as those rates go up, another factor comes in. It’s called FOMO. And as rates go up and it pushes the cost of borrowing money to buy homes up, those same people like little investor ants running around trying to get all the food they can, all the deals they can, they’re stuck in that deal and that process and they don’t see an end in sight.
So what they do is they start to panic and they start to offer a little bit more, a little bit more. Because what happens is inventory dries up. Inventory dries up because people that would normally sell their house to go buy a newer home, a bigger home somewhere else, they can’t. Because what happens is not only does the price of borrowing the money get more expensive, but actually insurance does go up.
Insurance went up. Insurance costs on homes went up in 2005, 2006. Why? Because the cost of home was being driven up. There are all kinds of other factors. We actually saw a time where oil got really expensive in 2007, 2008. Fuel was we were seeing fuel surcharges in construction, all kinds of things like that, right? So then what happens is eventually everything comes to a grinding halt and everybody’s locked in their home like little prisoners.
And all you’re waiting for now because the same interest rates that drove that real estate market are driving corporate America. Corporate America starts letting people off. And then you see the opposite, a cascade of inventory. That cascade of inventory starts next June and it has to do with DoddFrank and the length of time it takes now a bank to go and foreclose on someone. We also have other factors driving this real estate crash that weren’t driving the last one, and that was speculation in airbnb and vacation rental markets.
And now that you’re seeing those becoming illegal in big cities, it’s going to be only a matter of time before other airbnb operators or vacation rail operators figure out, oh, crap, I need to get out of this market, especially as and you’re going to see this. It’s already started with airfare. You’re going to see hotels start diving their prices down, and no one’s going to go to your airbnb because they’re like, it’s a third of the cost to go to a hotel.
Okay? So there are these easy to identify factors. Now let me explain what happened with my house. And I got to cut this one a little short because I’m going over the real estate ninja to do a video for an interview. Let me talk about the last house that I ever bought. It was near a lake. I was always buying the cheapest homes in the area, so I had a lot of competition, right? There’s always a ton of competition for the lowest price.
The only thing that dictates the sale of a house, when it all comes down to it, the brass tax, is price. Lowest price is always going to get the most amount of attention, right? Because there’s more people that can afford it. It’s very simple. It’s stupid simple in real estate. My point being is that I went and bought this house, and I did a light fix up on it.
Carpet, paint, just some patches on walls, things like that. Really just lipstick on the pig, right? It was a nice house. Good bones. Built in like, 1992. I want to say it was more modern, nice 1700 square foot, three two ranch style house with two car garage when I had it listed, and it was one of the lowest price homes in the county. I want to say actually in that area, let’s say in the direct area, it was probably the third or fourth lowest priced home.
And the other ones were complete garbage. This one was clean and remodeled. I wasn’t getting phone calls for 30. I didn’t get anyone coming to see it for the first couple of weeks, and I got some activity. But within 30 days, not one offer. That was it. I knew we were in trouble. Now, this was in late 2006. I went to one of my partners, and I said, we have to drop the price radically.
I mean, really big. Like, we got to make our house the lowest price house in town, or we’re screwed. And we sold it. We walked with just $6,000. I couldn’t even fathom that I was just making $6,000 on a home. As a matter of fact, we went to Mexico on a trip with a guy trip and we said, let’s just blow all the money. It was just like a mind freaking thing, like, just walk away, man.
And that was it. It was over. That was when I knew when you can’t sell the cheapest house, you got problems. Now in our area right now, where I was mainly doing all my flips in California, I had my long term rentals in Arizona and New Mexico because of the renter laws, they favored the landlord, they took care of the more responsible people. If you don’t pay the rent, there’s going to be a consequence, right? In California, you don’t have that.
So I don’t have rentals in California. I do something different when I do flips in California because of just the crazy appreciation. And also on the backside, the downside, my home in California, one of the hottest markets in California, dropped 46% from pizza trough. There’s a point, and it happened with the tractor business, too, and the trailer business. At a certain point when I was selling tractors and trailers, I had more used equipment like bobcats and mini excavators than anyone in the state.
Right? Same thing with trailers, park more. Me and my business partner had more park models for sale than anyone in the state. Actually, at one point, we held all the used inventory in the state of California. But there’s a point where that cycle ends and it has to do with the duration, the time on market, and it’s happening like crazy here. As a matter of fact, there’s no opportunities in this area and it’s happening all around the country.
The median home price has dropped. We have already seen the median home price drop more on a percentage basis, or it’s actually about right about the same as the entire time during the great financial cris. Now, a lot of people would say, well, yeah, Ninja, that’s because it went up a ton. And I completely agree with you, that is why. But see, there’s more to this slide, so it’s all up to you.
Do you want to take advantage of this? Do you want to be ready for it or you want to sit on the sideline? S? There are a lot of people that puff up their chest and they’re making hundreds of millions of dollars, no joke, in the real estate market right now. They bought their first house in 2012. They have no concept of what’s coming. I know some of them, I’ve talked to them.
They have no concept, zero. They’re going to get held like you wouldn’t believe, and we’ll be making videos about that. It’s sad, but it’s true, because they’re leading a lot of people down the wrong road just because they simply have not lived through it. And you need to follow people that have lived through that last crash. I mean, there’s a reason why Robert Kiyosaki talks about how real estate is going to tank again.
Now, of course, you got to buy properties, right? But you have to realize when you’re talking to billionaires and guys are sent to millionaires, they’re putting down 20, 30% on a property. Cash flow a small percent. They don’t care. We just got to store our money somewhere. But for a newer investor or even someone that’s like me that’s been through this last cycle, my goal is still to put down the bare minimum and cash flow a good amount, because that means I get to go buy more homes because I want to buy on the lows.
And it’s very easy to figure that out. Everyone that’s been in my course knows when to figure that out. And all of a sudden, it starts ticking up. And then you’re buying 20 homes knowing knowing that those are going to go up. See, there’s a way of knowing when they go down and knowing when they go up, but it comes down to bigger cycles. You’ve got to be ready for the bigger cycles.
Don’t go on the month to months. All right, with that being said, guys, I’m jumping over to Real Estate Ninja because there’s some really good banking news. There’s a bunch of banks closing their doors this month. With that being said, do you guys want the pre? Thanks. It’s the last day for the Black Friday deal. How to prepare for the real estate crash course and two bonus real estate courses home Seller Pro and Real Estate Media Master.
I hope you guys a great day. Economic Ninja is out. .
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