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American Middle Class FORCED OUT of the Housing Market (What to DO NOW) - YouTube
Channel: Dr. Nitin Chhoda - Ignition Time
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Hello everyone and welcome
to this episode of Ignition Time.
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The middle class of America is getting
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completely priced out
of the housing market.
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Welcome to our channel, everyone.
My name is Dr. Nitin Chhoda with Ignition Time.
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I work hard on this
channel every single day.
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Bringing you the latest news as it impacts
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the country, the economy,
as well as our money.
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Here's a headline of an article on your
screen from the Wall Street Journal.
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In the COVID 19 housing market,
the middle class is getting priced out.
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In fact, there's surging demand
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and shrinking supply,
and these are actually combining to make
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the home buying process
much more difficult
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and it's becoming harder and harder
for people to actually afford a home.
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I'll provide you with a link to this
resource in the description section below.
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Folks, what is the American dream?
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The American dream is owning your home,
paying off your mortgage,
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having home equity that you can tap
into one day, perhaps selling your home
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and downsizing if you choose to,
and living comfortably,
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maybe even leaving the home as
an inheritance for your loved ones.
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In fact, the dream of home
ownership is classically American.
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Unfortunately,
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it is becoming more and more difficult for
middle class Americans to afford homes.
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I'll quote from the Wall Street Journal,
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the surge in home prices and sharp decline
in the number of homes for sale have made
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home buying much more difficult for many
Americans compared with two years ago.
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And this actually was according to a study
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from the National Association
of Realtors that was just released.
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Here is an image on your screen that shows
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you the share of listings that are
affordable by income bracket.
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As you can start to see,
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and by the way, the income brackets are
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shown at the bottom, you'll see that those
in the less than $15,000 income bracket,
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there's not much change
in terms of affordability.
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But as individuals start to make a little
bit more money, we're talking $50,000
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to $75,000 a year, $75 to $100,000 a year,
and above, you can start to see
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that in 2021, listings that are affordable
by income bracket have started to reduce
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significantly, even for those who make
a substantial amount of money,
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those making above $200,000
a year, even for them.
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In 2021, the listings that are
affordable have actually reduced.
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In fact, at the end of last year 2021,
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there were about 411,000 fewer homes
on the market that were considered
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affordable for households
earning between 75 and $100,000.
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At the end of 2019,
there was only one available listing
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that was affordable for every 24
households in this income bracket.
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By December 2021, that figure was
one listing for every 65 households.
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In other words, more and more people are
now finding that they simply cannot find
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an affordable home, even if they
are in a higher income bracket.
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Pretty incredible.
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In fact, according to the Wall Street Journal,
unlike traditional measures of housing
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affordability, which typically compare
housing costs to income and mortgages.
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In fact, this study found that housing
affordability worsened over the past two
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years for everyone except
the wealthiest Americans.
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And in fact, the shrinking number of homes
on the market made the home buying process
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much more difficult
for every income bracket.
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In fact, the pandemic essentially lit up
the housing market because buyers were
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trying to take advantage of low mortgage
rates moving into bigger homes.
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But the supply of homes for sale, which,
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by the way, was very low during
the pandemic, actually reduced.
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In fact, home building activity slowed
down, and many, many potential sellers
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said that they would not sell
or were reluctant to sell.
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In fact, Americans in middle income class
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levels experienced significant
declines in buying power.
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In fact, let's show you this image on your
screen that shows you Metro areas
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with the least homes for sale
for annual incomes of $75 to $100,000.
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So you can start to see in California
and Washington,
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the number of homes that were available
for sale started to decrease.
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And let's take a look at the Metro
areas with the most homes for sale.
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You can start to see that Texas, Georgia,
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Iowa and other States actually
had more homes for sale.
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But in general, the number of homes
for sale are actually reducing.
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More and more Americans try and build
well through home ownership.
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But guess what?
It's not happening.
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In fact, according to Skylar Olsen,
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who is a principal economist
at the mortgage finance startup
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Como Networks, it's hard when both options
are eroding in affordability so quickly
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that will just make your future
wealth building even harder.
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So, folks, this is pretty incredible
if you actually think about it.
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And also for households earning between
$75 to $100,000, they could afford to buy
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51% of the active housing inventory in
December, down from 58% in December 2019.
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So in other words, even for those making
more money, they were able to afford less
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simply because there weren't many homes
for sale and home prices had gone up.
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So, again, this is pretty significant.
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And at the end of the day,
there are more and more people who want
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to buy, but there are fewer and fewer
options available to them,
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and there are fewer and fewer
homes that they can afford.
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Now, mortgage rates have been low,
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but unfortunately,
interest rates are going to go up,
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which is going to make it even harder
for people to be able to afford homes.
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And something tells me that even when
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mortgage rates rise,
I don't think home prices will come down
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because at the end of the day,
everything is about supply and demand.
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It's okay for mortgage rates to rise.
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But if there aren't a lot of homes
on the market, you're still going to have
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to pay top dollar
for a home that you want.
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And on top of that, your interest rate is
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probably going to be higher,
even if you're wealthy.
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In fact, for households Earning
between $$75,000 to $100,000 a year.
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Five of the top six Metro areas
with the fewest affordable homes for sale
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per household Were actually in the state
of California Again Making it harder than
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ever for individuals to be
able to afford homes.
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Now, some economists and real estate
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agents expect that the number of homes
for sale Will rise this spring and there
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could be essentially a more easing, if you
will, of the supply and demand problem.
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But the problem is not a lot of people Are
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selling their homes and the number
of homes Currently under construction Is
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at a multi year high and many of these
homes Are set to be completed this year.
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So when those homes hit the market, maybe,
just maybe, the situation Might ease up.
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But I have a feeling that interest rates
Will go up and home prices Will remain
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high Because there's just too much
demand and there is not enough supply.
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In fact, here's a quote From Jimmy Khan
Who is a real estate agent in Texas.
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She said she wrote dozens of offers
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on behalf of her clients in January And
she said everyone is predicting the rate
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is going to go up more So those people
are scrambling to lock something.
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There are so many buyers out there
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who haven't found their home
And Unfortunately, folks,
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the middle class Is getting priced out
and now when interest rates rise,
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I think the middle class Is going
to feel the pinch even more.
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Why again, there's surging demand
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and shrinking supply which are making
it difficult for people to find homes.
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There are fewer options and it's becoming
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harder and harder for people to afford
homes Because even if they are earning
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a high salary, Inflation is cutting
into their ability to save.
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Let me know what you think
in the comments section below.
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My name is Dr.
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Nathan Shoda With technician time.
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Thank you so much for being a viewer.
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Thank you so much for being a subscriber.
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I appreciate you.
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I'm looking forward to seeing you
in the next episode of ignition time.
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Take care.
I'll talk to you soon.
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Bye.
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