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Why The Housing Market Hasn't Crashed Yet - What Banks Don't Want You To Know - YouTube
Channel: Proactive Thinker
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When you look at the stock market, it's clear
that the last 2 years have been some of the
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best years in the history of the market.
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The sp500 grew by more than 100 percent since
the crash of 2020.
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That's something unheard of.
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That's not what usually happens.
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Historically you can expect around 10 percent
at best, and if we are going to be conservative,
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then 8 percent annually.
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But as we entered 2022, January proved to
be catastrophic.
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The entire market collapsed.
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The sp500 fell by almost 10 percent.
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Apple, Tesla, Meta, and everything else just
went down the drain.
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It was the worst month since March 2020.
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However, while stocks have been suffering,
the housing market continues to grow.
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Extreme low-interest rates have kept pushing
prices higher and higher, and experts have
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been predicting a crash since the beginning,
but the question is - where is the crash?
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Why is the housing market still growing?
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Why hasn't the real estate market crashed
yet?
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We will answer all of these questions and
many m ore but before we do that, make sure
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to give this video a thumbs up and subscribe.
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The housing market is very predictable and
easily controllable by the fed.
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There is always a demand for a house because
everyone needs a roof over their head.
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And even if you have shelter, a house is one
of the best assets that you can invest in
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since it provides cash flow.
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The demand for homes will always be there,
but it fluctuates based on the prices.
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From 2017 up to 2020, houses price didn't
grow at all because the economy was at its
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peak.
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If they were growing prior to 2017, all that
investors could see in the housing market
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is stagnation.
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Mortgage rates were around 4 to 5 percent,
which really hurt the demand for houses, but
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2020 came in and lowered the interest rates
to almost 0 percent, making mortgages much
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more affordable.
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Buying a home at 2 to 3 percent is one of
the greatest financial decisions you can ever
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make.
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That's what fueled the demand and pushed the
prices to grow by more than 20 percent.
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The moment those super-low rates go away,
that demand will vanish, which is what experts
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have been predicting all along, but guess
what?
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In the last 2 years, the fed never increased
the rates.
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They kept them at nearly 0 percent.
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At the time of this script, rates are still
nearly at 0 percent.
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But mortgage rates are slightly higher than
they were in 2020.
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Of course, Federal Reserve Chairman Jerome
Powell has said the central bank intends to
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raise interest rates this spring, but that's
not certain because the fed usually doesn't
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do what they say until they do it or sometimes
misrepresent facts in order to not cause any
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chaos in the market.
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Back in 2020 and 2021, they kept saying that
inflation is not an issue although the fed
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has the best data possible, and they knew
that it's a problem, but in order to calm
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everyone down, they kept saying that inflation
is around 3 percent.
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Regardless, rising interest rates is not a
matter of if but when.
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It's a normal proceeder.
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At the end of the day, if inflation is higher
than 3 percent, that's unsustainable.
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The main question is, will the market crash
when the rates are raised?
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The answer is - probably, no!
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After the 2008 crash, the supply of houses
has shrunk dramatically.
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This chart perfectly illustrates how many
fewer homes have been built since then.
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The government understood that if it ain't
going to control the housing market, then
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we might see another such crisis, so the supply
of houses was already tight, which kept real
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estate prices to rise gradually.
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However, the pandemic just destroyed whatever
was left of that supply chain.
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Although we are almost 2 years into the pandemic,
the supply chain hasn't recovered yet.
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So even if mortgage rates will rise substantially,
there aren't going to take houses prices down
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because there aren't enough homes in the market
anyways.
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We have been building this supply chain since
the end of ww2.
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To make a single timberland boot, for example,
the materials would be delivered from 5 or
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6 different counties to a factory in Thailand,
where it will be assembled and then shipped
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all over the world, including the United States.
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So, a closed factory in one place can affect
the rest of the supply chain.
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That's why companies are reshaping the ir
entire supply chains in order to be ready
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for another pandemic by relocating their factories
closer to where the final product is sold,
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for example.
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That's going to take some time as we are learning
how to live with this virus.
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About 91% of the home building companies surveyed
by Zonda reported struggling with s upply
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chain problems.
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The lack of material availability is making
it take longer to build a home, and the delays
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and higher input costs are contributing to
rising home prices.
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This is the most disastrous the situation
has been since at least World War II.
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These are not the only factors.
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Corporations are buying homes to rent, around
20 percent of homes are usually bought by
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corporate entities which further lowers the
supply of homes in the market.
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But the biggest threat is definitely inflation.
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Inflation has a deep psychological impact.
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If people expect their home to cost more in
the future, especially in the foreseeable
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future, then they will less likely to sell
now and wait for another year or so.
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Guess what does that means?
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A fewer supply of homes in the market will
keep prices rising.
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Why would you sell your house now when you
can sell for a 10 percent higher price by
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the end of the year for example.
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So until inflation is solved or supply chains
are restored, it's difficult to expect houses
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prices to calm down.
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But why hasn鈥檛 the fed increased the rates
yet?
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The job of the fed isn't just to tackle inflation
but also to make sure the economy is growing.
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And the last 2 years have been much more unpredictable
than anyone thought.
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At first glance, it seemed like as soon as
we come up with a vaccine, the problem is
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going to be resolved, however, the government
struggled to vaccinate enough people, and
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secondly, new variants of the virus kept coming
out which were not protected by the current
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vaccine.
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And thirdly, by the time we figured out how
to deal with the new variant or convinced
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the rest of the people to take the vaccine,
the people who took the vaccine initially
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had to revaccinate.
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It's a never-ending crisis.
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Most government officials are coming to realize
that no matter how dangerous this virus is,
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there is no way we can get rid of it entirely,
and even if we do that, that would come at
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such a great cost that it doesn't worth it
so we are learning how to live with it.
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So the fed is keeping the rates low until
its clear how the economy is going to move
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forward under these new restrictions.
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What we can say for sure is that we will not
see a double-digit increase in prices this
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year.
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It's probably going to be around 5 to 8 percent,
maybe even smaller.
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Even those who cannot make the payment on
their mortgages can still sell their houses
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with a profit because of the shortage of houses
in the market, which is another reason why
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we shouldn't expect any housing crash this
year.
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If the fed manages to bring down inflation
to under 3 percent, then things will get much
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clearer.
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At the end of the day, these are all predictions
based on the facts on the ground.
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Only time will show what exactly will happen.
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