A Shocking Look Into EXPENSIVE Housing - How MUCH THINGS COST Today

it feels like every week home prices in the housing market break a new record because home prices keep going up and housing demand keeps skyrocketing and the inventory of homes available for sale are still artificially low what's up everybody i am just pretty sing for the minoritymaster.com where money mine's rethink rich homes are getting expensive fast and it's really getting kind of scary let's look at some numbers if we go back in time to 1970 the median home price in 1970 was just 17 000 and the median household income back in 1970 was right around 8.7 000 so that means that an average person could go out and buy a home for right around two times their annual salary if you fast forward a little bit to the year 1995 where my 90s baby's at in the year 1995 the average home cost 124 000 quite a big jump but wages also went up too the median household income back in 1995 was 35 000 a year now the interesting thing here is that by the year 1995 if you wanted to go out and buy a home it would cost you about 3.6 times your household income and now let's fast forward all the way to the year 2021 where the median home costs 300 341 000 and wages have also gone up too the median household income in the year 2021 is 80 000 a year the thing that makes this very interesting is now if you want to go out to buy a home it's going to cost you about 4.2 times your annual household income so you can start to see why housing has become less affordable over the years because on one hand yes home prices have gone up and wages have also gone up too but home prices have gone up faster than wages that's why you can start to see this multiple start to grow because the multiple of wages to home prices have gone up too which means it's more expensive for you to go out and buy a home adjusting for inflation but we're not done yet because the thing that's even more interesting now than before is that now we have a lot of two income households this is the medium household income back in 1970 he didn't have a lot of two household incomes most of the households were just one income you had one person going to work nowadays you have two people going to work two income streams which is how we got to this eighty thousand dollar figure the median income in the united states right now at the time we recorded this video is 55 000 that means there's a good chance that you have one spouse making more than the other spouse and at 55 000 a year the multiple to the median home price is 6.5 times so now this is where you can really start to see the acceleration in home prices because yeah maybe here you've seen home prices kind of accelerate but this is really comparing apples to apples because in 1970 you only had one person earning for the household now you got two that's why in this video i want to go over why home prices are going up and what you need to know that way you can be smart with your money but before we get into that i need you to do me a quick favor and smash that thumbs up button below and by the way if you haven't already seen our 1 million subscribers special video i'll put that link for you in the description below and by the way i do want to let you know that we have just announced the winners for a 10 000 giveaway for stock market gift cards from a 1 million special subscriber video if you haven't seen the video i will link that for you in the description below and you might want to check your comments to see if you were one of the people that won 500 in free stock market gift cards there's a lot of different reasons for why home prices haven't gone up but the most obvious and the easiest to understand reason is that the cost of building a home has been going up too a general rule of thumb is that a real estate developer is trying to get a 20 return on their money which means if they can build a home for 100 000 they will want to sell it for at least a hundred and twenty thousand dollars but what's happening right now is that the price of everything from lumber to paint everything to build a home has been skyrocketing and on top of that the cost of labor for people to build a home has been going up too i mean if you drive by any busy area right now chances are you're going to see sign after sign after sign a business is saying come in and apply now get a free a thousand dollar bonus if you get accepted for this job or get a free 50 gift card if you apply for the job you don't even have to get accepted you get a 50 gift card just for applying and the reason why we're seeing that right now is because there's a lot of businesses that need labor and now in order for them to compete because businesses need work they're having to pay people more and so now if you are a real estate development company and you need a higher construction workers to build a home and people don't want to work or they're not working and you got to incentivize people to work you're going to have to pay them more money which means you're going to have a higher cost to build a home so now the labor side you have a lot of people that don't want to work or are not working and so development companies are having to pay more money to the laborers to build a home on top of that they're having to pay a higher cost of materials because of supply chain issues and a whole bunch of issues going on right now and so you've seen things like the price of lumber would double in the last year and so it costs a lot more money now to build a home than it did before so if a few years ago i could build a home for a hundred thousand dollars i might be okay selling it for 120 but now in order for me to build that home i have to spend a hundred and thirty thousand dollars so this is now this is before if i have to spend a hundred and thirty thousand dollars to build this home right now and now put on my 20 margin on top of that that means i'm gonna have to sell this home for at least 156 thousand dollars for it to make sense for me now all of a sudden if you want to go out and buy a home it's going to cost you more money because if you want to build your own home it's going to be more expensive you're going to have to pay more money for parts you're gonna have to pay more money for labor and now it's gonna cost you more money to buy a home than it did before but even if you don't wanna build your own home if you own a home in a neighborhood and you start to see these new homes that are selling for way more than what your home was worth before now you're gonna say hey my home i thought was worth 110 120 000 but these homes right down the street are selling for 150 and 160 000 maybe i can sell my home for more money because homes right down the street are selling for way more money and so now because these homes are being sold for way more people are selling their homes which are not brand new constructions for more money as well plus is making it more expensive for people to renovate homes so if someone's renovating a home either for a flip because they want to sell this home at a profit or because they want to live in the home themselves it's going to cost more money for them to renovate the home and that's being factored in into the price here but that's just one part of the equation because the second part of the equation is we have a really skewed supply and demand system out there because right now we don't have a huge supply of homes available for sale it's taking companies more time to build a home which is keeping the inventory of homes available for sale lower and a lot of people are not selling their homes maybe because they're in forbearance maybe because they don't want to deal with this pandemic whatever the reason is people are not selling their homes as much and they don't have people being foreclosed on because of the foreclosure moratorium so you have an artificially low supply of homes available for sale and you also have a ton of people you have a ton of people that want to go out and buy a home because they want any home to live in well there's a few reasons why people haven't buying homes right now one of the reasons is just because of this pandemic people for the first time in history have been able to work from home and now they're like well my company is letting me choose if i want to go back into the office or not and so if i'm going to be working from home all the time i might as well upgrade my home have a nicer home because i'm going to be spending more time there and i should get a home that has an office or at least a room for me to work in that way i have kind of my own private space and so people haven't moved away from the city or even if they're already in the suburbs they've been moving to new homes because they want a home with a little bit more space for the yard that way they can spend more time there and that way they have an office where they can work and save a lot of people just because of this economic shift because of the pandemic have been going on to buy a home because they want to get a new home that fits their new lifestyle the second reason you've been seeing more and more people go out to buy a home is because of well fomo fear and missing out is that emotion because maybe you've thought about buying a home a year ago or maybe a couple years ago and the stock has been in your mind and now all of a sudden you see home prices going up like this and you're telling yourself oh my god i don't know how long this is going to last so let's go out and buy a home right now before home prices get even more expensive and so now you're talking your spouse you're russian and you're trying to just go out and buy a home so you can capitalize on this housing market and own a home before home prices go up even more you see this happen in every asset class from real estate to stocks to cryptocurrency anytime you see an asset class start to go up like this people get excited and they don't want to miss out and then they kind of go in and they buy even if they don't necessarily need to buy or want to buy they just don't want to miss out and so they start to come in and they buy and the third major reason why you've been seeing a massive demand to go out and buy a home is because interest rates are dirt cheap people have been going out and buying new homes and refinancing their current homes and locking in a fixed rate mortgage for 30 years at less than a three percent annual interest rate this money is very cheap that you're able to borrow and use to go out and buy a home or refinance on the home that you do have we're at a point right now where mortgage rates are at rock bottom and the only real direction where mortgage rates can go is up because mortgage rates are already so low and so people have been trying to capitalize on these low mortgage rates by borrowing money either to go out and buy a home or to use this money to refinance on their mortgage now that's not a bad thing assuming that you can afford the home that you're buying and assuming that you're refinancing home the right way that's going to build you wealth not in a way where you're just going deeper and deeper in debt that we're just going to make your bank richer i mean it is still one of the best times in history to be borrowing money against a home just because mortgage rates are so cheap and for people that already own a home these low mortgage rates are almost like free money because now you can refinance out of the mortgage that you have right now and get a new lower interest rate mortgage on the exact same loan that you have that way now you could borrow the same amount of money that you had before and just pay less money in interest because borrowing money became cheaper now if you do decide to go out and borrow money to buy a home or if you want to refinance out on your mortgage just make sure you shop around because some lenders are going to charge you a whole lot less than other lenders for the exact same loan and the following is an advertisement from a sponsor credible who operates a mortgage comparison website at credible you can check pre-qualified mortgage or refinance rates at no charge to you they have multiple lenders competing on their marketplace so you can compare gate rates and pick the option that's best for you the process is pretty simple all you have to do is go into credible's website and enter in a few pieces of information which just takes a few minutes and the credible will present you with actual pre-qualified rates from different lenders that way you can compare credibles pre-qualification process is easy to use checking pre-qualified rates does not affect your credit score and it only takes a few minutes to do that so if you want to learn more and see what mortgage or refinance rates you might qualify for i got the link to how you can do that with credible in the description below credible does pay minority mindset an advertising fee when you submit a pre-qualification request and credible operations inc and mls number 1681276 is not available in all states so if you want to learn more and see what mortgage or refinance rates you might qualify for i got the link to how you can do that with credible in the description below interest rates are really weird because the federal reserve bank cuts interest rates when we're in a recession to help stimulate the economy and so right now we're kind of in a weird phase in our economy because everybody says that our economy is recovering but at the same time our economy isn't actually recovering because our economy is still relying on a lot of free money from the government in the form of bailouts and in the form of unemployment checks and in the form of stimulus and so this free money is still out there and this free money is subsidizing our economy and so while everybody says our economy is recovering we still have a lot of people that don't have jobs because people are benefiting from the unemployment programs and the stimulus programs that are out there at the same time the federal reserve bank has tried raising interest rates slowly because the federal reserve bank does want to raise interest rates but every time they raise rates they see mortgage applications and refinance applications fall so they're worried that if they raise rates too quickly that people aren't going to stop going out to buy a home the housing market has been fueling our economic growth because that's one of the industries that has really been skyrocketing and yeah people are going back to work and people are starting to make money and people are starting to spend money but we still have a lot of people out there that aren't spending money on their mortgages because we have the mortgage forbearance program still going on and we have the student loan forebears program that's still going on and so people have more money in their pockets that they can use to spend and some people are using this money to go out and buy a home which makes things very interesting because if we talk about mortgage rates well the federation bank wants to raise mortgage rates they have said that time and time again and they are working to raise mortgage rates and their first priority is to raise mortgage rates as fast as possible but at the same time they don't want to destroy the housing market and so the thing that the fed is monitoring is once you start to see the economy recover besides just the housing markets chances are you're going to see mortgage rates start to really take up i mean you've already seen mortgage rates start to come up quite a bit off of the lows now mortgage rates today are still historically extremely low but they're not as low as they once were and so people are trying to take advantage of these low mortgage rates while they still can which is why now you have a massive demand to buy a home and you don't have the same supply which is causing home prices to shoot up so when you put these three things together you have a material shortage and a labor shortage you have the supply and demand shift and now on top of that you have these very low mortgage rates you essentially created this perfect storm where everybody wants to buy a home everybody's trying to take advantage of these low mortgage rates and the cost to build a home is way up here which is causing the price of homes to shoot up like this now the question that everybody has about these housing prices is are they sustainable well let me start by talking about this there's a big difference between a real estate crash and a real estate correction and so when everybody thinks about home prices coming down they assume real estate crash because the last time we saw real estate correction was the 2008 housing market and that was an all-out real estate collapse and so just because we see a real estate correction does not mean we're going to see another 2008 but home prices have definitely heated up and in order for them to be sustainable there's going to be a lot of things that have to happen the price of anything i don't care if you're talking about real estate or stocks or cryptocurrency or gold or whatever the price of anything depends on how many sellers there are and how many buyers there are there's supply and demand if you have a lot of people selling an asset let's assume we're talking about homes if you have a lot of people selling homes and no one buying homes well that's what we saw after the 2008 crash everybody was getting foreclosed on everybody was trying to sell their home because they were underwater and nobody had the money to buy yes the home prices came crashing down right now it's the exact opposite right now a lot of people have some extra cash in the bank and a lot of people want to go out and take advantage of these low mortgage rates and a lot of people are not selling their homes so you have a major demand to buy homes and a very little supply which is pushing home prices up and so in order to keep home prices up you have to keep having more buyers and so what you have to think is eventually we're going to hit a point that if home prices keep growing so quickly we're going to hit a point where home prices are going to out price buyers because if mortgage rates start to go up and the cost of materials keep going up then home prices are going to go up so high that people cannot afford to go out and buy a home if you hit that point then naturally you're going to have way less buyers out there because buyers are going to say well it's way cheaper for me to rent i can't afford a home anymore so i'm just going to rent a home now people who are selling a home are going to say well we've had our home on market for two weeks four weeks six weeks and we can't get a buyer so now we have to cut our prices and if you start to see that happen now you'll start to see home prices start to correct and in a normal market this is how you start to see market equilibrium you see your asset price go up too high it has to correct and it comes back down to earth and then you'll start to see it go back up again but sometimes you can see things get skewed like right now we have a lot of things getting skewed because of government intervention people don't have to pay the mortgages they don't have to pay the student loans people are not getting foreclosed on and so you have a lot of people who want to buy a home and a very short supply of homes available for sale which is keeping the housing market artificially inflated and so when you start to see these things come back then our housing market is going to rely on the strength of our economy if our economy continues to stay strong if wages continue to go up and if people can continue to qualify for a mortgage and people keep buying a home then you can continue to see home prices go up but if people cannot afford a home and if because of this new inflation people can't afford the cost of living and so they want to downsize then you might see more people selling at home and not as many people buying this is where i want you to understand that it is very difficult to predict the economy it is very difficult to predict the market nobody knows what's going to happen nobody knows when we're going to see a realistic crash and nobody knows how big it's going to be when it happens so what i want you to understand is instead of living in fear and in living in emotions i want you to make smart decisions today if you want to go out and buy a home or refinance on your mortgage make sure you can afford it so if you're going out to buy a home make sure you can afford the down payment and make sure you can afford your monthly payments so what i mean by affording the down payment is i want you to have equity in your property because if home prices go down i don't want you to be underwater on your homes so you want to have equity in your property ideally you want to have 20 down when you go to buy a home i know that's a lot of cash but then you know that you're actually affording your home and you have skin in the game so even if home prices do come down a little bit you're not underwater you also want to make sure that you can afford your monthly payment the advantage that we have now that we didn't have before the 2008 real estate crash is that back before the 2008 crash you had so many people on variable interest rate mortgages so back then when mortgage rates started to go up people's payments started to skyrocket now you have a lot of people on fixed rate mortgages so even if interest rates go up or i should say when interest rates go up people's payments will not go up assuming that you have a fixed rate mortgage and so the worry is that as mortgage rates go up you might see more and more people start to kind of go towards variable interest rate mortgages that way they can get that low teaser rate again but i want you to be smart here make sure you can afford your mortgage payments and lock in your payments whether you're getting a 30 year or a 15 year mortgage lock it in with a fixed rate mortgage if you have a fixed rate mortgage you know what your payments are going to be in five years and 30 years and the hope let's assume that you live in this home for 30 years is in 30 years your wages are gonna go up too but your mortgage payments are flat your mortgage payment is not going to go up but the amount of money you're making will go up so this is where i want you to be smart if you're gonna go and buy a home just make sure you can afford the home and that it doesn't stretch yourself too thin and if you're gonna afford it make sure you can afford the down payment and your monthly mortgage payment so if you can cover these two things you're okay you don't got to worry about what's going to happen in the housing market because you can afford the home that you're living in if you're refinancing a mortgage make sure you're refinancing the right way don't just pull out a whole bunch of cash out of your home now we can go out and buy a boat or go on vacation these things are liabilities and now you're financing your expensive lifestyle if you're going to refinance your home make sure you do it the right way in a way that's going to build your wealth pull out just as much money as you need to pay off your first mortgage or if you want to pull up more money make sure you have a place to put this money maybe it's an investment maybe you're starting a business maybe it's a rental property just make sure you understand what you're doing and make sure you understand the risks associated with taking on any more debt if you enjoyed this video here's a video on how to start generating passive income that i think you'll love and while you edit download a free money management pdf and as always keep hustling one of the biggest lies out there about passive income is that you need a ton of money to start generating passive income yeah the more money you have the more passive income that you can generate but you don't need a ton of money to start generating passive income

Channel: Minority Mindset

Views: 173,699

Keywords: minoritymindset, minority mindset, minority123, jaspreet singh, rethink rich, financial education, financial literacy, real estate, housing market, housing, buy a home, get a mortgage, refinance, refinancing, how to buy a home, real estate investing, investing, build wealth, become wealthy, how to become wealthy, how to build wealth, investing 101, real estate for beginners, real estate 101

Id: okjYwwLdkow

Length: 19min 34sec (1174 seconds)

Published: Mon Jun 14 2021