Are We Experiencing Another 2008 Housing Crash? - Ken McElroy LIVE!

hey this is the ken mcelroy show and i'm danielle here with ken mcelroy what's going on we're going to start here in about a minute but i'm just going to let some more people get in uh welcome jason and bahamian one deplorable millennial hello that's a great name where's everybody from oh we have some montana here georgia new york vancouver as well hey katie carl says hi from san francisco what's up carl nepal maya studios from nepal very good yeah what time is it in nepal no idea pratik is from india we have people from all over michigan virginia illinois appreciate your support guys thank you sunshine forever is from arizona our hometown it's cold today exactly right hey we're in our new studio what do you guys think it's turned out all right we just finished uh over the weekend it's our first official use yeah we're going to be doing podcasts in here youtube videos live streams all kinds of stuff so um you guys keep the content coming let us know what you want we really do look at your stuff and we really really want to deliver on what it is that you want so we keep getting great questions every week keep getting great topics every week and appreciate your support and if you don't know anybody that's over at that youtube channel uh had them hit the subscribe and like button so that you know we can jump up and uh spread more of this around guys thank you yeah so let's jump into our topic today yeah what are we talking about so i never know so today we're talking about how now is different from 2008 yeah i went through 2008 so that was a rough period of time very different yes so what uh so it gets compared to 2008 a lot and you do think there's going to be a correction but not like 2008. well let's first go back because i lived this i went through this our company was around there's a couple things that happened first of all nobody ever believed that now it's easy to say let's talk about 2008 but when you're at the beginning of 2008 even in 2007 it feels very much like it does right now in other words people don't see what's about ready to come nobody anticipated what happened so what happened for me was one day literally the lending just completely shut down on us and our investor loans our you know the mortgage industry completely stopped and i was in the middle of a thousand-unit condo project well because that's back when you did condo conversions right right in las vegas actually and literally overnight everything stopped and uh it was literally like a um you know you know the music when everybody sits down it's like okay so so what happened was depending on how how much cash you had depending on how much inventory you had because inventory uh if if you're a developer or your home builder or your apartment guy or you're you know a single family uh you know subdivision or whatever you are if you're at the beginning of that and you put all this money out in infrastructure perhaps and then the the you know the lending stops then you're stuck with you know all your money in every single development deal you do all your money's kind of up front so on a smaller level if you buy a home and you expect it to sell it for more you know in in a few months or six months or a month or whatever it is you know you're stuck with whatever cash you have in that so that's what was that immediately stopped and nobody saw it well right because when you had all those condos the problem was that now nobody could buy them they couldn't get lending to buy them that's exactly what happened now so that also came some good things came out of that what what what they had at that time was what was called a no doc loan which means you didn't have to have any documents so basically you could fog a mirror and get it and get a loan now that was bad obviously and you know but if you were in the lending industry you were making a ton of money i had a bunch of friends making a bunch of money during that time and and um you know everybody was thinking oh my god look how smart we are right that was the funny part and then done and so i was sitting we we had um we had about 70 units thankfully left in a project and uh it was around uh you know almost 20 million dollars worth of inventory luckily we had paid off our lenders and so that was all profit at the end but uh it was a rough rough time and and then of course everything just started unwinding the big issue then the big difference between 2008 and now is that this time around people have a lot more equity in their homes and back then they did not they do you know it's 25 percent of people were underwater in 2008 and now you know i think it's one percent yeah or something right it's very different and that's a very good that's a very very good thing so what that means is that the mortgages were higher than the value of the home so now it didn't happen that way initially because the lender is going to lend money to somebody they're going to have equity in that so the difference between let's say they do 70 loan to value as example or 80. well that difference is that person's equity well that value dropped when all that product hit the market so it was a slow drop so let's let's chat about that beth said uh he's going to rescue an escrow now and they're asking for a ton of documents and i'm actually going to refinance myself and i was just telling you about that yeah that's that's that's one thing lenders learned from the last time around it was a good thing yeah because let's talk about the last time around so last time around um people could use stated income so you didn't have to prove your income you could just say i make a hundred grand a year and if your credit was good they would just believe it right right it's crazy to think about but it's true they were basically and that's you know that if you ever watch that show the big short that's a fascinating show if you really understand it from what happened so all these mortgages get sold in the secondary market so like i'm sure you guys when you buy stuff you get a mortgage statement from xyz mortgage well that might get traded like you know that week that month next month to abc mortgage and all of a sudden you get a different mortgage company different statement so that's what happens when these mortgages get sold and then they get packaged up and they get packaged up into these tranches that are raided by moody's and moody's as a rating system and they rate them like a paper you know etc all the way down and so that that's why they call them subprime so subprime means people that have credit issues and what they did is they took these subprime mortgages and they rated them higher so people thought that they were buying these you know aaa rated mortgages you know with people that could pay and they were actually buying ones that weren't and so that's actually what the big short is about yeah so let's just take it back though to just like how they were giving just anybody a mortgage and what was happening is they had these adjustable rate mortgages that they had no cap on so they might have signed up at three percent or five percent and all of a sudden they owed 12 percent on you know their interest rate so their mortgage payment went way up right so then they couldn't afford their mortgage that happened but also the va you know when all that inventory hit the market which is kind of what i've been talking about mostly is you know as you guys as you guys know you know there's different numbers out there but there's you know an estimated of two to three to four million houses that are you know the mortgages that are in this forbearance so you know that's what i keep talking about i keep talking about that is at some point now the good part about that is that people it's gonna be very different people unfortunately are gonna have to sell or list their home first that's gonna be an inventory that's gonna that's what i'm talking about by the prices i'm not saying that people are gonna have to file bankruptcy and do all that kind of stuff this time around because that's a massive massive difference yeah but um you know that's why i think this um you know people are rather than go through foreclosure i think there's gonna be a lot of action in this pre-foreclosure stage which hasn't gotten a lot of attention in the past right so let's talk about that so last time in 2008 you know foreclosures happened so the property went to the bank and the bank auctioned the property for the buyer and you would buy it from the bank and the reason that people did this was because say they owed 200 000 on their mortgage well the bank was just trying to get maybe 200 150 because they just wanted to get rid of it and take that loss because the prices were dumping but now if somebody's gonna foreclose and they owe 200 on their mortgage their house might be worth 300. so they're not going to let the bank take it they're going to get rid of it right right so there's a whole bunch of scenarios that you guys need to consider uh the first one is to stay and pay right so if they have the capability the homeowner has the capability then they're gonna stay and pay and there's obviously people that probably have money that are utilizing forbearance but they're hoping that the lenders you know throw it on the back end that's that's number one number two is the short sale now that requires bank forgiveness and we haven't really seen anything around the bank forgiveness piece but that was a big deal so in other words what was happening back then is let's say the bank was owed to 200 grand on a mortgage then somebody would come in and say i'll give you one 150. and then the bank would take that hit that's a short sale the bank has to forgive that another one is just to walk away which happened a lot people we called that jingle mail where they just literally mail their with their keys their keys and so that obviously uh impacts people's credit and their tax but these are all things that could potentially happen still because not everyone is above the you know the value on their home and we are going to see some price dips i still believe another one is to refinance which a lot of people are doing and have done and obviously just like we talked about in order to refinance you gotta submit all these documents to a bank or you know whoever the lender is and they have all these things that they're watching because they're not gonna just refinance somebody that is in a poor financial situation right no i know kobet's been bad and the quarantine's been horrible and all that kind of stuff and there there's a lot of things happening but a bank isn't going to just refinance you just because you owe money just to you know and then another one is deed in lieu of foreclosure and that's you can avoid the foreclosure the bank takes that back um and then um the the last one and i'm sure there's more is a loan modification that's the extending of the term and that's i think what everybody's thinking this is going to happen oh we're just going to loan mod all of these you know the best then what a loan mod is okay so loan modification literally think about this the bank just you have a loan agreement the bank is not going to just say oh we'll just throw it on the back end you know we we get the fact that you guys aren't can't pay forget the last year yeah yeah so what what happens they throw it on the back end and then you can't pay that next month they're not going to do that like so these loan mods are important and uh hopefully the people that have kind of resurrected themselves got some cash maybe they got some income coming in whatever it might be um you know and and you're gonna have to show the bank that you're going to be able to pay that next payment for a loan modification and not all banks are government sponsored loans either you know so so you've got these um you know you've got different things happening with private lenders and and government lenders and and uh and of course don't forget these things do get sold off well and alex from premium i had a good question she wanted to know but do you see prices so you're saying right now prices are elevated because you know there's not much inventory but what about when all these get listed do you think that we could have another 2008 then because there'll be so much inventory so uh one of the great things i love about youtube and and you guys you know i love the fact that even when i say a word wrong man you guys hit me on it and and it's true like i like i use the word real at or it's not realitor it's realtor so stuff like that i do read this stuff so thank you and and so uh you know it's funny like i'll say that there's gonna be a crash in the fourth quarter and then i'll come out with a video that says hey here's the place to look well everybody's like what like you said there's gonna be a crash i still believe that guys like like there's just you know but is everybody treats real estate like it's a national market right the united states is not one market if there's one thing you should take away the united states is not one understand like like there are there are there are there are markets that are not going to crash and there are markets that are going to crash okay and as you roll them all up is there going to be pain of course so you know we're we're doing a a youtube video later today on this exact issue there are definitely markets right now that are in trouble for sure and and you know we're going to talk about those more on a friday video but the the truth is uh i i'm not sure exactly how to answer that question because i don't know where it is and you have to get into the data so remember there's there's a couple things in our play here one is which way are people moving that's a biggie so are they moving in are they moving out and i've talked enough about migration patterns so but the fact is are they moving in are they moving out there's neighborhoods where people are moving in and there's neighborhoods where there are people moving out that's a big factor because if they're moving out obviously inventory's increasing and i just did a video on friday that talked about that it said you know we have we have we have listings increasing in these areas we have prices dropping in multiple areas mr wright says i need a housing crash so my kids can get out i know well you know what we actually need a housing crash for affordability so people can can get in so it's like my kid is graduating from college in may and you know he's right now there's just no way you know so affordability is becoming a problem right now so now i don't want people to lose money i i don't but i can assure you of this guys you know er this is the exact same stuff that happened last time you know if you're under the age of 35 you've never been through one right that's true i mean well you you have but but but not really not professional not as a professional you know and so all you've ever seen is real estate goes up right and and my point is is it's not true just go back and look go back and look at what happens in in all the prior recessions and is this going to be different of course it is it'll be and so will the next one but the fact is we're having a massive we have a massive inventory issue right now we have massive unemployment as you guys know the vaccine hopefully is rolled out and and people um you know we're going to be past that and we're going to things are going to start opening up again i believe that we are going to start to see the forbearance uh it's through june now right is that right yeah well it's between june and december depending on the mortgage type yeah so so it's going to roll out and i think there's a reason they did that so if you read into the documents this is that mortgage protection plan the forbearance piece you know they staged it right they stayed they didn't want it all at once right right so they staged it okay why would they do that they don't want it all they hit at once they should probably stage it with evictions you know right they want it to roll yeah yeah i mean we you know we got close to anywhere from 8 to 10 million people facing eviction same issue and and they did not extend it by the way yet so that's uh so so that's at the end of this month end of march so we have you know we have you know three four million people behind on their mortgages as we've talked about we have you know eight to ten million people facing eviction this is going to work itself out and the government if you look at personal income you look at money that people have gotten the reason the savings are up the reasoning all that stuff's happening is because of the government yeah money yeah the money the government's been giving people is the reason and by the way they need it they needed to pay food they needed to pay rent all that stuff is important but i'm telling you it's going to start rolling out and and the video we're going to talk about later today is where we think those markets right now there's a lot of foreclosures out there guys there's a lot of foreclosures and there's a lot of pre-foreclosures right now yep yep and we're that video releases friday i believe right yes okay so um i wanted to get uh ghost jojo says how could you find these regional crashes so great question uh there's a few things that you can do one is i suggest you go to the u.s census bureau there's a great amount of information on that another one is the the consumer financial protection bureau realty track is something that i am a member of and i pay for it's realty r-e-a-t-y t-r-a-c and that is a great resource that talks about foreclosures to your question specifically and what it does is you can actually go into the state the county the city even you know it even gets into some markets so and it shows you how many houses are delinquent right now how many are in foreclosure or pre-foreclosure so it actually has three categories it has bank owned which there are some there's pre-foreclosure and there's foreclosure and and those are all in process obviously they're all protected right now i believe those numbers are going to really jump here in the second half of the year yep as everything starts to kind of come up and come together so you can find that data right now as an example as of today there are um 25 432 pre-foreclosures in florida think about that 25 800 or 432 pre-foreclosures in florida there's eight t5 85 899 pre-foreclosures in new york and there's only 5 324 000 in california which is really hard to believe but that is the truth and i think the reason is that there's a lot people in california had a lot of equity in their homes just as we talked about earlier and brighter homes really said their services that go to the courthouse and look for foreclosure filings for you uh they do i don't know if they'll find pre-foreclosures but they'll find foreign they're right yeah yeah there's lots of services guys out there and there's you know this isn't my specialty you know typically but there's a lot of people a lot of really smart people that that work on this pre-foreclosure and foreclosure um you know lists and i think that you just got to know that if if somebody is has a bunch of equity in their home and they're behind though they're they're they're not going to allow the foreclosure process to happen so laker mark wanted to know is it true you can only buy foreclosures with cash um i don't know actually that's a great question i i i i have i'll tell you what i've done before on the bigger stuff is i've had the banks finance it yeah so if a bank holds a note uh it probably the answer is yes because think how complicated that is on a pre-foreclosure right yeah i would say a pre-foreclosure the buyer is going to pick somebody with cash because they don't have time right right so you're going to have a massive advantage you know it's like today like even on the multi-family stuff that you know we'll put uh an offer on something we're doing maybe two to three offers a week and you know and these are 40 50 million dollar projects and and you know we we might say hey well you know we're going to uh finance this well somebody else will come in and pay all cash and of course the seller's going to go with them and so we've lost a number of deals on an all-cash basis and i would imagine that's going to happen again so so as these pre-foreclosures and foreclosures start to line themselves up you guys are going to want to have that dry powder that's why i said earlier you know have that money ready have that have those reserves ready and and and be on the lookout you know there are markets right now that are are severely in trouble there's some that are over 10 percent delinquent right now that's crazy now and also with the cash only for foreclosures you know you can also use a credit line so if you have a property and you put a credit line on it you can also use your card line for the cash and refinance because that's just what i did yep that's exactly what you did yeah yeah so so if you have a lot of equity in a home somewhere you know go go get your credit line approved and and you don't necessarily have to have the cash in the bank um it's actually crazy that we're even talking about foreclosures because you know the market's zooming and so so you know if you're a realtor that that uh you know uh just just firmly believes that the market's going to go up forever and it's hotter and hot it's true it is but it won't go up forever and all we're trying to do is prepare you for the last half of this year and watch as as these things start to unroll make sure you're going to have several months to get yourself a line in order get the cash together get your partners together be able to move with speed and and i don't know what kind of deal you're going to get it's going to be on a case-by-case basis and you're going to be dealing with the seller of the home directly so jose asked is it wise to buy a foreclosure or pre-foreclosure as a beginning investor again it depends on the math but yes it means the cash flow yeah yeah yeah so so you know if if you just think about it let's say you're let's say your your neighbor next door that you've known forever um is having a hard time and they you know they're out of work and and they owe you know 30 40 000 in in back payments which is very you know not uncommon uh but they have a hundred grand of equity in there you know you might want to just sit down with them and cut a deal with them yeah and they might go hey great i just want to get rid of this i want to move on you know i've got some cash in the pocket i'll pay off my first i'll pay off this uh what i owe and and they'll call it a day and you can get a house that way i would imagine there's gonna be a tremendous amount of hope you know horse trading going on uh you know because the the um there's gonna be a lot of activity guys there's a lot of money looking for deals right now and uh which is you know why the prices are driving up like they are and then praja wanted to know what do you think about looking for foreclosures in underdeveloped countries huh boy i don't know you know it's a it's a tough one for me uh under development countries again it goes back to demand and and um obviously if it's a good deal it's a good deal if if there's a bunch of people moving there and and you've got a secure tenant and it's all about the income and you don't really like to invest in out of i don't but that's just me you know it's uh there's a lot of different laws in different countries around um ownership well we have a friend that invested somewhere and she you know the there's been a little bit of issues with her being able to get her money you know from you know what she's renting and there's no she can't do anything about it right right like if you not to pick on mexico but you know mexico has what's called a feta camiso which is a um you basically have to lease the you know you can't uh if you if you're uh if you don't aren't a citizen of mexico i believe it is uh and it's 50 kilometers from the from the water so you can't own anything so if you own something in cabo or puerto vallarta as an american as an example you you are basically leasing it and so i you we've heard that we've heard problems on tribal land in the u.s we've heard problems in mexico uh you know arizona's on the border so we've heard tons of problems in an area called rocky point which is just south of here um i'm not saying it's a bad thing but what i'm saying is it's just another layer of issues that and you really have to dig into you know how if something goes sideways and the government takes your property uh which has happened before you know it's the that whole property right thing so just be careful and then uh sam wanted to know do you predict southern california's real estate crashing well i will tell you this you know i'm actually looking in manhattan beach right now and and uh uh it's pretty strong yeah you know but uh you know southern california also includes riverside you know which is not doing well so you know you have to take a look again it's it's it's uh kind of hit and miss southern california is too big of a market to just call it one market yeah yeah so i think you just got to take a look at uh where it is you want to be take a look i i looked actually yesterday there's only one default in the entire city of manhattan beach oh really yeah only one so you know but it's not you know los angeles county is very different so um you know it's a good it's going to be very specific and then damien wanted to know something i thought it's interesting because i know you're kind of looking at this he wanted to know if you would invest in rv storage wow so i looked at one of these actually i actually was in escrow we were we were buying an rv storage place uh it was covered and uncovered and then they had a little like service shop on the side so it's almost like a self storage which i have i love these things be honest because you know these guys they buy these million dollar half a million dollar motor coaches and they park them inside for you know 10 months and you know they give you four or 500 a month and and uh this place had them stacked in there and uh so i personally like them you know the thing about um you know where we're heading again go back to the math go back to the demographic you know as baby boomers retire you're going to see more of this you're going to see the people that retire get a motorhome tour around the country for a year or two and say hey i love this or i don't love this and and you know there's going to be which is the rv sales are over the top right now guys so it started during covid right but uh you know these storage facilities have to be bursting at the seams right now i haven't dug into it probably two years before covert but my guess is it's going to be a great long-term viable deal but in the right area of course right in the right area the one you were looking at was by two country clubs so you knew that people could pay for it and afford it and that they were going to be gone half the year right right right and it was right off a freeway so i had freeway frontage it was in between arizona and tucson actually right as you go into tucson so it was uh you know and and i went in there i'll tell you what you got montana plates you got washing plates you got oregon plates you got arizona plates you got people that license these things all over the place and store them flat arizona they hang out here and and then they go where they go yep yep and uh laker mark said manhattan beach where all the celebrities are we haven't seen any but um well cool well i think that wraps up for today um thank you guys for joining us and we'll see you next week yeah thanks guys and if you want to be able to ask a question and for sure get an answer head over to kenmcelroy.com forward slash premium cheers thanks again you

Channel: Ken McElroy

Views: 66,878

Keywords: Rich Dad, Entrepreneurship, Investing, Personal Development, Get Wealthy, Earn Wealth, Ken McElroy, Entrepreneur, Rich Dad Advisor, Success, Business, Self-Help, Coaching, Real Estate, Real Estate Entrepreneur, Real Estate Investing, Freedom, Lifestyle Business, Hustle

Id: APcbUoB4_ls

Length: 30min 15sec (1815 seconds)

Published: Mon Mar 15 2021