Home Owners Making THIS HUGE MISTAKE RIGHT NOW

you know a few times on my channel in the past I've talked about some of the really bad advice that I've heard people like Dave Ramsey and Barbara Corran give when it comes to buying real estate uh most recently is the fact that they tell you to jump into the market today and don't worry you can refinance later down the road and this video is not going to be about that I've already made some videos about that which you can check out but today I want to actually say that there's something that I agree with Dave Ramsey on because he recently came out and said that you know a lot of homeowners today are making this huge stupid mistake which I completely agree with and in case you don't know what it is it's borrowing against your home in the form of getting a home equity line of credit this is something that Dave Ramsey is against and I'm not really against it but I caution against it because depending on how you're going to use that money it can make a huge difference of whether or not it's a good idea some of the stupid mistakes that people are making when they do this can ultimately lead them to losing their home and I'm going to go over with you guys what some of those things are so that way people can be prepared like obviously there's a lot of people that watch my channel that want to become homeowners there's a lot people who already are homeowners and this can really help everybody that owns real estate or plans on owning real estate so the first problem and big mistake with getting one of these home equity lines of credit is you could lose your home guys a lot of people don't realize that you can actually lose your house if you don't pay your home equity line of credit they can in fact foreclose on you if you don't pay it's one of those things that people always think is never going to happen to them right everybody thinks that the car accident's going to happen to somebody else or you know that surprise death or you know poor health diagnosis is going to happen to somebody else and you know that's kind of like our human nature optimistic way of thinking but the reality is it can happen to you and it does happen to people when you least expect it same thing goes for getting one of these home equity lines of credit you get one you think you're going to be able to pay it back because things are going well and then Wham you get hit with something in life that's a big curveball and makes it so you can't pay it back and ultimately leads you into foreclosure you don't want that the other stupid mistake that people make with this is borrowing against their home taking one of these home equity lines of credit to pay for other debts and expenses okay you're basically robbing Peter to pay Paul in this case and you see people do this a lot you know that's actually one of the biggest reasons that is promoted for people to get a home equity line of credit and you know one thing that Dave Ramsey said on this is that you're basically you know just creating more financial stress and headaches for yourself by doing this cuz you're not really solving any of your problems you're getting out of debt in one area of your life and creating debt in another area of your life and if you use the money to pay off debts or make investments that somehow go south and things don't work out in your favor now you have more headaches than you even started with and I actually totally agree with Dave on this like people need to learn how to pay off debts without borrowing against the biggest asset that they own which is their house I have made several videos on this road in the past and every time I walk past this house it has a for sale sign in the front yard previously it was for rent now it's for sale for almost $ 2.9 Million but here's an investment gone wrong they bought it in December of 2021 for 1.9 million then listed it for rent in January the following month for $ 225,000 kept reducing the rent all the way down to $175,000 kept this place empty for 2 years guys 2 years this house sat empty now they're finally trying to sell it and they're property tax bills are whopping $41,000 a year while this house has sat empty for 2 years in a row because another thing that people do with this is sometimes they'll take out the home equity line of credit to make another investment right and if that investment doesn't pay off or it goes down in value or something happens now you have basically this extra lean on your house that you're responsible for paying back and I don't see why anybody would actually do this the interest rates on these HELOC loans are like 10% plus these days okay so it's a very expensive loan to take to begin with so I can't see why anyone would take one of these loans unless they actually needed the money like if you had the money yourself to make this alternative investment my guess is you probably wouldn't be borrowing against your home and so that's the biggest problem here you know people use it as a casino an ATM they gamble with this money thinking that oh yeah I'm going to take you know $50,000 home equity line of credit and invested into the stock market because that's booming well what happens when it's not booming you're upside down on that investment but now you owe that 50 Grand in your house what now here we have a $23 million Bayfront home that is already under contract which I find kind of suspicious because it's a very new listing came out at the beginning of December and already went under contract and is on its way to being sold as of the beginning of January which is kind of unusual especially for listing this expensive so something may be strange going on right there I think it's more than luck but anyways their property tax bill here is $96,000 a year and that is with a homestead exemption guys even with the homestead they're paying this much imagine if they try to turn this property into investment what that property tax bill will be now the third big mistake that people make with this that they really don't understand sometimes is that this is floating rate debt when you take a home equity line of cred credit it can actually go up guys like say they quote you at a 9% rate today and then interest rates start going up in the future that 9% rate can shoot up to 11 12% and within a relatively short period of time which ultimately increases the amount of money you owe and it increases your monthly payment and that can come unexpectedly and you might think well it can also work the opposite way then too right and the rate can go down yeah sure it can but I would be willing to bet that most of these people lending you on a home equity line of credit are not going to be decreasing your rates by much below what you got it quoted for so I wouldn't be counting on that now a lot of people know that Dave Ramsey is somebody who's like against people being into debt he thinks you should pay cash for everything and have no debt and that's probably pretty good Financial advice for a lot of people that are just flat out irresponsible with their finances no doubt right there are some great use cases for debt and debt can make people people a lot of money if you know what you're doing but the average person that can't control it and doesn't get into the right kind of debt and use it responsibly can easily get upside down in life and that's how most people end up with it that's like the fourth stupid mistake with these home equity lines of credit is that you're still in debt once you get into a home equity line of credit guys you're still in debt and you're basically fooling yourself if you're thinking oh well I am using it to pay off other debts and so you know I'm getting out of debt by taking this no you're not you're just shifting your debt around from you know one spot to another you're shifting it from your credit cards or your personal loans or your student loans to your house and then what happens is people realize okay now I have more money to spend on my credit cards and stuff again let's go back out and keep spending and then you just dig yourself further into debt because basically getting one of these home equity lines of credit can't fix stupid guys and I hate to say it like that but it's like if you think you're just going to you know borrow against your home and pay off debts with it and that's going to solve all your financial problems it couldn't be further from the truth unless you really have the discipline not to continue going further into debt with your other debt tools like credit cards and personal loans the next huge problem with this is you could end up owing more than you think because you pull out money from the home equity line of credit right let's say they give you you know $100,000 maybe that's too much maybe the average person probably gets like 50,000 right and you get this home equity line of credit and you're only plan on using 20,000 of it right but you take the first 20 and the 20 didn't go as far as you thought it would next thing you know you're taking 35 now you're up to 40 and before you know it you're maxing it out and you're taking out more debt from this loan than you originally anticipated the payments are higher than you originally anticipated and before you know it you might not actually have the budget that you need in order to pay this new monthly bill that you didn't have before because once again people that are doing this people that are taking out these home equity lines of credit often need it for something that they can't pay for on their own right so now you're basically you're taking on a new payment that you didn't have before and if you were already struggling before that that's probably going to lead to further struggle down the road is really the idea here and probably the worst and biggest mistake of all that people make with this is they get a HELOC loan and they use this as their emergency fund rather than building their own emergency fund and saving money and having that 3 to six months of savings in the bank they say well I don't have to worry about that because you know my house went up in value by 30 or 40% over the past couple of years so I can just use that and that is totally not the right way to think about it because borrowing against your house is not an emergency fund guys that would be you know the absolute Last Resort if you had an emergency fund and then the emergency fund got Tapped Out you know but people are using this in lie of having an emergency fund that way you can further fuel you know the Jet Set lifestyle that you're looking to have you know and that's the problem with people they just spend money that they don't have guys this is an epidemic you know I saw on uh I think it was CNB 's YouTube channel just yesterday about how Americans just have this huge spending problem like people just cannot control the amount of money that they're spending the amount of debt that they're taking on it is just unprecedented really you know especially when you have so many people that make six figure salaries today that are literally living paycheck to paycheck what does that say about our current economy and our current American culture right now it just says that people have no self-control they don't know how to spend their money guys now the next thing is the Fed okay because this week we received the most recent meeting minutes from the fed and to most people surprise it didn't really mention cutting rates that's the other thing right now guys like as soon as uh the last fed meeting happened you know everybody was jumping for joy that there were going to be multiple rate Cuts coming into 2024 and you know things are going to start returning back to normal inflation is going down yet in the fed's most recent minutes that was not stated okay basically what was stated is that uh they still stress the importance of remaining Vigilant and keeping rates High until inflation was clearly moving down sustainably towards their 2% Target which does not mean we're cutting ver of all they may be done raising interest rates for now but there's still no indication that there's going to be a rate cut coming anytime soon and it even indicated that even though they're likely done hiking rates for now that another rate hike is not out of the question because they're going to be watching things closely and even though they signaled that they might be cutting rates in 2024 another rate increase is not out of the question yet guys so you know people are way jumping the gun on this and thinking that you know all of this is over with and that they're going to start cutting in March already don't count on it because these meeting minutes did not say that and even the FED has been trying to curb this they're trying to steer investors away from expecting any imminent rate Cuts because that's exactly what the investor Market thought was going to happen after the last meeting but they they're trying to now make people realize that that might not actually happen guys then you still got you know the bullish people out there on Wall Street saying oh well there's nothing in here that you know tells us that they're still not going to cut rates in 2024 so we're basically sticking to our guns that there's going to be multiple rate Cuts this year and there very well may be but the reality is these meeting minutes did not reflect that and one thing for sure they're definitely going to be watching is the labor market and we know this because one thing that they've been wanting to see happen is a slow down in the amount of jobs a slow down in the amount of hiring as well as the unemployment rate inching up that's a goal that they've been striving for since they started these rate increases well the December jobs report came out at 216,000 jobs in December and that was above expectations and unemployment did not move still at 3.7% but once again every single time we get these job numbers what happens later on it gets revised down right so even though the numbers came in stronger than expected it might actually get Rev Vis down to around the expected Mark later on and down the road but one thing to pay attention to here is just how much the job growth is slowing guys which is very significant right now okay in 2023 we added 2.7 million jobs which averages out to about 225,000 jobs per month sounds pretty good right well yeah until you look at the numbers from 2022 because in 2022 it was almost double okay it was 4.8 million jobs for the year at an average of about 399,000 jobs per month so that is a substantial decrease and this is proof that these interest rate hikes are starting to make its way through the economy as more companies are cutting back on hiring and are being more cautious right now and because they see all this stuff happening you know there's still all this talk that we're going to have this soft Landing guys which let me remind you once again has never happened before before we've never had a soft Landing from a situation like this ever but this time is different right now the majority of the jobs are saying are coming from the government sector which we kind of covered a few days ago that the government is hiring a lot and is contributing massively to these job numbers and think about that for a second if already 2023 is numbers are not nearly as good as 2022 and most of the hiring is coming from the government sector sounds a little bit like to me that these numbers are kind of fudged a little bit because they're artificially uh higher than they would be due to all the government hiring which isn't necessarily you know a reflection of the real economy but anyways it's been the government health care and social assistance has been at the top of the hiring list for 2023 but you know what's actually going down and is a more real reflection of our real economy right now you know other jobs like Trucking okay and transportation stuff like that that's in charge of getting all the goods and services that you buy to your doorstep yeah that's been taking a huge hit and I regularly get truckers commenting on my YouTube channel saying hey Michael you are 100% correct you know I've been driving a truck for the last 25 30 years and never seen anything like this in terms of how much smaller the loads are getting how slow business is getting you have a bunch of truckers that can't even make ends meet anymore that are essentially going out of business people who are Independent Drivers and it's not looking good guys and they're the ones that are saying this you know they're watching my videos and backing up what I've been saying here and they're out there in the real world driving the trucks and telling you that that's what's happening but you're going to sit there and say that it's not I would be listening very closely to what these people are saying right now because it's a huge warning sign guys it's a warning sign of how much things are slowing down it's showing you that people are not buying the amount of stuff that they were a year or two ago and the reason for that is probably because people do not have the money guys I know one excuse that I heard about this recently was that well people already bought up a bunch of these Goods during the pandemic therefore they don't need them anymore and now they're spending it on travel and Leisure which some of the data does reflect that but really if you just look at like Airbnb for example like this year people who run airbnbs have seen their profits drop pretty substantially because less and less people are booking airbnbs right now so if that's just one indicator of how much people are traveling that's showing you what's really going on just like the trucking thing right and you know one thing that drives me crazy is when people make stupid comments and say oh I'm not seeing any of this happening so you must just be spewing out the gloom and doom here like okay so you're telling me just because it's not happening to you and your nice little cushy lifestyle is not being affected that it's not happening to anyone that's delusional guys and you know what people like that are going to have to get slapped upside the head by this recession for them to actually change their mind and I'm not trying to change their mind I'm trying to give you the the facts here here's the other side of this story is because once again the jobs numbers came in higher than expected right this could ultimately lead the FED to keeping interest rates higher for longer which is something that they very well may do and their most recent meeting minutes are proof of that they're not saying anything about cutting rates yet and they're saying that they're going to be vigilant and they're going to keep an eye on what's happening with inflation and the jobs and they may very well keep these rates higher for longer which is going to squash the stock market guys because they have been saying oh no we're going to see the First Rate cut in March well you know that's right around the corner and so far there's no indicator of that happening and on top of all of that the labor market is expected to cool even further this year this year they're anticipating only an average of 53,000 jobs added per month think about the difference right there in 2022 the number was basically 400,000 a month in 2023 it was 225,000 a month and then it plummets down to 50,000 a month that is not going to be good for people who are looking for a job guys so you better get ready to hang on to the job you have now I saw another story today talking about the four things that we can expect to actually be cheaper in 2024 which is probably going to be a sigh of relief for many people right especially with how much inflation has impacted all of our monthly budgets and I want to bring some of these up because they relate exactly to what we talk about here on the channel the first one they say is gas prices which is something I definitely notice guys like I recently just paid $289 a gallon down here in Miami which is the cheapest I've seen it since I came back from California in fact when I got back here it was like $379 a gallon and to go down almost a dollar in just a couple of months is pretty substantial they say of course that the gas prices will likely Peak towards the middle of the year like they always do could even Peak towards $4 a gallon but overall we're going to see cheaper gas this year okay well that's great but it's still more expensive than it was pre pandemic anyhow let's move on the next one domestic airfare the travel app Hopper they anticipate that domestic airfare it's going to be much cheaper this year than it was in 2023 and possibly even cheaper than it was pre pandemic over the next six months guys so it sounds like it's going to be a pretty good time to book an airline flight according to this even right now plane tickets are about 11% cheaper than they were last year and average about $285 a ticket the third thing they say is going to get cheaper in 2024 are electric and brand new vehicles now obviously electric cars are pretty expensive so much so that they have tax credits which they just made harder to get by the way only a handful of uh Vehicles now qualify to get these uh tax credits like the Ford F-150 Lightning pickup truck the Tesla Model 3 and a few versions of the Tesla Model y are some of the models that qualify for the tax credit but overall most EVS don't actually qualify but they're saying because of the glut of all of these EV cars that are still basically unsold on these car lots they're going to continue to get cheaper into 2024 and also because now that all the supply chain issues have been worked out for brand new cars we're not going to see this shortage of cars anymore and we're not going to see big problems with you know people not being able to get cars and people paying over asking price for cars just like they were for houses people paying more for used cars than than brand new cars those days are over now but it's still going to be more expensive than it was before the pandemic now this last one I'm glad they saved for last we can save the best for Less okay the fourth thing that's anticipated to go down in 2024 are home prices and morgage rates well lucky for all of you guys that watch my channel that's what everybody's been hoping for right in 2024 realtor.com is predicting that home prices and mortgage rates are going to go down which is ultimately going to make housing more affordable guys and like I said before is this going to make a huge impact on your budget probably not they're saying maybe you know 50 bucks a month off of what the current payment would be right now on average but that's still cheaper right I've given you guys this example several times of how if somebody bought a house in October of 2023 if they would have just waited a couple of months you could have saved a substantial amount of money with how much the interest rates have come down and so everybody who has been patient and waiting out the market a little bit longer to see what's going to happen it looks like you're going to be rewarded for waiting in 2024 you're going to have more inventory to choose from you're going to have lower mortgage rates most likely than you had a year ago although that's not guaranteed and lower prices as more inventory comes online looks like there was no reason to have fomo in 2023 and feel like you're never going to be able to get that house you're never going to be able to afford a house again because even realtor.com who's in the business of selling homes doesn't think that's the case guys so anybody who Panic bought in 2023 likely made a mistake and could have just waited for this year for better deals and lower rates to come along so I don't know about you guys but I'm ready for anything to be cheaper even if it's just lower gas prices I'll take it it's better than nothing right so if you guys enjoyed this video make sure you subscribe to the channel and if you don't want to wait for my next video to come out check out this one on the screen right over here and I'll see you in the next one

Channel: Michael Bordenaro

Views: 102,773

Keywords: real estate, home prices crash, housing bubble crash, housing crash, housing crash coming, housing market, housing market 2024, housing market 2024 forecast, housing market update, housing news, real estate crash, real estate market today, us housing market, us housing market news, home equity line of credit, heloc

Id: stQTzsqKEdA

Length: 24min 6sec (1446 seconds)

Published: Sun Jan 07 2024