How The Housing Crash Will Happen

hey welcome back to the channel in this video you and I are going to go on a journey together to predict what everyone including these experts say is impossible to predict hundreds if not thousands of you have asked me to make this precise video I've listened so here it is exactly how the upcoming housing crash is going to occur step-by-step because this is such a complex topic I'm gonna break it down into seven really easy to follow and easy to understand steps and if you get stuck or confused at any point you don't understand some of them just make a comment below and I will do my best to answer that question for you so before we go and look into the future we must first look to the past so let me take you back no not that far back I mean to the turn of the new millennium the year 2000 [Applause] between the year 2000 and 2005 home prices across the USA grew by a staggering 50% in just five years by 2005 40% of all house purchases were as investments or second homes 40% and this ladies and gentlemen begins stage one where a house no longer becomes a home speculation from investors and more importantly REITs push house prices up in that area forcing families out of the affordability range for many houses REITs if you don't know our real estate investment trusts and they only buy the best houses in the best areas which therefore skyrockets the price and forces out a lot of good everyday families financial institutions in particular and the majority driven by the shadow banking sector which I'm a huge critic of as many of you know I read on't like the shadow banking sector were responsible for most of these loans which were on a RMS which stands for adjustable rate mortgages not good mortgage products in my opinion these are also known as variable rate mortgages in other countries outside of the US the idea or the dream that was sold to people was that in two years time you could refinance your house and get a fantastic new introductory rate mortgage and therefore release even more equity from your house the con was that you could just keep doing this and using houses which really are homes as your cash cow to live the millionaire lifestyle if you're enjoying this video so far I really appreciate if you can click the like button below for me now I really appreciate that and why not subscribe to the channel while you're here doing this really helps this video to actually get ranked by YouTube this was of course a huge lie and this is where stage 2 began the brokers got rich by selling these mortgage products to just about anyone the banks then got rich by packaging up all of these mortgages and selling them as CDOs which stands for collateralized debt obligations which is basically packaging up all of these mortgages in a big bundle some of them exceptional some of them well crap and then selling them to pretty much any financial institution or investment fund that would buy them with a triple-a rating of course can you name one time in the past year where you check the tape and you didn't give the bank's the triple-a percentage they wanted if we don't work with them they will go to our competitors that our fault simply the way the world works CDOs were then rightfully outlawed but you know these crafty bankers they came up with another way to recreate the CDO they called it BTO a bespoke tranche opportunity very clever if this wasn't crazy enough banks and started to do swaps with other banks with these crappy bundles these were called credit default swaps and to save us getting too complicated here because it really does get a lot more complicated than this just think of it like playing blackjack yeah it's a bit like gambling with your family home so these bankers could buy thousand-dollar bottles of champagne and a strip club we had to buy champagne and you got it all the facts all about the size of the side-side-side 26,000 thousands worth besides [Music] stage-three was of course people living beyond their means and creating a bubble GDP GDP is gross domestic product which i won't go into now otherwise it will over complicate the video but this is basically all the goods and services that a country produces in a set amount of time some studies suggest that a crazy 50 percent of the country's GDP was as a direct result of the housing market Stage four is where we go into crisis mode in a 2008 crisis this was caused by the shadow banking sector and polls on Wall Street in this 2020 recession this has been caused by a global virus how a crisis comes about is irrelevant the important thing is really how the central bank of each country deals with the crisis to overcome it okay so the price of housing is predominantly affected and driven by two distinct points number one is the unemployment rate the lower the unemployment rate the more affordability people have because they have jobs they can afford better housing or more accurately the payments the monthly payment on a house and the second point is interest rates when you have high interest rates less people can afford to buy a house but when you have low interest rates that means more people can get into the housing market and they can get more house for their monthly payment this of course can also work in a bad way because when you have historically low interest rates like we have right now people don't realize that historically interest rates have been double digits when it comes to housing and eventually it will go back to double digits in the future means some people in the very distant future could get into a lot of trouble but right now we do have these low interest rates meaning that more people can afford to buy a house the lower the interest rate means that pretty much anybody can get into the housing market assuming that the down payment is not too high and the credit score requirement is also not too high combine this with low unemployment meaning people have a job and they can afford the monthly payment wait a second wait a second haven't all three of these points just reversed yeah they have so if these aren't warning bells for you I don't know what are there's also one other point that I need to address because it's very very important and crucial with these are the two points and that is inventory level which for simplicity I'm just going to call this supply and demand so here's an example for you why is in Lamborghini so valuable compared to say a Ford well the Lamborghini is in very short supply they don't make many of them compared to a Ford which they are just coming off the assembly line non-stop all day long so you have more of a supply of Ford's meaning the price is a lot lower than a Lamborghini the same principle applies to the housing market too many houses on the market just like the Ford cars and the price comes right down but when you don't have enough houses on the market like the Lamborghini the prices go up this is supply and demand in the housing market and take a wild guess at where we are in this principle right now yep we don't have enough houses on the market we have very low inventory meaning that the prices are being pushed up Stage five then takes us into the realm of high unemployment signaling the start of the recessionary cycle what is the recessionary cycle you may ask well it means high unemployment meaning job losses and wage cuts where we are right now and because people have less money there's then a lesser demand for products and services in the marketplace when there's a lesser demand prices have to go down to meet that new demand from the marketplace you of course have other competition so this causes a constraint in the business community meaning that some businesses will go out of business meaning more unemployment meaning that this creates a downward negative spiral more employment leads to more unemployment it's just an ongoing cycle if you just look at this graph you can see that we're already 50 percent over the peak of the unemployment rate from the 2008 recession with high unemployment comes financial hardship such as missed mortgage and rent payments we also have something called unemployment scarring which is where a percentage of those jobs lost during a recession simply never come back again despite the feds best efforts unemployment remained high right throughout the 2008 crisis and I expected it to do the same again during this crisis stage 6 is always the central bank to the rescue during the 2008 crisis the feds weapons of choice were as follows number one interest rate cuts this is the most powerful weapon that any central bank has it is like bringing out the big guns and during the 2008 crisis the Fed were able to / rates right down close to zero what this does is it stimulates the economy it allows business owners and people in general to borrow money very cheaply and therefore stimulating the economy number two was targeted assistance to failing or struggling financial institutions bailouts bailouts number three is quantitative easing a term the Fed hates us to use they call it wait for it got it right here large-scale asset purchases which means buying up lots of longer-term debt issues by the federal government Fannie Mae and Freddie Mac come to think of it that's not a bad role for a central bank to have to create currency out of thin air and then to loan it to the government with interest so they have to pay it back on money that didn't exist in the first place hey I we're in the wrong job guys right now central bank's only have two out of these three options available to deal with this financial crisis and unfortunately their most powerful weapon is out of ammunition and that is interest rate cuts in order to stimulate the economy and this is because the country still hasn't quite 100% recovered from the last financial crisis so all the central bank could do was cut the base rate right down to zero bringing us into the final stage stage seven which is where the crash should happen should be happening right now as we speak however the reason it hasn't is because central banks have created a new bonus round the bonus round is called mortgage forbearance also known as a mortgage break in other countries so we'll call this stage seven pas a and pretty much everyone has bought into this myth that this is going to stop the housing market from crashing by simply allowing homeowners not to pay their mortgage for the foreseeable future and if this is true and the housing market isn't going to crash like every expert and YouTube troll tells me every day then here's my question to you why then are mortgage lenders or banks or shadow banks pulling their products from the marketplace and/or why are they making it harder for you and I to get a mortgage such as a really high credit score a larger much larger down payment and other difficult measures aren't these banks and businesses in business to make money to make a profit isn't now the whole reason for it so why then would they make it more difficult why would they not want our business hmm I think I may know the answer the banks are preparing for a reduction in house prices look guys you know me I'm just a logical critical thinker I think very deeply on topics and I just apply logic and common sense if you think I've missed something another reason why the banks are doing there please let me know below in the comments I'm happy to be corrected and this brings me on to my final stage which is the final stage of this cycle stage 7 Part B and since this is the most important stage now that I'm about to explain I do hope you've clicked the like button below and you've subscribed otherwise you're gonna miss these videos as they get released every week stage B then our final stage is where this mortgage forbearance which is currently at 9% by the way 9% of all mortgages are in mortgage forbearance still today as we're about to go into July 9% when this finally runs out this is when we end this cycle because with search high unemployment people families are simply not going to be able to afford the monthly payment they were before on their house their home and they will really only have one or two options number one is give it back to the bank or number two is sell it on the open market and to cash out whatever little bit of equity is still left in that house in that property this is where prices will come down to more accurately reflect the supply and demand curve and also the GDP curve so let me give you a little timeline now then of how I think this is most likely to play out part one of the mortgage forbearance program was April May in June of 2020 which we're coming to the end of right now I didn't think there'd be a problem at this stage and there hasn't been because there's still 90 and actually even more room to go in this program part 2 then is this next 90 days comprising of July August and September of 2020 this ends the first period of mortgage forbearance that initial 180 days taking us to the end of this first cycle this could result in a number of house is going back on to the market as people simply cannot afford to make the payments I don't think we're still gonna have a major problem at this stage but we probably will see some of these houses come to market during this period part three then is the final stage the final nail in the coffin which is the second part the second period of a hundred and eighty days so this comprises of October November December of 2020 and then January February and March of 2021 if the crash is going to happen at any time is probably going to happen in this period right in the heart of this period so if I had to take a guess at this I would say you're probably going to see it somewhere between December in January December 2020 January 21 but it could even start as early as say October November 2020 but as we know the government and the Fed are doing their best to keep this show on the road with mortgage forbearance programs which could even get extended or printing of more currency not money printing of more currency or just digitally injecting more currency through stimulus into the economy so just because we haven't seen a crash by April of 2021 it doesn't mean that it isn't coming it's just been delayed or it could have showed up as another economic or marker such as high inflation where the value of your house has actually gone up significantly or should I say the price has gone up significantly but the value of your house pretty much hasn't changed now let's come on to what the biggest problem is here now and I'll use an example to illustrate this I want you to imagine a freight train pulling hundreds or even thousands of tons of cargo across a train line unless say this train is doing 60 miles per hour the train doesn't start at that speed in fact when it first tries to get going it uses all of his energy all of its strength just to move even an inch that is an example of our economy right now it takes a lot of effort to get going but what we've done is we've just put something right on the tracks and the trainer's had to do an emergency stop and just slam on its brake and come to a complete halt but guess what the train can't just get back up to 60 miles per hour instantly no it has to start out trying to move one inch all over again and this is the biggest challenge we have right now so if you found this video overwhelming so far I'm just gonna wrap it up now I'm gonna give you three final points or indicators to look out for so you know when the market is gonna turn number one we've already covered this is when the mortgage forbearance ends this is where we're gonna see some issues number two is interest rate rises I can't see this happening for a very long time because it would pretty much bankrupt the US government and other governments around the world if interest rates did go up so I can't see that happening so which only leaves the third option which is the lack of inventory turning around once you see more houses going on to the market with people panic selling trying to get out before the crash this is when we're gonna see a crash that could be historically the worst ever seen in the history of our planet there's only one reason I can see why houses won't crash at the end of this period and that is because of all this quantitative easing this currency creation that's gone back into hard assets so it could go into hard assets like housing which artificially pushes the prices up making everyone think their house is gone up in value this is also a possibility if you'd like to learn more about housing finance and investing why not head over to my patreon community and have a look at that to see if it would be right for you I'll post a link below now in the description and finally thank you so much for watching my video all the way through I really appreciate you and if you haven't already could you please click the like button subscribe to the channel and please definitely share this video with someone in your network someone important to you that you know is about to either buy or sell a house right now and they really need to see this video so apart from that I will see you all next time take care god bless

Channel: Neil McCoy-Ward

Views: 1,061,359

Rating: 4.9084125 out of 5

Keywords: real estate crash 2020, neil mccoy-ward, housing bubble, will the housing market crash, real estate market crash, real estate bubble, mortgage collapse, housing market predictions, mortgage crisis, real estate pricing, housing market, housing data, Crash, crisis, mortgage debt, mortgage news, investing, finance, economics, news, property investment, real estate investing, economy, real estate, 2020 recession, mortgage updates, economic collapse, tenants not paying, foreclosure, Debt

Id: HEI3GIU5m3s

Length: 20min 48sec (1248 seconds)

Published: Fri Jun 26 2020