Mortgage Applications Drop - Is The Housing Boom Over?

the mortgage bankers association just came out and said that the demand to buy a home is steadily shrinking because people are not applying to get a new mortgage as fast as they were before and the number of first-time home buyers is shrinking and reaching record lows so if you're wondering if this is the end of the mortgage and housing boom make sure you watch this video until the end [Music] what's up everybody i am jasper singh from the minoritymindset.com and welcome to the minority mindset 2020 was a crazy year in real estate so i'm involved in real estate pretty heavily because i am a real estate investor but let's go over kind of like the timeline of what happened in 2020 real estate first in the first kind of quarter of 2020 so we're talking january february march we had this kind of bump in home prices because in 2019 you might remember the federal reserve bank cut interest rates even though we were in a strong economy so this made buying a home more affordable and so you had more people wanting to buy a home so this is like let's say march but in march that's when the pandemic hit and everything shut down and home inventory froze because nobody was allowed outside and we had lockdowns so from like march to like let's say april or early may so we'll put early may nothing happened like the whole real estate inventory stopped and no real estate was being sold then in like late april and early may things started to open back up and you had this like little window from may to like july ish where interest rates were cut to brand new record lows right so like when this pandemic first hit the federal reserve bank came out and they slashed interest rates to brand new lows and during this time from may to july you had insanely low interest rates and home prices were also still very low and so now in all the surge of home buyers people came in between may and july who got to buy these homes at last year's prices but they were getting dirt cheap loans so people who bought in between may and july got these amazing deals because they got good priced homes and they got very cheap loans then between july august september and october ish october november let's put it actually between july and november what happened was we saw home prices skyrockets i'm going to put home values hv home values skyrocket while interest rates were down so now people kept buying homes because they were like wow mortgage rates are so low so people were buying homes like crazy but home prices shot up faster than ever so people were buying between july august september october november like crazy but now people were paying a lot of money to buy these homes because interest rates went down so what you see happen a lot of times is when interest rates go down you see more demand to buy homes and this pushes home prices up so people who bought between july and november they were the people who are now buying homes at higher prices with low interest rates so these were the people that really got the steals people who bought between may and july and then july to november were the people who came in and now they're buying an expensive property and they're justifying that because they're getting lower interest rates and now between november and december this is where we're starting to see home demand start to trickle down and now everybody's wondering is this the end of the housing boom let me also give you a little caveat because the interesting thing during 2020 was this pandemic hit we actually saw demand for real estate in big cities like new york and san francisco tank while inventory levels went up you had all these people living in big cities who are now working from home because this pandemic hits saying why am i paying three or four thousand dollars a month for this tiny apartment when i can move out to a suburb pay half the price get two or three times of space with a yard and i can continue working online and get the same income so we saw this really strange drop in demand in these big urban cities like new york and san francisco and we saw this huge boom in suburbs so we have these low interest rates and the shift in demand from urban cities to suburban cities pushing up the price of homes at speeds that we've never seen before and now what had happened during this time when home prices were booming was people would list their homes for sale and then two days later they'd have like 14 offers to buy their home so they'd be like holy crap i need to raise the price of my home the asking price and so home prices skyrocketed yeah raise oh sorry i was just texting my broker telling them to raise the asking price on a home by 30 thousand dollars this is where things get really interesting because real estate doesn't work like the stock market you can see stock prices move like this essentially in a straight line upwards especially if a stock is releasing this new kind of inventory or they're creating these new products and they're making all this money and then if you have the federalist bank behind it you can see a stock price essentially shoot straight up and it can defy gravity essentially because even if a stock is very expensive they can do something called a stock price split where now if a stock was trading for let's say a hundred dollars a share and you have one share of the stock they can do a split where now the price of the stock goes down to fifty dollars a share and you will have two shares of the stock so the stock market is very unique where the affordability of a stock price doesn't really matter and it doesn't really affect the price or the value of a stock not to mention that with technology nowadays you can buy fractional shares of a stock so if a price of a stock goes too high and you can't buy the whole share you can just buy a fraction of a share with real estate you can't do that because if you're buying a home you're going to want to buy the entire home it's not like you're going to want to buy just let's say i don't know the front door of a home you want to buy the entire home because you want to live there so the affordability of a home is very important when you're looking at real estate prices so if real estate prices are going up like this in a straight line where real estate prices look like they're just defying gravity eventually you're going to hit a ceiling where buyers cannot afford to buy a home anymore because if real estate prices keep growing faster than wages eventually people are not going to be able to afford a home anymore remember people are not buying fractional shares of homes they're not just buying the front door or window people want to buy the entire home so home affordability is very important when it comes to people buying homes and sustaining home values what we're seeing happen in 2020 and into 2021 is that home prices grew very quickly and if home prices outgrow wages for long enough eventually home prices are going to outpace buyers and so if buyers cannot afford homes then you're going to see the demand to buy a home go down and this could cause a correction in home prices so real estate is very unique because you cannot see real estate home prices go up like this while wages are only going like this you're going to create this discrepancy in home buyers and so this is just not sustainable we had that brief period of time in the summer time in 2020 when homes actually became more affordable because home prices were selling for the same price as they were before but interest rates came down so people were able to buy a home at last year's prices paying this year's interest rates which is very cheap debt so homes actually became more affordable in the summer of 2020 and then towards the end of 2020 deaths and home prices started shooting up and then homes became much less affordable it's gotten to the point where home prices have gone up 14 from just a year ago and compare that to wages where lots of americans don't have jobs before i talk about what's coming next in this housing market let's talk about who are the winners because right now we have four winners first are the home buyers who bought between april and july if you bought during that time where home prices were low and interest rates were low you came out with a steal because you got the best of both worlds now if you bought a home after july that doesn't mean that you got a necessarily bad deal that just means you didn't necessarily get the best deal possible because you missed out on that little dip your home is not an investment property so you shouldn't be kicking yourself in the butt if you didn't get the best deal on your home because this is a place where you're going to live in and enjoy okay this isn't something where you need to necessarily get the best deal like you need to go to walmart to get your home is a place where you want to live and where you want to enjoy being so if we don't necessarily get the best price that's okay second winner are homeowners because well you just gained a lot of wealth on paper because the value of your home probably just went up if you bought a home for 250 000 and you owe two hundred thousand dollars on this home right now you had fifty thousand dollars worth of equity but now because of this home price boom your home price value might have gone up to two hundred and seventy thousand dollars so you just gain the extra equity the twenty thousand dollars of equity by doing nothing just because home prices have gone up you might not feel any richer because this is just an increase in wealth on paper but if you were to sell your home today you could walk away with a nice profit third are homeowners of the mortgage because like we just talked about chances are you have more equity in your home so your home value is more but at the same time you can also save a lot of money on your mortgage by refinancing your debt into a lower interest rate cheaper mortgage interest rates have come down to the lowest levels we have ever seen in history we have people taking out new 30-year mortgages paying less than 3 percent a year on their mortgages these are unbelievably low interest rates so if you refinance your mortgage chances are you're saving a ton of money because you're refinanced if you have a mortgage and you have not refinanced yet you still have the opportunity to save a ton of money on your mortgage by refinancing but don't wait too long because you don't want to miss out on this opportunity when you're refinancing your mortgage don't just take the first offer that your bank offers you because some lenders are going to charge you way less in fees and way lower interest rates on the exact same loan so you want to use something like a mortgage comparison tool because you want to make sure you're getting the best deal possible on your refinance and the following is an advertisement from our sponsor credible who operates a mortgage comparison website at credible you can check pre-qualified mortgage or refinance rates at no charge to you there are multiple lenders competing on credibles marketplace so you can compare get rates and pick the best mortgage or refinance option for you the way it works is simple all you have to do is go on to their website and enter in a few pieces of information which just takes a few minutes and that credible will present you with actual pre-qualified rates from different lenders that way you can compare credible's pre-qualification process is easy to use it only takes a few minutes and checking pre-qualified rates does not affect your credit score so if you want to learn more and see what mortgage or refinance rates you might qualify for i got the link to where you can do that with credible and the description below credible does pay minority minus an advertising fee when you submit a pre-qualification request and credible operations inc nmls number 168 1276 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 where you can do that with credible in the description below and the fourth winners are the people that are working in real estate so these are the real estate agents the real estate brokers and the mortgage brokers now while this wasn't necessarily the greatest time for real estate investors because of all the rent moratoriums that were in place this was a great time for real estate agents and the banks because everybody was trying to buy a home and tons of people refinancing their homes so here's what's going on in 2020 we saw home prices go from here to inventory number one at all and our home price is going up very quickly and now we're seeing the demand to buy a home drop very fast and everybody's wondering is this the end of the housing boom before we jump to conclusion and say the housing boom is over and real estate prices are about to crash let's really understand what's going on i mentioned this in the beginning of the video but i'm involved in real estate as a real estate investor now and i got involved in real estate back in college and right after i got involved in the investment side and things i also got my real estate salesperson license and this is when i was in college so i would actually help people buy and sell homes and what you see happen in the real estate market is that real estate is very cyclical in the time of year that homes are sold because in the summer time lots of people want to be outside and you see home sales go up because people want to sell their homes and people are looking to buy their homes but in the wintertime and close to the holidays you see naturally less people wanting to sell their homes less people wanted to move and less people wanting to buy a home and so you see this not just in 2020 but in every year pretty much where in the winter months and close to the holiday time you just see less traction and movement in the real estate market so as we're going into 2021 you have to imagine that some with this drop in demand and real estate is due to the fact that the holidays are here and the winter time is here so last people just want to be moving during this holiday season the second issue is this virus the pandemic that's going on at the time of me recording this video the united states has seen the highest number of daily cases ever with hospitalization rates going back up i think the first wave of home buyers people who bought homes in april may june and even into early july these were the people that were like you know what i don't really care about this pandemic i want a home now and so i'm gonna go and buy a home and then from the summertime into the winter time that's when everybody who was scared of the pandemic started slowly coming out and saying you know what i don't want to miss out on this housing boom and miss out on getting these low interest rates so yeah i'm still scared of this pandemic but i really want to buy home so i'm going to go and buy a home now but you also have this group of people that are saying yeah i want to buy a home but i really don't want to buy a home until this pandemic is over and if things are getting worse i'm not going out to go look for a home to buy anymore let's say there's a million people out there that want to buy a home and out of these million people half of them might care about the virus and the other half might just not care so you have this 50 of people there's 500 000 people that just don't care about the virus and they're going to go out and buy a home no matter what's happening out of this other 50 of people who are actually kind of worried about this virus you might have half of them that say yeah you know what i'm a little worried but i'll just wear a mask it's fine no big deal so that's another quarter million people 25 percent that are still going to be buying a home but just going to be a little bit cautious now out of this last 25 half of those people so 12 and a half percent of this total population might say yeah i'm pretty worried about this virus so i'm going to be extra extra cautious so i'm going to look slower and look at less homes so that's going to be slower moving inventory and then the other half the other 12 and a half percent these might be people who say yeah we're not buying a home until this pandemic is over so while it might seem like a small percentage it's still a lot of people who are not buying a home even though they want one and they have the means to buy a home because they're worried about this pandemic and now that we're seeing virus cases skyrocket and hospitalizations go up you can bet that there's more and more people that are hesitant about looking at homes to buy just because of what's going on in the world i don't have a crystal ball it is impossible to look forward and say oh yeah this housing boom is over there are so many different factors at play like we have to look at how fast wages are rising compared to housing prices we have to look at jobs we have to look at this mortgage for bands program and when people are going to allow it to be foreclosed on because all these things are going to affect the supply of homes and this is going to affect the demand for homes because if people have jobs and if interest rates are low the people are going to want to buy homes but if foreclosures are not happening then that's going to keep the inventory of homes ball and if you have all these rent moratoriums out there then that's going to kind of skew the housing market which makes it very hard to predict what's happening couple that with this pandemic getting worse and now people are getting worried about another round of lockdowns and we have a lot of uncertainty in the housing market so i do not think this housing boom is over i think there's a lot more room to run but that doesn't mean this housing market is just gonna go straight up there's a lot of uncertainty ahead thank you for watching if you enjoyed this video i'll link the video over here that i think you're going to love and while you're at it make sure you subscribe to the minority master youtube channel and join our free finance and business newsletter below right now there is a huge demand to buy homes because interest rates are so low and people want to capitalize on these low mortgage rates so everybody wants to buy a home so you have all this demand

Channel: Minority Mindset

Views: 127,573

Keywords: minoritymindset, minority mindset, jaspreet singh, financial literacy, financial literacy 101, mortgage application, housing boom 2021, housing boom 2020, is the housing boom over, housing prices, housing prices 2021, housing prices too high, housing prices 2020, housing prices increasing, housing prices california, housing prices in usa, mortgage applications high, mortgage applications weekly, housing market

Id: -OoQzWQ32P0

Length: 15min 16sec (916 seconds)

Published: Wed Nov 18 2020