Real Estate Housing Crash Q4 2021

hey guys it's ken so i get lots of information  from a lot of you guys what do you guys think   of Graham Stephan what do you guys think of meet  Kevin they have different information on when the   housing's gonna bust us you know i know it's super  confusing guys and we're all trying to figure this   out but the one thing that i want to talk to you  guys today about is primarily inventory and really   what i want you to do is follow the math so i just  got done watching graham's video which i really   liked he goes into a lot of detail on housing  inventory and prices and rents and all those   kinds of things but what i'm trying to do here is  actually bring it down to math so we can follow it   logically and make some assumptions just for you  so stay tuned and hey guys as you know there's a   ton of information in this video you don't need to  write anything down we're going to have it below   just click the link and you can go to the show  notes and have all this stuff so the number one   question is is what do i think's gonna happen in  2021 so let me just jump right in guys as you guys   know the inventory is at an all-time low and if  you want to track this month to month i recommend   that you go to the federal reserve of st louis  and just type that in and you can get you can   get an idea of like the active listing counts in  the united states as you guys can see they've been   down and we're all obviously an all-time low and  then another one that i really want you guys to   take a look at is this housing inventory right  now these are new listing counts in the united   states as you can see they've actually gone up  from december this is a very important point i'm   going to come back to this later but you can see  here the new listing count in the united states   actually went up from december or january that's  actually voting well so what this really means   is that inventory comes back on the market that  prices will then stabilize so let's take a look at   the existing inventory right now what we can see  here from the federal reserve is that the housing   inventory right now in december was right around a  million houses and as you can see guys this is 1.4   it's bounced around from march april may june so  it spiked somewhere about in here right after the   pandemic started and it obviously just started to  go down right now we're basically at one million   seventy thousand so the real question is what's  a normal market because that's the first thing   you gotta solve too what do people think a normal  market is when prices are not going up like crazy   and there's not too much inventory so that's what  we're going to solve to next so what i decided to   do was just jump over to the national association  of realtors and see what do they consider to be a   balanced market and what the national association  of realtors says is that a six-month supply   is associated with moderate price appreciation so  basically the national association of realtors is   saying six months supply is about right not too  much inventory and not too much sales so that   prices generally go up but they don't necessarily  go down or they don't go up too quickly so we're   gonna put in here that the ballast market is about  six months this is going to be very important for   you guys to come back to later a balanced market  according to the national association of realtors   is six months of inventory now here's  where it really starts getting interesting   so we know that the national association of  realtors says that six months inventory is   a balanced market so now we got to take a look at  the month's supply so we knew that in december of   2019 in this period of time there were three  months of supply and right now in december of   2020 just one year later there's 1.9 months  of supply so basically supply has gone from   three months to about two months in one year so  when they had three months of supply in december   of 2019 they were saying that that was 1 million  390 000 listings what we already talked about   is that the supply is sitting around two  months is one million seventy thousand   listings so the difference between december of  2019 to december of 2020 is right around 300   000. so as you guys can see this is about two  months and this is about three months so you can   reasonably say that about 300 000 listings equals  about one month supply three minus two one million   three ninety minus one million seventy so i know  it's not exact math but it's pretty darn close   so here's where it gets a little confusing so  we know that right now we got a million seventy   thousand of homes that are listed and according  to the national association of realtors it's about   two months worth of inventory so we'll say two  months equals one million of inventory or listings   right now that's two months of inventory per  their data but here's where the twist comes in   if you take a look at where they were in december  of 2019 the 1 million 390 minus the 1 million 170   so we can conclude that a 300 house inventory  declined so we'll go 300k inventory decline equals   one month inventory based on the three all the way  to two so the real question then is how many homes   is it gonna take for us to get to six months and  all you need to do is take the six months minus   the two months equals four months of inventory  times it times the 300 000 or 1.2 million we need   1.2 million houses in order to get the inventory  back to balance so it'd be 1.21 million which is   about 2.2 million is about six months of inventory  so we'll put that right here 2.2 million is about   six months of inventory so now let's take those  inventory numbers and see where we're going to go   next we know that we're basically a million houses  and we know that the six-month number is about 2.2   so what i decided to do was dig in a little deeper  on some of these forbearance issues and some of   these issues on who's seriously delinquent because  i personally think that's going to be a big issue   in 2021 so let's first go back to forbearance  and what we know is that we have 600 000 people   in three of 2021 coming to the end of their  forbearance and we know that there's another 400   in april so basically in about a two-month  period we have a million people that are   going to have to deal with their forbearance so  where is all this heading so we need to go to   the data once more so in black night which  hopefully a lot of you guys are following   this is very very very interesting and it's down  in the fine print but basically they're saying   that they've got 3 million 557 people that are  now over 30 days delinquent on their mortgages   that's a big number so we're going to put that  right here that's 3 million 557 000 people that   are in some kind of forbearance at least 30 days  or delinquent and we also know that we have at   least 2.2 million seriously delinquent according  to black knight and we're going to put that 2.2   million right here so we have 3.57 million people  that are 30 days delinquent and we have 2.2   million people that are over 90 days delinquent or  considered seriously delinquent we know that 600   000 of those are going to come due in basically  just a little bit over a month and then the other   400 000 plus or minus are actually going to come  due right after that so the real question guys is when we are only looking at forbearance just  forbearance how many defaults and the reason   the faults are low is because the president's  making them low the president is making them low   the stimulus packages and everything are kicking  these things down the road the real question is   how many of these folks are going to list their  homes or go into foreclosure that's actually what   you should be asking yourself so we know that  we have at least 2.2 million people seriously   delinquent my belief is that these people they're  probably not going to be able to come up with the   money to fix their problems unless the lender  allows that so if we just split this number   by half let's say that 50 of these people  cannot pay now we're looking at 1.75 million   now is this a guess of course it's a guest but  you can't tell me that a lot of these people are   not going to sell their homes a lot of these  people are not going to lose their homes and   i'm only using 50 so let's just take this number  forward we know that six months equals 2.2 million   balanced housing units we know that right now we  have 1 million which equals 2 months of supply   so if we add the inventory of about 1.75 million  people to the 1 million that we have already   we're now at 2.75 to 3 million of inventory so  this number is going to go way up way past the   six months of balanced housing which is 2.2  so my prediction is by the end of this year   and into next year we're going to have at  least this many defaults and it's going to   add to the inventory which is currently at about 1  million houses so for those of you that are upset   just be upset at the numbers the numbers are  what they are there's 3.5 million people that   are delinquent there's 2.2 million people that  are seriously delinquent and i'm only using   1.75 million as my estimate so now let's take  a look at where we're all heading with all this   i already went through the forbearance but this  is what i think is going to happen to inventory   and this is where you guys need to be watching  this year and it's going to be different from   market to market in other words florida is going  to be drastically different than new york which is   going to be drastically different than california  so this is all a local issue a sub-market issue   and you can drill down and find all the specific  information in your individual market if you like   but forbearance is definitely going to grow the  inventory there's no way around it the government   can't keep kicking the can down the road on  this issue this is real money that people owe   and at some point just like in 2008 they're  going to have to pay it or default interest rates   should probably stay low and you're going to see  a rash of refinances just like you saw in 2020   but the interest rates are going to actually help  inventory keep it down not that we want it down   because that's why prices are up but people are  basically home they're refinancing their houses   with lower rates they're lowering their payments  they're getting some cash out they're even doing   renovations so i predict that interest rates are  going to stay low and that it's going to actually   help keep inventory low the work from home is  also going to keep people in their houses and keep   inventory low i think we saw a lot of migration  already in 2020 we'll probably see some more   but for now i think that it's probably only going  to contribute to people staying home and working   from home as opposed to going to the office the  unemployment is still an issue and a lot of people   aren't talking about this this is way up there  well over 10 million people the economy still   is not on track unemployment is definitely  tracking the wrong way some of these people   could be up here in the forbearance obviously i  predict that unemployment is going to continue   even though people like janet yellen believe that  it's going to be all back to normal very soon   i completely disagree i don't see how we have  interest rates at the lowest they've ever been   and businesses are absolutely hurting there  are businesses that are doing just fine but   the majority of businesses are not doing that  well and they're struggling they're cutting   back on their people they're cutting back on  making them part-time they're using ai they're   using technology all those things are happening  right now and i think what's going to happen is   people are going to either list their houses  or potentially fall into this category up here   the renters we haven't really talked about renters  there's millions and millions and millions of   people and the government's going to kick that  can down the road again but i believe that a   lot of those people are in occupied houses so they  might even be up here in this particular category   but this renter issue is going to be a real  mess next year again we're going to have to   pop the lid off and i believe that that's gonna  be an issue next year as well possibly even   2022 and then the last thing that not a lot of  people are talking about is the new supply we   all know that we need it you can't have prices  go up like this when prices go up that high   what it does is actually helps the builder because  now they can build homes even though they're more   expensive but so are the prices that people  are paying so when the margins go up you're   going to start to see these inventory numbers go  up right now they're projected to deliver about   somewhere between eight and nine hundred  thousand new housing units in 2021 that's   definitely going to increase the inventory so we  only talked about the inventory on forbearance   which i projected to be 1.7 we know that this is  going to be about 800 000 we don't know exactly   what's going to happen with the renters of the  unemployment and we're not sure what's going to   happen in these categories but between this  category and this category i can assure you   we're going to have a lot more inventory  next year and you're going to start to see   all kinds of things change in all the individual  markets in the sub market so in summary i already   talked to you guys i believe that we're going to  have at least a 2 million increase in inventory   sometime in late 4th quarter 2021 that's what i  believe that i'll start to see these prices drop   once all this inventory starts to creep up and  hit the market you'll see the days on the market   longer you'll see the prices longer which is  unfortunately going to make people list more homes   so once we start to click this over let's say  about summertime my estimation is people are going   to try to stack on by listing their houses and  what's going to happen is this inventory is going   to grow even more and then you start to throw on  the new builds and all of a sudden your inventory   is significantly higher in the fourth quarter of  this year and then 2022 i think you're going to   start to see most of this stuff unravel also what  i'm projecting is rentals are going to be flat in   2021 but they're going to be increased in 2022  because just like in 2008 when we went through   this already and i personally went through this  when people are falling out of their houses here   then they default back into rentals it's going to  push pressure back on those rentals so it's going   to be a fine balance between where they move what  the prices are what the rents are going to be and   how much supply and how much demand there's going  to be in those particular areas those sub markets   those cities those counties those states etc so  as you guys move forward pay very close attention   to what's happening on the forbearance and the  inventory levels in your particular state in your   particular city so lastly what can throw all of  this sideways as already has happened through the   year it's the wizard of oz biden what will biden  do will he throw more money at forbearance will   he kick the can down the road on that issue if he  does obviously these numbers are not going to be   what they are is he going to throw more money at  the renter community if he does obviously we're   not going to have as much disruption in those  particular areas one thing is for sure all this is   going to cost a lot of money the latest stimulus  package is right around 2 trillion and we're i   can tell you for sure that we're probably going  to have some inflation so if you guys haven't   watched that inflation video my suggestion if you  go over and take a look at that because you can't   dump that much money onto economy i'm not saying  we don't need it because these people need it 100   but you can't dump that kind of money on an  economy and expect the dollar to be strong   over the long term with all that extra money  chasing all those goods so again thank you guys   thanks for watching if you like this just hit the  like button and subscribe button and send this to   your friends it takes a lot of work to put these  together as always i appreciate you all thank you

Channel: Ken McElroy

Views: 591,993

Rating: 4.9012613 out of 5

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, housing market, housing crash 2021, housing bubble, housing market crash, housing crisis, housing market crash 2021, housing inventory, foreclosures 2021, forbearance, foreclosure, forbearance mortgage

Id: ZFXObY99bXg

Length: 18min 4sec (1084 seconds)

Published: Fri Feb 19 2021

Reddit Comments

[u/Actualise101]

Commentators seem to get around to the issue but in a convoluted way.

Big issue is housing affordability. If people have earnings impaired (Labor force participation mainly) through an economic downturn then this feeds through into the housing market.

The economic recession will work it's way through although I believe on the other side we'll see expansion with significant inflation that won't be dampened with increased interest rates. Hence holding property with debt will be a good investment with buying at the height of the downturn.