The 2021 Housing Crash

hey everybody it's ken mcelroy here so i'm predicting there's going to be a massive housing crash at the end of 2021 and if you want to hear all the details please be sure to listen to the very end because i'm going to go through the different reasons as to why i think and they're facts they're not opinions so let's first talk about why housing is strong and why housing is weak so you always need to go back to the two fundamentals which are supply and demand you always have to move to that so as everybody talks about real estate on a national scale or real estate on a state scale or even real estate on a city scale we all know that real estate performs differently in some areas than it does in others so the key to finding out where to be as wayne gretzky says you want to skate to the puck not where the puck is you want to find out where things are heading and there are lots of information on the internet for you guys to predict the stuff and kind of make good good decisions moving forward so i want you to look at the data the raw data and i know it's confusing and i know there's lots of opinions out there including mine but i want you to always go back to the data and that's what i studied before this video so that i could deliver what i found so far just for you so what i'm going to do is i'm going to summarize it for you in some show notes all you got to do is click at the bottom of the video and you can have those for free so one of the keys is to figure out why does real estate sell quickly and why do prices go up in certain markets certain sub markets certain cities certain states certain countries all of those things and there's lots of factors but i'm going to talk about three the first one has to do with inventory low inventory higher prices just like anything when there's more demand for something inventory is typically low so think about the way that this pandemic has driven prices up for food as an example so we all know that the toilet paper was out and the hand sanitizer was out and you started seeing bottles of hand sanitizer on the internet for sale for a lot of money the reason was not because hand sanitizer changed it was because there was a high demand low supply so right now when inventory is low and it is and i'm going to talk about that in a minute that's one of the factors that's going to keep sales high and prices high when inventory is low the second thing are low interest rates and we know these are historically low interest rates and i don't believe and most people don't believe that interest rates are going up anytime soon and while that's not necessarily a factor now it's something to watch because if interest rates go up for any reason it's going to have a further negative impact on the prices and on the sales of real estate so what happens is when the federal reserve lowers interest rate it puts more wind in the sales for real estate it pushes the sales and the prices and all those things further that's exactly what happened in the single family market that's what hap exactly what happened in the multi-family market and so that was kind of the last piece of the tailwind so before this pandemic everybody was wondering when is all this going to crash it just happened to crash due to this pandemic so the third one of course is just basic income stability there's a lot of people in a lot of pain right now there's a lot of uncertainty a lot of anxiety and a lot of stress if you're a business owner there's a lot of stress about whether you're going to reopen about whether or not you're going to have the customers that you had before and what is going to be considered the new normal if you're an employee you might be wondering if your employer is even going to open back up if your employee you're wondering whether or not you're going to have the employment benefits you know that we have at the moment to be able to help people pay their things like food and rent and those kinds of things so there's a lot of uncertainty so i would i would say that at the moment we do not have income stability right now so now let's take a look at the factors that create a reduction in real estate sales and prices and momentum number one inventory high inventory of course it does higher inventory lower demand lower prices okay just the opposite of what we just talked about the second one of course is interest rates i don't think interest rates can go much lower they're incredibly low right now so that's why the government is using all these other things to try to stimulate the economy because interest rates are already very very very low so i don't expect those to change much the third one is again income stability so for this video i'm going to focus on two things one the income stability and to the inventory and then i'll conclude it at the end for you so if you guys like this please like or subscribe this video and look to my channel because i like to tie it this back to the community if you think other people would like to hear this message so thank you so let's start with the first one income let's look at the facts of where we are right now and what i want you to do is i want you to go to the website www.epi.org and this is the economic policy institute now the reason i like this website you're going to take a look at real data and they have analysts and economists to dig into this data around unemployment the cares act and all of these things and they're trying to predict forward of course where we are on unemployment and the fallout that we're going to have on the furloughed employees the employees that are getting benefits et cetera et cetera et cetera so i'm going to summarize their information here for you so i'm sure a lot of you have read all about the unemployment statistics okay so we know that there's been at least 44 million people that have filed for unemployment and a lot of those people have gone back to work as the different states and cities have opened and reopened et cetera et cetera et cetera okay but as of right now what we do know is this there are 21 million americans right now getting unemployment benefits we definitely know that and one of the things that i want you to look at with the economic policy institute here is nearly 11 of the workforce is out of work with no reasonable chance of getting back to a prior job okay so as you start to dig into the statistics here's what you'll find 4.9 million employees are currently furloughed or still in the employed category that will not go back to work per the economic policy institute now is it possible that they're wrong yes is it possible that you're right yes i don't really care the point is that somebody's right and there's going to be a lot of employees that will not go back to work that are currently employed and are currently furloughed the second big piece as you'll find from this data is 6.6 million people have dropped out of the workforce so let's do some simple math you got 21 million people that are currently on some kind of financial benefit some kind of employment benefit from the government you got 4.9 million people that the economic policy institute are saying are not going to come back to work and you have 6.6 million people that have dropped out so as you add all those up that's 32 million people they also go on to predict all kinds of other things like 30 percent of the businesses will not survive and will not come back to work therefore that's going to be even a bigger number but we do know that a large part of those 21 million people will go back to work so the question is going to be of the 21 million people that are currently on unemployment benefits how many of those people are going to go back to work so based on the information from the economic policy institute i believe that it's going to be somewhere around 70 percent so 70 of the 21 million people will hopefully go back to work why is this important when the economy reopens and businesses go back to normal and people go back to their work we are going to have some kind of unemployment the question is how many people so my estimate based on the information as of today when the dust settles we're going to have somewhere around 23 million people unemployed and if you know back in my prior videos i suggested that we were going to be somewhere in the 18 to 20 million people unemployed and i got lots of hate mail from it so thank you guys keep that comment of course this is just data on the internet you can dispute it all you want so let's settle in on somewhere around the low 20 million of unemployed because it's gonna be a big number guys it's going to be here's what i want you to realize and back to the income stability this is going to force people who are having problems paying their rent paying their mortgages paying their landlords it's going to force people to close their businesses it's going to force people to go on unemployment for a long period of time when they don't want to it's going to force people to take pay cuts all of those things are going to happen and most importantly millions and millions and millions of people are going to cut their spending dramatically and they're going to stop purchasing and they're going to stop buying things like real estate so we all know that people have been massively disruptive and incomes are in question so let's just talk a minute about the cares act so as we know the cares act has multiple things in it but i'm going to talk about three things i'm going to talk about the ppp which is the payroll protection program i'm going to talk about unemployment benefits which is the 600 more a week that everyone's getting and i'm going to talk about forbearance those are the three things and here's what we know we know that 30 of americans miss their housing payments in the month of june that's a massive massive number this is what we know already again it's just data but we know that it's a combination of rent and mortgage so the ppp program is obviously directed at business so let's just hang out over here for a minute the ppp program was rolled out in march and some some got their money in april but essentially it was to pay for employees that were furloughed or to keep the employers to keep their employees that's what that was for that is ending then we have the unemployment benefits which we know were an additional six hundred dollars a week that is scheduled to end at the end of july and we know the forbearance program that started in march a lot of people jumped on that and we know that at least four and a half to five million people have elected to use the forbearance program which we'll get into later so you guys can jump all over the internet and take a look at the number of people the millions of people utilizing the forbearance program and the amount of people struggling right now to pay their rent recently in the new york times there was an article about renters facing eviction and they estimated that somewhere between 19 and 22 million people are facing eviction between now and the end of september of this year so you have this forbearance program and you have this eviction issue going on all as a result of income stability or no income stability all of it and it's all being propped up by things like the ppp and the unemployment benefits and of course the forbearance program among others so i think we can all agree that income stability is clearly going to be a future issue and right now a lot of people are propped up with these government stimulus programs and there's a lot of uncertainty and stress and anxiety around all these programs right now and i think we can agree that we're going to have a lot of unemployment at some point when the economy reopens because there's a lot of businesses that are not going to survive so let's move to supply so we're talking about inventory so we all know that high inventory drives prices down and low inventory drives prices up so i've been asking a lot of my real estate professionals why is it that some markets are on fire and why is it that sales are brisk why is it there are price wars right now going on in the first few months of this pandemic it just doesn't make sense to me so here's the reason why if you google zillow and the number of listings you'll see a 28 decline in the number of listings now there's some states that were fine and there's other states that we're not for example new york city declined by 57 percent imagine that over 50 percent of the listings in new york city were taken off the listing service so what does that do to supply it lowers the supply it lowers the inventory of things that people can buy so this is the point of why prices are going up right now people are largely moving out of bigger cities like seattle new york los angeles chicago and they're moving out to these suburbs because there's more open space there's not as dense the prices are less the property taxes are often less the rent is often less the mortgages are often less because the home prices are less the cost of living is less and they can work remotely so a lot of these smaller little sub markets are actually doing pretty well right now but nobody's really calculating in right now the four and a half to five million people that are on forbearance and the 20 million people that are facing eviction by the end of september those are two massive factors and what you're going to see are people moving out of apartments and people moving out of homes that can't afford them for all kinds of reasons so this is how forbearance works you get up to 180 days to defer your mortgage payment and then at the end of that you have to prove hardship you can do another 180 days so i predict that in september of this year late september unless the cares act is extended you're going to start to see these mortgage foreclosures pile up you're going to see a little bit at the end of 2020 but really it takes a while for people to walk away from their homes it's going to spill into 2021 and the ones that can prove hardship and get another 180 days well then that expires basically in march or april of 2021. so this is why i believe because of an inventory issue we're going to have a lot of renters displaced and we're going to have a lot of homeowners displaced in the millions and millions of homes so we're gonna have two waves of inventory we're gonna have an inventory wave at the end of the year and we're gonna have another big inventory wave at the end of next year i also predict that there'll be even more foreclosures and what's going to happen is these homes are going to go back to the banks or the people are going to try to list them to scoop whatever equity they might have so that they have that cash to be able to survive based on potentially not having any income so that's going to put further pressure on the amount of homes in the inventory on the listings which again increases the inventory lowers the prices and just like in 2008 the inventory will be in the millions of bank-owned homes at the end of next year now there's a few things that can totally kick this can down the road and that of course is the extension of the cares act so we still don't know whether or not the 600 per week for all those who are unemployed is going to stay or not or be extended or not we don't know whether the forbearance program will be extended or not we don't know if jobs are going to return or not we don't know whether businesses are going to get their ppp or not we don't know if the businesses are going to survive or not so there's a tremendous amount of uncertainty but this is where we are now what i'd really like to do is talk to you about a few things that you can watch things that i watch in order to stay ahead of all these things that are changing on a daily basis so i do believe that this is what's going to happen we're going to have income instability and we're going to have high inventory at the end of next year so here's a couple things that you can do right now one first wrap your head around the fact that prices will drop because i know a lot of you are going to argue with me and ride it all the way to the bottom and as i like to say catch a falling knife or continue to hold on to that falling knife or buy a falling knife two know that inventory price drops rent drops etc are going to be sub market to submarket this is not a national thing it's not a state thing it's not a cities thing as you guys know i live in phoenix there are some areas of phoenix that are great other areas of phoenix that are not great some areas are going to be more impacted than other areas so when you say phoenix it doesn't necessarily mean the entire city be careful of the big cities right now people are moving out of seattle they're moving out of la they're moving out of new york it's not time to buy yet monitor new listings and sales on zillow make sure you guys are connected to large companies that monitor the real estate industry like zillow or realtor.com and those kinds of things and then you can now see where listings are happening and prices are increasing or reducing you can see all that real time it's a true survey of what's happening in the market as people add listings pay attention to supply and foreclosures and inventory you're going to see high inventory in some areas and low inventory and others just be very very cognizant you can still make money you can still invest in this kind of a market trust me but you need to be careful and need to monitor these things at a much more organic granular level and lastly pay attention to population migration patterns and what that means is where are people going it's very important you understand where people are going because you want to be there you want to be in front of that you don't want to be in a spot where they're leaving from and there's a great website that i pulled up for you and this is the u.s census bureau and it talks about migration patterns and where people are going right here recent migration flows it's all on the internet folks there are lots of ways to look at this you can look at out-of-state driver's licenses that are being turned into cities and states so you know how many people are moving to idaho for example because when they get here in 30 days they have to turn in their driver's license there's services like north american van lines that produces like where are the moving trucks going or u-haul where are the moving trucks going where are people renting rider trucks and u-haul trucks and where are they going and where are they being dropped off because it shows if they're moving from seattle to phoenix it shows it's data all that's on the internet you can find this stuff you need to really be careful and take a look at the outflows versus the inflows because you do not want to be buying something that has an outflow right now and lastly i want you to be cognizant of one more thing i'm going to predict that property taxes are going to go up dramatically in most areas here's why the government can't throw this money at the economy and not get it some way and what's going to happen is property taxes are going to go up in most metro markets and i do understand that property taxes pay for things i get that but if you're an investor or you're a property owner it's going to affect you because you're actually the one paying it so be cognizant on the government stance around property taxes and any other kinds of taxes because i can tell you people right now that are hurting that don't have money are looking at those things they're taking a look at where they can live the most efficient with what they have today so thanks for listening

Channel: Ken McElroy

Views: 237,339

Rating: 4.8982015 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

Id: hF1H1qfW15Y

Length: 21min 28sec (1288 seconds)

Published: Fri Jul 31 2020