The Housing Market has Flipped

the video you're about to watch is brought to you by deal machine find deals off market and before they hit the market by going to metkevin.com deals to sign up for deal machine to find real estate leads before they get away from you medkevin.com deals hey everyone meet kevin here let's talk about five reasons why the housing market is so broken and unaffordable right now folks it sucks right now if you want to get into real estate and build wealth it's not easy because things are flying off the shelf and bidding wars left and right you don't even need to look far to know this everybody knows this right now but there is some nuance that we should really talk about right now now this is not just a problem that is plaguing cities or larger communities it's also plaguing rural towns and cities throughout the country in fact of 6000 different rural towns surveyed one fourth are seeing the most dramatic increase in people spending more than 50 percent of their money on housing of their income folks half of their income on housing how are you supposed to do anything else how are you even supposed to operate like you're literally just trying to get by with a roof over your head it is ridiculous how unaffordable housing is throughout the country we have a massive lack of housing in this country especially in california where i'm running to be governor to try to fix the madness because california is like the worst out of the entire country in terms of actually having affordable options for people people are fleeing california because they can't afford it in california anymore and i think even more people especially higher income earners are going to be fleeing after covet because why not go to austin or miami the new tech hubs when you're paying all these crazy taxes in california and things are still unaffordable but anyway this video is not about california it's about the housing crisis in the country so let's talk about it so the first reason that housing prices are obviously high we like to think that there aren't enough homes for sale but the truth is there are just too many buyers we are actually selling more homes in 2021 than we have at the start of 2020 2019 and 2018. the issue is we have a lot more buyers and there are reasons for this demand is up and supply is up but demand is just up way more than what supply is up and so this takes a little nuance because a lot of folks i hear them all the time they're like i just can't find anything well you realize just as many homes are selling in fact more homes are selling than they were last year you're just not looking hard enough or you're not fast enough or you're not catching them when they're off market deal machine or using agents or maybe you're missing something in the way you're presenting your offers maybe you're not negotiating the way i teach in my real estate investing course to make sure you know like if you're writing an offer and you're like what what's gonna happen what's gonna happen like if you're surprised that you missed the deal then you're not negotiating correctly like you should know okay we're getting the deal or not and in most cases you could find that out with proper negotiating techniques but take a look at this just to evidence what i'm saying here this is the redfin data center and if we jump over here we'll see weekly housing data going back to about the yeah this is the first week of this goes back to january 1st here so uh this is an average a four week duration chart right here and what this shows us is the difference in home sales in 2021 2020 2019 and 2018. and you can see here 2020 and through 2018 those three years here pretty dang similar here's your cova dip but look at 2021 you're actually at every point selling more homes so again more homes are selling the problem is demand is just so freaking high right now so why do we have more buyers well it's simple number one interest rates are super low so things have been more affordable this is a simple explanation to give obviously people get incentivized to buy but there's also part fomo buying and fomo holding which is where if you were moving why would you sell your prior property you may as well just keep it because the market keeps going up and we all know that things that go up can only go up right no but people do actually continue to hold their real estate when prices are going up and so they either turn their real estate into rental property or what's happening more commonly now is they keep their previous residents as a second home covet has really allowed us to live in many new places that we never thought were possible this really enables a lot of folks to move out of states high tax states like new york or california and just live six months in a day in a place like nevada or florida or texas and not pay your state income taxes anymore because you spent over 181 days in a different state some big opportunities here to save some big dollars in taxes and while at the same time have a second home now that's not sustainable we know real estate's not going to keep going up forever but maybe it's going to take us getting to that inflection point in prices for sellers to actually go all right you know what it's time to offload a little bit more than we're offloading right now because again like in some cases you're better off leaving a house vacant than you are selling it if the price keeps going up the second problem and this is really just a national problem home prices are rising faster than 80 percent of wages in the united states there was a recent atom data solutions rental affordability report and it points out that home prices are climbing faster than wages in 80 of us markets and they go on to say that median home prices increased at a faster pace than average weekly wages in 601 out of 755 counties and that climbing home prices and less than significant increases in wage growth have contributed to renting becoming a more affordable option so in other words we're somewhat becoming a renter nation the more expensive it gets to get into real estate because people who already have wealth are buying multiple homes less people feel inclined to sell properties because why not just total when prices keep going up basically more people are just inclined to stay in their rentals and this prevents them from building wealth this is one of the problems with for example affordable housing restricted affordable housing or rent control is you basically force people into never becoming owners well the same thing here that usually happens artificially with rent control and affordable housing restrictions by governments governments create massive inefficiencies in this sense locking people essentially into a lack of wealth building opportunities big big big mistake but the market is essentially driving that same wedge right now in that because governments have restrained how many houses were building and commodity prices have shot through the freaking roof lumber copper sheet metal you name it this has been i mean you could have invested in commodities like copper this year and you would have had almost 10x the return you would have had in electric vehicle companies for example or tech companies the returns have been amazing in commodities especially since a lot of the techs and evs have lost money so far to date this year but we don't need to talk about that because real estate has been doing very well again people not wanting to sell but folks it's not just low interest rates it's not just people fomo holding and renting properties and it's not just second homes that people want it's also wall street coming in to shake things up now wall street generally competes for around historically 10 to 10 of the homes that are available for home buyers to buy so if 100 houses come on the market maybe 10 of those homes go to investors lately that number has started getting skewed in areas like texas you're starting to see out of 100 homes maybe 15 to 20 homes go to wall street style landlords now this isn't necessarily their fault they're operating a business and providing rentals for the people who need rentals you can't just solve the problem by saying well screw you landlords get you out of the market and just let people buy those extra 10 to 20 homes that just creates more inefficiencies in the market what you actually need is more homes but what's happening in the meantime well again regular communities are getting screwed because these homes are getting sucked up by either people who can qualify with higher wages or financial institutions now most of the time eighty percent of the time at least 80 percent of the time it's people who have higher wages so the rich are getting richer right the other 20 10 to 20 of the time yeah wall street's coming in there's no joke about that wall street firms are buying up single-family homes firms like blackrock and other institutions invitation homes you name it it's a profitable business to be in i get it i know it and it's something i encourage everybody get into landlording becoming a landlord bill buy your first property buy it with three and a half percent five percent down own that property buy another property move into that house with three and a half five percent ten percent down whatever rent out the first place after you've lived there for a year you can do it it's called bank hacking hop hop hop hop before you know it you own four or five homes totally legal nothing wrong with that how does the market balance it out you need to build more homes it's that simple and that's exactly why in california rather than what our state currently does build 80 000 homes i have initiatives that would make it possible for us to build 500 000 units redeveloping commercial spaces making sure that we fast-track permits building new communities but that's beside the point that i'm mentioning broadly for the united states is a solution that would work if prices are too high give people more options that doesn't mean go into like downtown l.a and start building a bunch more homes and skyscrapers or units to make traffic even worse traffic is a problem it's a different whole different video right but it does mean you need to build more homes when you have a lack of supply build more government right now kind of has sort of like a boot on the back of real estate development and it's a big problem the government's exacerbating this issue and so it's easy to sort of point the finger at wall street when really the finger points back at the government but folks it's not just wall street coming in and buying 10 to 20 percent of the homes that exist that's just part of the problem the other thing is wall street firms have lots of money to lobby the government to say hey we got to lift these eviction bans the eviction bans are another issue because what happens when people get kicked out of their homes where are they supposed to go we've got about 10 million americans behind on their rent now congress has passed rental assistance bills but folks most of these rental assistance programs aren't even up and running in california you've got about maybe 30 of the funds actually allocated for rental assistance you've got people clamoring to try to get rental assistance while at the same time wall street is trying to go hey let's go let's beat up these evictions let's get people out if they can't catch up while at the same time you got cities and counties like oh well like 70 of them haven't even set up their rental assistance portals yet or if they have they have really weird restrictions on them like oh well we'll only pay 50 of your back rent that's not what congress said congress said here's rental assistance you can get up to 12 months of back rent and six months of rent going forward if you prove you're at risk of going homeless well all these cities and counties like la or even broward county in florida they're coming out going hey well you know we only want to pay 80 of the landlord's rent you know if the landlord wants uh you know 80 of the money well they're gonna have to take a 20 haircut that's just the way it is a lot of landlords are going why would i do that kick them out evict them sue them have a judgment against them and get 100 get it through small claims maybe not small claims depending on the amount would depend but geez i mean the whole process is screwed up like if if we actually had a cohesive government that came in and said no no it's 100 rental forgiveness it's like a ppp loan give people money get rid of the back rent well then we would have less problems but again wall street has a lot of leverage here and right now while the eviction bans are still in place we have held up inventory once people actually get evicted which is horrible but if people actually get evicted sure homes might come up but it's the wrong way to think about creating more housing supply we need to be building more homes not kicking people out of their homes because they got to live somewhere and so generally what happens then is you end up concentrating the poor this is a phenomenon where basically if you end up having mass evictions people have to leave an existing area where they're making money move to a poor area and what happens when they move to a poorer area is that area becomes even poorer because the schools get overburdened the medical and police services get overburdened the city can't keep it doesn't have enough tax revenue to keep up with streets and graffiti and crime and and dirt and debris or whatever and the city goes into an even worse state of despair so you have a massive massive issue in this country when it comes to housing affordability and so it's very simple to just blame oh that's it wall street landlords are coming in to buy everything up not quite yes they're buying more but 10 to 20 percent isn't moving the needle the bigger problems are the fact that yeah on one hand you do have wall street pushing people to get evicted and that's going to lead people to concentrate into poorer areas leading to more housing unaffordability because now we're concentrating here prices have to go up a little bit over here the places they left might become available but there are plenty of people to take those homes because there's so much demand right now it's a big big big issue problem number four the average wait time for permits and remodels in the u.s is ridiculous right now it takes on on average over 60 days to pull a basic building permit that's because most cities are just overwhelmed want to pull a basic building permit to do a remodel 60 days basic then they come back and go you have to go into plan check you could be waiting for two to three months or more sometimes even four to 10 months 12 months just to remodel a property this ends up leaving properties sitting vacant even longer to be transparent the last buildings that i bought that i've put into larger renovations where i'm working with architects and engineers well long story short it's been a complete disaster first architect got fired second architect was non-functional got nothing done for months third architect can't use what the first architect already did has to basically start over from scratch it's a complete nightmare and it all has to do with the overbearing permit process because just to hear back from the city took 10 weeks on projects to hear back once you submit corrections you hear back again take some other stomachs it's a disaster stay away from projects right now with architects and engineers cities are just way too overwhelmed you had massive crises here i mean think about the things that we have so far you've got in a lot of them it's the government in the way people not selling well this makes sense because people are holding on they're buying second homes that's just the market at work demanding more homes demanding more luxuries for the people who can afford it so demand is way up supply is nowhere near as up but it is up we're selling more homes as we saw homes home prices are rising faster than wages well yeah wages are stagnant in part because we also have this massive transition in the labor markets where you have folks who especially after covid might not be employable anymore they might have to get educated and the government actually doesn't provide a convenient way for you to go to a trade or technical school get a financial education you know get a college style degree with with little cost and little debt those things are really hard to come by hard to come by and so retooling america to be able to qualify for homes it's not easy it's not easy and that means more and more again concentration of poverty and then when people do want to remodel homes you've got average wait times for permits in excess of 60 days you'd be kidding me but then you've also got problem number five and this has to do with some levels of systemic inequality and this is very very true i mean we know that housing helps people build wealth and unfortunately in areas where there has been even less wealth building you typically find that they are larger minority communities so blacks and hispanics are disadvantaged thanks to decades upon decades of discrimination that's happened in our country now racial inequality and the k-shaped recovery is also very real consider this if you were born in the 1970s or 80s where do you think you were able to build more wealth through real estate investing as a white person in a white family or a black person in a black family well obviously here the answer is a white person would have had an easier time building wealth why because even though we have the 1968 civil rights act guess what we still had throughout the 70s 80s and even into the 90s blockbusting where folks were panic selling in certain areas because of potentially other races coming in leading prices to fall these were real things that happened it's just history redlining where lenders wouldn't do loans in minority neighborhoods these are massive issues and they contribute in california people of color make up nearly 92 percent of the 1.8 million people living and guess what within one mile of oil and gas development which means now you've got families more exposed to lower quality neighborhoods where you've got pollution from oil wells pumps and facilities putting them at greater risk of health problems with symptoms ranging from nosebleeds to chronic headaches higher rates of asthma respiratory illness increased cancer risk folks it sucks it race is a very very real issue in wealth building in this country and really it's a lesson for everybody it doesn't matter if you're a black white hispanic or whatever the lesson is really to build generational wealth you got to start the generational wealth you know the best time to plant a tree is not tomorrow it's yesterday right or really the best time to plant a tree what is it 20 was 20 years ago the second best time is today and plant it right now you got to get on the ball with building wealth but it's been very difficult so in this fictitious black family example maybe you try to go buy your first home and you're in your 40s in in 2020 that's great but what if your pay hasn't kept pace were you able to get out of college with about without a bunch of student debt to where you can actually qualify so now you're on the first you're the first person on the right of trying to build wealth through real estate it's a lot harder than whites who disproportionately own more homes and have greater wealth there's a reason the average net worth of a homeowner is 173 000 and the average net worth of a renter is somewhere around 5 600 real estate owners build wealth they make money and we have massive issues in this country massive massive issues so when folks say oh they're just no homes for sale no the issues of our real estate affordability crisis are way way deeper than that we are in a housing emergency a housing crisis in this country we don't have enough homes it's that simple sure we have way less discrimination today which helps but it certainly doesn't help all the people who got screwed in the past decades it's nice to know there's less or hopefully there's less discrimination today you know redlining blockbusting these things have become illegal over time fair housing laws are much more stringent today than they have been in the past there is hope but we got to get government out of the way of building that's the big problem sure people aren't selling well there are more people selling but there are still way more people buying thanks to second homes and price increases we know that home prices are rising faster than wages this means it's tougher for people to buy because well they need to be able to get a better job but in this country to get a better job you need to probably take on more student debt which is also a problem wall street is encouraging evictions while at the same time trying to buy up more homes that's a problem we're not building enough homes because building permit wait times have become a disaster thanks to coven and building permit processes in many states specifically california are a complete complete complete disaster but then you've also got systemic inequality that has made it almost impossible for certain groups to even get on the ride and this is something that the federal reserve is paying attention to the federal reserve has recently been regularly talking about race in america and it's very very important that in order for us to see a full lasting recovery we need all groups within our country to be able to afford homes so what's the solution well from a government point of view the solution is simple we need to build more homes it's very very simple loosen regulations have statewide permitting so that folks can get statewide permits with development companies develop in new areas develop them where solar and wind farms are so you don't have to transmit that electricity a long distance literally build communities around solar and solar wind farms now you're becoming green you're providing more housing also you should improve transportation there are many solutions to the housing problem in fact if you go to meet kevin.com you'll see my full 20 part plan on how i plan to fix california and my housing project is is part of that but i acknowledge the very serious issues that we have in this country so how do you personally try to get out of this crap it's very hard but the very first thing that you need to do if you want to get into owning real estate is in my opinion it's not necessarily weight you know i don't want to tell you how to time the market my belief is it's better to buy and then wait than to wait and then buy so i'd rather see you in sooner i think the first thing that you really have to do is you have to accept smaller except less except an area that maybe previously you didn't think was going to be perfect get in you gotta get in three percent down three and a half percent down call up your local community development corporations try to get down payment assistance just make sure you can always rent out whatever property you buy never ever buy a property that you cannot rent out i teach this in the real estate investing course i want you to buy homes buy buy buy real estate it's very important for your building of wealth i want everyone in the country to be able to build wealth now even though i say that you know sometimes i get these cynical comments and go well kevin if everybody buys up all the homes and nobody's going to be renting i don't get to reach everybody with my message and even if i did not everybody does what i say and i'm not saying you should do what i say but i think you get the messaging here and that is if you want to be at build wealth you got to get in you get it smaller you want a three bedroom two bath suck it up in a one bedroom one bath as soon as possible to get in start building wealth try to get a two bedroom one bath rent out a room try to get a two bedroom two bath rent out a room in a bathroom get a three and two rent out a bathroom and and two rooms do whatever you got to do to build your wealth ideally start with a property that needs a little bit of fixing up if you need to buy new construction that's fine you're paying a little bit over market value for it but at least it gets you in and then you can house hack right away but you've got to get into the game and remember more houses are selling right now they're just selling faster than they ever have before with many offers there are there's a lot of competition get pre-approved do not get discouraged use the negotiating tactics that you learn in the real estate investing course use the coupon code down below and folks hopefully this helps you out i really want to see you help yourself out because the reality is somebody's not just going to go like that and build hundreds of thousands of new homes i will try to do that if i become governor in california if i don't become governor in california it's going to be even harder to do it in california and i probably gotta leave but anyway folks hopefully this helps you out let me know if you found this helpful consider subscribing and sharing the video if you did and we'll see you next [Music] you

Channel: Meet Kevin

Views: 277,032

Rating: 4.7203779 out of 5

Keywords: real estate, housing market, housing, real estate crash

Id: N921WbmGZTI

Length: 23min 56sec (1436 seconds)

Published: Thu Jun 10 2021