The Housing Market JUST Went From Crazy To INSANE

the housing market was already crazy but now we have some new proposals which could take our housing market from crazy to absolutely insane what's up everybody i'm jasperet singh from the minoritymindset.com where money minds rethink rich ever since this pandemic hit our housing market has been booming because the federal reserve bank slashed interest rates which made it cheaper for you to go out and buy a home because now mortgage rates were so much lower now this was kind of a strange situation to see because the united states entered a recession and at the same time we entered the recession we also entered one of the biggest housing market booms that we've ever seen in history and so we have our economy that's struggling but we have some people to have the cash to buy a home and this is causing home prices to go like this while the economy is on real choppy waters now to make matters a little bit more crazy we have some new proposals out right now which could take a housing market to new insane levels and so you got to understand what's going on and that's what i'm going to be talking about in this video but before i do that i need you to do me a quick favor and smash the thumbs up button but now here's the agenda for today i'm going to start by talking about what's happening so we're all on the same page then i'm going to get into the forbearance program because there might be some major changes coming to our forbearance program which could drastically change our housing market then i'm going to be talking about equity this is important to understand number four the housing bubble because some people are talking about a potential housing bubble so you want to understand what's going on with that and then number five i'm going to be talking about my thoughts with what could be coming in the future so let's jump into it between 2020 and 2021 we saw the median wages in the united states grow by right around three percent at the same time we saw housing prices between march 2020 when the pandemic hit in march 2021 grow not by 3 but by 15.6 in just 12 months and i'm talking about the median home prices in america here generally you want to see home prices grow at the same rate as wages because if home prices are growing like this while wages are only growing like this eventually you are going to hit a tipping point eventually you're going to hit a point where buyers can no longer afford hopes because if housing prices keep going up like this eventually right you're going to hit a point where your income is not going to afford new home prices and so buyers are not going to be able to buy homes and this would cause a housing market correction because the people can't afford homes then home prices have to correct not crash but correct so people can afford homes and then this would eventually hopefully cause the housing market to go back up but a few things that have been fueling this housing price growth between 2020 and into 2021 has been low interest rates because in march 2020 we entered this recession and pandemic and so the federal reserve bank slashed interest rates which made mortgage rates drop as everybody was trying to buy a home and take advantage of these low interest rates and second we had a super low inventory of homes available for sale so you had all these people that wanted to buy a home and not that many people selling homes as to everybody who wanted to buy a home went out and they were fighting each other to buy a home at the same time we had this mortgage forbearance program created because now you had a lot of people that didn't have money to make their mortgage payments typically what would happen we saw this happen in 2007 and 2008 and 2009 if you cannot make your mortgage payments the bank is going to come in and they're going to take your property away from you they're going to foreclose on you but the government stopped that from happening and so now you had a lot of people that weren't selling their homes so you had a low supply of homes available for sale and you had a lot of people that can't afford their housing payments but they're not getting foreclosed on because of the forbearance program so now we've created the perfect storm in the housing market because we have super low mortgage rates we have a small inventory of homes available for sale and at the same time we have a ton of people that want to buy homes all of these things together have been pushing home prices through the roof literally this brings me to the issue that we're facing right now forbearance so back in 2020 the government created the cares act which allowed people who had a government-backed mortgage to put their mortgage on hold through the fairbanks program essentially whether you're facing a financial hardship or not you could put your mortgage on hold for up to 18 months they kept extending it but up to 18 months which means that the mortgage forbearance program assuming that you entered into it when it first started you would be ending in around september october of 2021 and now it looks like they might be extending this forbearance program again and at the time we're recording this video we have right around 2.6 million americans this is 2021 that are in forbearance on their mortgages that are not paying their mortgages right now to put that in perspective if 2.6 million people were foreclosed on today because these are the people that are not paying their mortgages right now we would see an all-out economic collapse if this were to happen today our whole entire economy would completely melt down because if you remember back in 2008 when the 2008 crash happened there were right around 3 million people that got a foreclosure notice but right around 860 000 people were actually foreclosed upon so in 2008 860 000 foreclosures caused our entire economic system to almost fail now we have 2.6 million people that are not paying their mortgages and so the government is naturally concerned because nobody wants a repeat of 2008 but there are some differences between now and 2008 because this forbearance program is voluntary and so you have a lot of people in this forbearance program right now that are not paying their mortgages because they're thinking well i could pay 1500 a month to my mortgage or i can just put my mortgage on hold and i can take this extra fifteen hundred dollars and invest it in the stock market where i can take this extra fifteen hundred dollars and put it towards my savings where i can take this extra fifteen hundred dollars and go shopping if you have a government-backed mortgage there is nearly no requirement for what you need to do in order to apply and get approved for this forbearance program all you have to do is say i want to forbid my mortgage and now you don't have to pay your mortgage payments anymore so you don't have to have a financial hardship to apply for this for brands program which is why we don't know out of this 2.6 million people how many people are not able to pay because they're facing a financial hardship and how many people are not paying because they just don't want to i mean you have financial advisors out there that are telling people hey put your mortgage on hold and take this money that you would have been paying towards your mortgage and put it towards your investment put it towards your debts or your savings or whatever because you don't have to pay your mortgage right now and so some people here are trying to take advantage of that but now the thing that's making this even more interesting is the new proposal so i just cleaned off my whiteboard so i can diagram what's going on but the cfpb or consumer financial protection bureau has put out a brand new proposal that will do three things to help out the 2.6 million americans that are in forbearance right now the first thing they want to do is they want to give borrowers more time to come up with a plan on how they can recover on their finances after the forbearance program ends and so what they're proposing is no foreclosures until 2022 essentially they're saying that you cannot file a foreclosure on somebody until after december 31 2021 which means you will not be able to foreclose on anybody until 2022 but this rule only applies to primary residences which means if you have an investment property this does not apply to you the second thing they want to do is give you more options that way you have more ways to kind of get out of your forbearance program without real financial hardships and so they don't want people to end the forbearance program and they get slapped with late fees or fines or huge lump sum payments and so one of the options is actually going to really shake up the housing market because one of the things that they're proposing is to give borrowers who are facing a hardship because of this pandemic to now extend their mortgage to a brand new 40-year mortgage so if you took out a 30-year mortgage and you've been paying your mortgage for let's say five years now you have 25 years left on your mortgage and now you're in forbearance what you can do is you can start your mortgage process all over again if you can show that you had a financial hardship whatever that means this is up to you to decide but if you can say that you had a financial hardship now you can start your mortgage all over again with now a 40-year term instead of a 30-year term so you can have smaller monthly payments and your bank is not allowed to charge you any interest or any fees in order to do that so your interest rate will stay the same all your other fees and stuff would say the same they cannot tack on more fees and now you can start your mortgage all over again with lower monthly payments because now you would have a 40-year mortgage instead of a 30-year mortgage and you would keep the exact same interest rate you have today the reason why this is such a big deal it's because of two reasons first it can really change how much your monthly payments are i'll show you if you owe 400 000 to your bank and you had a 15-year mortgage your monthly payment is going to be right around 28 2900 a month but if you had a 20-year mortgage now your payments dropped down to 2 300 a month if you got a 25-year mortgage that was 2 000 a month and if you got a 30-year mortgage your payments would be right around 1800 a month but if you had a 40-year mortgage your payments would drop down all the way to 15.50 a month so some people are gonna be saving a thousand dollars a month if they change their mortgage to a brand new 40-year term the second reason why this is so important is because it doesn't just apply to federally backed mortgages it also applies to private mortgages so the original forbearance program and the cares act was only applying to mortgages that were backed by the government fha usda va mortgages but if you had a non-government mortgage a private mortgage a conventional mortgage then you weren't able to get the same forbearance plans that other people had this program would allow you whether you have a private mortgage or a government-backed mortgage if this is passed to now get the same options and the reason why this is so significant is because if you have a private-backed mortgage then some lenders can come to you and say all right you haven't made payments for the last 12 months you owe us all this money right now and so if people can now start a brand new mortgage without paying any fees keep the same interest rate and now extend their mortgage for 40 years then people could save 200 to a thousand dollars a month and now this could help grow the economy even more because people will have more money in their pocket which means now they'll have more money that they can use to go shopping and go stimulate the economy now i'm not saying this is what you should do this is just how the system thinks and works so if this proposal is passed you have to imagine that this is going to be a pretty big chunk of people that are going to apply for this brand new 40-year option because they'll be able to keep more money in their pockets you'll be in debt for the next 40 years on your mortgage but if you can save money every single month now you're also going to have a new group of people that might not want to sell their homes because you're not going to get that same kind of cost of ownership in a brand new property because home prices keep going up and interest rates are starting to go up and so you might be staying in your home for a long time now because you got the benefit of a low interest rate you can extend the life of your mortgage and now you might want to stay in this property which means we're going to have a small inventory of homes continue to stay available for sale because we can't have foreclosures and now people might not want to sell their home but i'll get more to that in a little bit and the third thing that this proposal talks about is that banks will have to keep you up to date as a borrower as to what your options are so even if you weren't aware that you could take this new mortgage of 40 years the bank is supposed to tell you that if you are facing a financial hardship so if this gets passed banks might be required to ask you if you faced a financial hardship because of this pandemic and if so then banks might have to give you different options on how you can pay back your mortgage the third thing that i want to talk about is equity because when home prices are going up this is very good for homeowners but it's not so good for people who want to be homeowners because now if you are a homeowner and home prices keep going up you just found brand new wealth because now you have more equity at least on paper now you don't actually keep this wealth or have this cash in your hand unless you sell their property or i guess unless you refinance and you pull out some cash but you don't actually see that money until you actually do something now if you want to be a homeowner rising home prices are bad news because now it's going to cost you more money to be a homeowner if you really want to understand the housing market you have to pay attention to equity and how much equity people have in their homes because one of the reasons why the 2008 crash happened was because people had no equity in their homes and so when people have no skin in the game and housing prices fall and they can no longer make the monthly mortgage payments they have no incentive to not walk away because you're already underwater in the home and now you can't afford the monthly payments so what's the point of staying in a home and keep kind of going deeper and deeper into debt when you can just walk away and so if people have equity in their homes then they're going to be much less likely to walk away now i'm going to talk more about that when i get into number four the potential housing bubble that everyone's worried about but the thing that i want you to understand about equity right now is we have this refinance boom going on which can be good or it can be bad and it just depends on what you're doing there are two big reasons for why somebody would want to refinance their home one is if interest rates fall and now you can save money on your mortgage and second is if home prices go up and somebody wants to pull out some cash from their home mortgage rates right now are still at historic lows they're not as low as they were a few months ago but they're still historically very low which means if you took out a mortgage a year or two ago or any longer than that then you could save a ton of money on your mortgage just by refinancing into a new cheaper loan now at the same time many people have been refinancing because they saw that the 200 000 home is now worth 250 000 and so now they want to pull out some cash now this can be good it just depends what you do with this cash if you are an experienced investor and now you're pulling out this cash because you can get this cheap debt and you're going to use this debt to go out and buy a rental property or you're going to use this debt to invest that way you can make more money that is a good use for your money but if you are refinancing home pulling out cash from your home that way now you can go out and go on a shopping spree that is a big no-no in general if you want to refinance your home and you want to be debt-free as fast as possible then you want to pull out the least amount of cash as possible and then you want to work to pay off this debt as fast as possible so if you're in that situation that what you want to do is you want to refinance it to the lowest interest rate possible that way you can pay the least amount of money on your mortgage and keep more money in your pocket that way more money is going to build your wealth instead of just your banker's wealth the thing that i'm worried about here is we do have a lot of people that are pulling out cash from their homes which is not necessarily a bad thing but now is what do you do with that cash and this is something we're going to see more into next year and the year after that but if people are pulling out this cash and they're doing let's say not financially smart things with this cash this will help the economy in the short term but over the long term that could cause more issues if people do not have equity in their homes because people do not have equity or they have very small equity and the housing prices drop now all of a sudden people were doing really great because they had this newfound equity and they pulled this cash out and now if home prices drop i'm not saying this is going to happen i'm saying this is a big if but if home prices do drop and people have no equity now this could make a bad situation worse so this is something i just want you to pay attention to because we're seeing more and more programs that are allowing people to buy homes with three percent down and in some situations even zero percent down and so you want to pay attention to how many people are buying homes with equity and how many people are buying homes with no equity because if you see more and more people buy homes and they have no skin in the game then that's something you kind of want to be a little bit concerned about because if people have no skin in the game then they're going to feel like they have nothing to lose now before i get into this potential housing bubble that everybody keeps talking about i do want to say another thing about refinancing because if you are interested in refinancing right now this is still one of the best times in history to refinance but you don't want to wait too long because if interest rates keep going up then you might miss out on the great interest rates that you have right now so if you are interested in refinancing on your mortgage don't wait too long and wait for interest rates to go up even more because the lower interest rates are the more money that you can save and one of the best ways that you can save money through a refinance is just by shopping around because some lenders are going to charge you a whole lot less for the exact same loan or refinance and one of the easiest ways that you can shop around right now is just by using a mortgage comparison tool and the following is an advertisement from our sponsor credible who operates a mortgage comparison website incredible you can check pre-qualified mortgage or refinance rates at no charge to you they have multiple lenders competing on their marketplace so you can compare great rates and pick the option that's best for you the process is pretty simple all you have to do is go into credible's website and enter in a few pieces of information which just takes a few minutes and the credible is going to show you 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 how you can do that with credible in the description below credible does pay minority minus an advertising fee when you submit a pre-qualification request and credible operations inc mls number one six eight one two seven six is not available in all states so if you wanna learn more and see what mortgage a refinance rate you might qualify for i got the link to how you can do that in the description now let's get into the topic that many people have been talking about a potential housing bubble that is building right now a lot of people like to compare 2021 and 2020 to 2008 because they say okay in 2008 you had three million people that were not able to pay the mortgages that received a foreclosure notice in 2021 right now like i talked about you have 2.6 million people that are not able to pay their mortgages now there's a big difference between what happened in 2008 and what's going on in 2021 back in 2008 you had a lot of things building up because back before the 2008 crash people were not able to afford homes that's similar to what you're seeing now but what happened was banks started creating these new programs such as ninja loans no income no job no asset loans letting people who have no money buy a home you could buy a home with little to no down payment at all and then on top of that because you couldn't afford the home you had these low variable interest rates and these variable interest rates came in with these very low teaser rates so you could come in buy a home with no money down and your monthly payments for the first three years were super cheap maybe even five years depending on what mortgage you got and she had a lot of people buying homes without really understanding their mortgages and then once this variable interest rate started to hit and their mortgage payment started to go up now all of a sudden you had these people that had no equity in their homes and had these super high mortgage payments that could no longer afford their payments and so people just started walking away we're seeing right now is similar but very different at the exact same time and so right now we still have a lot of people that are struggling to be able to afford a home kind of like what you saw happen in the mid 2000s now the way the banks and our systems are working to help people buy homes is very different than before because now we don't have those ninja loans we don't have a lot of people getting variable interest rates thankfully they are starting to come back but we don't have a lot of people getting variable interest rates and so people are buying homes with fixed rate mortgages which means if in five years mortgage rates go up drastically it's not going to affect people who bought a home today because you have a fixed rate mortgage which means your monthly payments are not going to change and so even if interest rates go up the people that bought a home today as long as they can keep making their current monthly payments they're not going to really see any major financial hardship because they know what their monthly payment is going to be for the next 10 20 30 years assuming they don't refinance when mortgage rates are a lot higher the second major difference between now and then is now you can't even foreclose on somebody who is not able to pay their mortgages back then if somebody wasn't paying their mortgage 120 days later they were in the process of getting kicked out of their home now it's not allowed by the government and so even if this forbearance program ended and people were still not paying their mortgages you still wouldn't see this foreclosures because the government is not letting that happen third the government is trying to do what they can to make housing more affordable now what's interesting is these programs will actually end up making housing less affordable in the future but we'll talk about that in just a little bit because now the government is saying that they're working to pass a 15 000 first-time home buyer credit to people who want to buy their first home so this 15 000 credit would essentially be free money to people who want to buy their first home and this money could be applied to your down payment now if that happens then people who cannot afford a down payment would have some assistance for the government but what that could cause over the long term is now you have a lot of people buying homes and they're getting this free fifteen thousand dollars and this would cause more buyers to enter the market which would cause home prices to go up by i don't know fifteen thousand dollars so we don't have the same red flags that led up to the 2008 crash right now right now we have issues that are a little bit different but they're not as directly linked to the housing market as we saw before the 2008 crash because right now we have a rising national debt we have a rising cost of living and we have rising inflation which makes the cost of everything around us from our rents to our groceries to our health care costs to keep going up and so all these extra costs that we have are squeezing people they're squeezing people's ability to spend money now one of the ways that they could squeeze people is their ability to spend money on their mortgages and so this is something that you have to pay attention to because we had an insane amount of money printing happen in 2020 and 2021. these things have a cost all this money printing is going to dilute the value of our dollars and that could cause home prices to go up even more and so we could see home prices go up a lot which could outprice buyers like i talked about earlier and if that happens then you would have to see home prices eventually correct because if you have people selling homes but nobody is able to buy the home because they don't have the means or the ability to afford homes then you'd have to see home prices come down to correct now that doesn't mean that you see a home price crash but a home price correction could happen if you see home prices go up way too fast now everything that i'm saying right now is based on the information that's public at the time we record in this video if interest rates start to really go up in the future and now people cannot afford homes so now banks have to make changes like maybe they bring back zero percent down payments maybe they bring back variable interest rates and people start to take advantage of these things because they want to buy homes now that would be almost an exact repeat of what we saw before the 2008 crash this is why i said just a minute ago equity is so important you have to pay attention to equity because if people have cash they have equity in their homes then people are not going to want to walk away they're going to find a way to keep making the mortgage payments they're going to do whatever they can to keep their homes which is why you would not see a huge boom in foreclosures which would prevent you from seeing a repeat of 2008. and this brings me to number five what's coming next well over the long term home prices cannot sustainably grow many times faster than wages it's just not sustainable and so you have to kind of pay attention to one how fast home prices are growing and second how fast wages are growing but home prices can go up fast as long as you have this kind of influx of buyers with not enough sellers in the market and so yes although home prices are growing way faster than wages this can keep happening as long as you have way more buyers than sellers out there and there's a few different things that can fuel that one is low mortgage rates so if you continue to see low interest rates that will continue to bring more buyers into the market because people will want to take advantage of this cheap debt second is a low inventory of homes available for sale so right now we still have a labor shortage and a material shortage which is making it harder for people to develop and build new homes and so it was taking longer for people to build new homes then that could keep the inventory of homes available for sale small but if we see a whole lot more homes getting finished and being sold and being developed then that could increase the supply of homes available for sale which could help kind of balance this market and so if we have a whole lot more homes available for sale then that could balance out the buyers which would slow down the housing price growth and the third thing is the economy because right now what we've been seeing happen is a k-shaped recovery what that means is we had some people that were really impacted in a good way by this pandemic and these are the people that have been buying homes these are the people that came out of the pandemic stronger or were not hurt by this pandemic and so they still had an income they were able to qualify for a mortgage they were able to take advantage of the cheap debt and they were able to go out and buy homes but at the same time we had a lot of people that were hurt by this pandemic that are not able to qualify for a mortgage right now because they lost a job or they lost an income stream or they saw their wages get cut and so for the people that are working in the retail sector or the hospitality sector or the food restaurant sector these people were hurt by the pandemic and these are people that are not able to buy homes and so if the economy starts to recover very quickly and you see these people get their jobs back then what you're going to see happen is a lot of these people may want to now try to take advantage of these low interest rates because although mortgage rates are not where they were a little while ago they're still historically low and so if we start to see these people start to buy homes this is a whole new wave of people that are going to want to go out and buy homes and so we could see if the economy recovers a new wave of buyers entered the market which would continue to push housing prices up at least in the short term so in the short term the next 12 months maybe 18 months we could continue seeing the housing market boom at record levels assuming interest rates stay low assuming that we have a low supply of homeless development for sale and assuming that the economy continues to grow if these three things happen you can see the economy boom especially in the short term now over the long term we have a lot of fundamental issues like i talked about we have a lot of cheap debt we have a very high national debt we have inflation that is growing we have a higher cost of living and if people are not able to afford the livelihood if they're not able to afford a new home if they're not able to afford the housing payments now we could continue to see major issues in the future which could cause a correction maybe in the crash now when is that going to happen i have no idea but in the short term our housing market looks like it's set up to boom at least based on the information that we have right now if you enjoyed this video here's a video on how to buy a home that i think you love and while you're at it download our free money management pdf and as always keep hustling the way real estate investing works is like this let's say you find this house right here on sale for 100 000 and you go through the property and you think it's a good property in a good area so then you come in so i'm gonna draw you right here and i'm

Channel: Minority Mindset

Views: 415,414

Keywords: minoritymindset, minority mindset, minority123, jaspreet singh, rethink rich, financial education, financial literacy, housing market, housing market 2021 forecast, housing crisis, housing crash 2021, housing bubble, real estate, buy a home, how to buy a home, buying a home, real estate investing, investing, investing 101, build wealth, become wealthy, wealth, how to buy your first home, home buying, mortgage, get a mortgage, refinance, mortgage refinance, mortgage forbearance

Id: itmtWvqm_QE

Length: 26min 29sec (1589 seconds)

Published: Tue Apr 13 2021

Reddit Comments

[u/ArcticLeopard]

I am a simple man, I see Jaspreet, I upvote

[u/expressionexp]

Smash the thumbs up button BALOW!!

[u/DiveCat]

Really good video, thanks for linking OP!

[u/specialistdeluxe]

Whoa... extending forbearance to 2022 will only puff more air into this 'bubble' and i'm not just talking housing either. It's almost like the govt knows shit's about to hit the fan so they're trying to buy time to figure something out... but buying more time only stalls the inevitable. On top of that, the populace will take on more and more debt over time because 'i don't have to pay it now, i'll invest in the stock market'... but if one goes, they both go... KABOOM.

Me thinks shutting down a vast portion of the economy for the better part of a year, moratoriums, mortgage forbearance, stimulus, etc all while shouting from the rooftops 'Things are great! The stock market is at all time highs! Rates are at all time lows! Economy will boom! Buy a house!' is a pretty big sign things are not ok. If things were just peachy in Mr. Rogers neighborhood then Mr. Rogers wouldn't need a stimulus, forbearance and 40yr mortgages...

I'm no economist or anything and I don't own a home so maybe i'm completely wrong, but creating 40 year mortgages, extending forbearance, stimulus, stock market highs, etc during a global pandemic are all GIANT FLASHING FUCKING SIGNS that a vast swath of Americans can't afford fuck all right now, and that should scare the shit out of everyone...

The only explanation i can logically conclude here is ultra wealthy offsetting the middle/lower class, which we know is happening but to what degree? Man we're in for a crazy couple of years.

EDIT: AND FURTHERMORE (lol) at what point does the govt stop bailing literally anything and everything out? When will it end? The more this goes on, the worse it gets in the long run. I'd love to hear someone smarter than myself explain to me how this doesn't end in almost complete disaster. Also, thanks for reading my scatterbrain'd thoughts :)