The TRUTH About The 2021 Housing Market Crash

talks of another housing crash are all over the news you have millions of american homeowners in forbearance you have home prices that keep going up which is ramping up talks of a real estate bubble and now people are worried about the mortgage bubble popping but things are not always as they seem so if you want to know the truth about what's going on in the housing market and this potential housing market crash make sure you watch this video until the [Music] end what's up everybody i am justine singh from the minoritymindset.com and welcome to the minority mindset if you are a real estate investor a homeowner or you want to buy a home you've probably heard of this looming real estate crash i am very involved in real estate i am a real estate investor i have a real estate salesperson license and we all very painfully remember what happened during the 2008 real estate crash everybody's asking if 2021 is gonna be a repeat of our 2008 housing crash and if you really want to understand what's going on in the housing market today we need to go back in time to understand what really happened leading up to the 2008 crash there were a lot of causes of the 2008 housing market crash but in the years leading up to 2008 if you wanted to get a mortgage all you really had to do was go into the bank and tell them that you wanted to get a loan in the early 2000s ninja loans became very popular and ninja stands for no income no job and no asset loans that means if you didn't have an income and you didn't have a job and you didn't have any assets you could still qualify for a huge mortgage because banks thought real estate can never go down in value you all remember how that turned out so in the years leading up to 2008 lending became very relaxed and anybody who wanted a mortgage could go out and get one and then people were leveraged up to their eyeballs because nobody thought real estate prices could go down and this pushed real estate prices up because everybody was buying a home even if they couldn't afford one coupled that was some very creative marketing strategies by banks to help you get an even bigger mortgage loan officers realized that they could get a bigger commission check if they sold subprime mortgages which are mortgages to people who can't afford them and what's the best way to get somebody who can't afford a mortgage to get one give them a low teaser rate so what banks did is they started giving people these variable interest rate mortgages which means that your monthly payments are going to fluctuate based on what interest rates are and to get you signed up for one of these variable interest rate mortgages they would give you this very low teaser rate which means in the beginning your monthly payment would be very low you can have these monthly payments that are a fraction of what you would be paying otherwise at this point many people would then ask the banker what happens if interest rates go up and i can't afford my monthly payments anymore and the banker would always say something like well real estate prices always go up so if your monthly payment goes up you can just refinance your mortgage with a new lower interest rate mortgage that way you can lock in a low monthly payment everything was looking good banks are making huge profits so stocks were soaring loan officers were making great salaries the american dream was alive because everybody was buying a home you could get into the big dream home that you wanted and have low monthly payments and if interest rates did go up you could just refinance and everything would be okay these lending practices went on for years and then in 2005 and 2006 things started to get a little bit messed up in 2005 and 2006 interest rates started going up which meant your monthly payment started going up which meant people started getting behind on their mortgages let me show you what i mean so let's say you bought this home in 2004 and the fair market value the amount of money you paid for this home in 2004 was three hundred thousand dollars at the time you didn't need a big down payment so you might have put down ten thousand dollars if you were lucky so let's say after getting this loan you owed two hundred and ninety thousand dollars because you were one of the people who decided to put down some money in your home and you put down ten thousand dollars so you bought this home for three hundred thousand dollars you owe two hundred and ninety thousand dollars because you put down ten thousand and because you took one of those variable interest rate mortgages you got a low teaser rate to start so you were only paying in the beginning fourteen hundred dollars a month now a few years later in 2017 interest rates go up and so you got a letter in the mail from your bank saying that your payments are now going to go up from fourteen hundred dollars to nineteen hundred dollars just because interest rates went up at this point if you were like the majority of americans and you didn't have an extra 500 a month to put towards your mortgage you said let me do what the loan officer told me i could do if my payments went up and i will refinance because now for the last few years you've been putting money towards your loan and you only owe 276 000 on your home now so you go to the bank you ask them to refinance that way you can get a lower mortgage payment and that's when the bank tells you that the fair market value the worth of your home now isn't three hundred thousand dollars it's two hundred and seventy thousand dollars you owe more than the home was worth so you're under water on your home and you can no longer refinance and now you're stuck with this monthly payment that's more than you can afford you can't sell your home because you're not going to get enough money to pay off your mortgage you thought that this was an investment that was going to make you rich but you're not going to be able to sell it to make enough money to even pay off your mortgage you can't refinance because you don't have enough equity in the home and you don't have enough money coming in from your job to make your monthly payments so your options now are either to stop paying or walk away from your home these circumstances created a massive wave of foreclosures between 2007 and 2012 which caused housing prices to crash that's the past now let's get into the housing market today because in 2020 home delinquencies are already on the rise so everybody's asking is this going to be a repeat of the 2008 housing market crash i'm gonna show you the answer to that question but before i do i need you to do me a quick favor and smash that thumbs up button below because the way the youtube algorithm works if you do not smash that thumbs up button then youtube is much less likely to show you and other people our financial news and education videos let me draw you a little housing market timeline from 2001 to where we are now and what's coming in the future because this is going to really help put things in perspective so in 2001 this was when the dot com bubble had crashed and interest rates were slashed at this point to help the economy recover interest rates were cut by the federal reserve bank because everybody knows that if you want to stimulate the economy and encourage people to spend and buy homes you got to cut interest rates because that makes borrowing money cheaper so interest rates were cut in 2001 and then in 2002 2003 2004 and 2005. this was when lending requirements relaxed because to help out with these low interest rates banks made it very easy for you to go out and get a mortgage so this is when the ninja loans became very popular this is when subprime mortgages became very popular so during this time lending requirements were very relaxed and during these later years these were when interest rates started going up a little bit in 2006 2007 and 2008 this was when the bubble started to crash this is when people started to default on their mortgages and this is when banks started to get very nervous actually in 2007 right here this is when real estate prices started to come down a little bit and everybody was saying it's just a little dip it's just a little correction real estate will bounce right back up and there's a couple numbers that i want you to remember in 2008 we had 11.1 million americans that were jobless and we had 3.1 million americans that received a foreclosure notice so 2008 was when everything just completely collapsed and everybody was worried about the entire financial system collapsing and failing luckily the stimulus measures worked for the time being and these interest rate cuts worked and after 2008 the stock market started to recover and by 2012 the stock market had fully recovered the economy was turning around and in 2012 pay attention to this this is when real estate prices bottomed so the whole crash happened in 2008 right that was when the entire thing imploded but real estate prices home prices didn't bottom out until 2012. that was when real estate prices started to finally go up after 2012. so take a good look at this 2001 was the dot-com bubble crash that was when interest rates were cut and then between 2001 to 2005 2006 that's when these new loan programs were created to encourage people who couldn't afford a home to buy a home using risky loan tactics and then when interest rates started to go up in 2005 that's when people could no longer afford their monthly mortgage payments did 2006 2007 2008 that's when the foreclosure started to come in and then in 2008 was when we bottomed 11.1 million americans didn't have a job 3.1 million americans were filed a foreclosure notice in 2008 that was the bottom but real estate prices kept going down from 2008 until 2012 and then in 2012 real estate prices had fully bottomed out in 2012 you might remember that it was very difficult to get a mortgage to buy a home because banks had made it very difficult to get a mortgage because the government had put a ton of restrictions on banks because they didn't want a repeat of what happened here so in 2012 it was very hard to buy a home but then in 2012 2013 that's when these restrictions started to lax just a little bit so 2012 2013 2014 2015 2016 17 18 19 between this time let's say 2018 this is when mortgage restrictions started to lax a little bit it wasn't like 2005 but they did start to lessen quite a bit compared to what they were 2010 11 and 12. so during these years home ownership ownership started going up again but then in 2019 we were in the strongest economy of all time during the time and the interesting that happened in 2019 i'm going to show this in red was interest rates were cut instead of going up this is a very interesting thing to happen because normally interest rates are cut when you are in a recession we saw that happen in 2008 we saw that happen in 2001 but then in 2019 interest rates were cut again in an already strong economy to encourage people to go out and buy a home and to encourage people to go out and spend money then in 2020 came this pandemic and that's when things got really interesting because the first thing that happened you probably remember is the fed cut interest rates again now interest rates in 2020 became the lowest that they have ever been they're hovering right around zero percent and this encouraged people to buy a home so what happened was home ownership boomed we are at multi-year home ownership highs we're hovering right around 2008 levels but interestingly in 2020 as interest rates were cut and home ownership boomed so did mortgage delinquencies mortgage delinquencies are when people are behind on their mortgages and in 2020 we have seen a multi-year high on mortgage delinquencies that was when the government got involved again because the government didn't want a repeat of what happened in 2008 so in 2020 the government came out and they created a mortgage forbearance program which says that if you are facing a hardship or if you lost your job or for any reason actually if you want to put your mortgage on hold you can do that and so in 2020 we have this brand new mortgage forbearance program which allows many americans to put their mortgages on hold for a year if they're facing some sort of financial hardship now let me put some numbers on this that way we can understand where we are in 2020. as of september 2020 there are 12.6 million americans that are jobless and there are 3.6 million americans who are for parents on their mortgages so there are 3.6 million americans who are either not able to pay their mortgages and are in fairbanks or they just don't want to pay their mortgages and they're in forbearance and there are 12.6 million americans that do not have a job compare that to 2008 numbers when 11.1 million americans didn't have a job and 3.1 million americans received a foreclosure notice now i know this foreclosure notice is different than the forbearance but we can't file foreclosures in 2020 because the government has banned that so this is the only number we have right now this is where things get really interesting because we have all these americans that are out of a job and we have all these americans that are behind on their mortgages or not paying their mortgages rather and yet we cannot foreclose on anybody until 2021 in 2008 if you didn't have the money to pay a mortgage your foreclosure process started right away now if you don't have the money to pay a mortgage nothing happens until at least 2021 but that's not all if you remember in the chart i showed you in the beginning of this video i showed you that if you bought a home here and he tried to refinance on your mortgage here you weren't able to do that because many people were underwater on their homes because home prices started to drop well in 2020 home prices aren't dropping actually home prices are skyrocketing to brand new highs this is where things are different than 2008 because in 2020 we have a lot of people that are out of a job like we saw in 2008 but we have home prices that keep going up this is what happened in 2005. so in 2020 if you want to go out and buy a home you can go out and borrow money very cheap while home prices keep going up even though we have all these people who are not paying their mortgages and even though we have all these people that do not have a job so now if we want to understand what's going to happen in the housing market in 2021 in the future and we want to understand that foreclosures are going to take up if the housing market's going to crash you have to look at two different things you have to look at jobs because jobs are going to contribute to foreclosures and then you have to look at home values remember the price of an asset depends on supply and demand if you have a lot of people selling their homes so if you have a lot of homes going into foreclosure you're going to have a huge inventory a huge supply of homes but if you don't have a lot of buyers then home prices are going to come down that's what happened in 2008 and so if you want to understand 2021 you got to remember that in 2008 people were walking away from their homes because two things happened first their mortgage payments kept going up and it was to the point where they couldn't afford to make the monthly payments anymore and second people were under water on their homes because home prices started to come down so you had monthly payments going up and home prices going down so people were underwater and they couldn't afford the payments anymore so they started walking away and they were getting foreclosed on what's happening now in 2020 is we have all these homeowners that cannot afford to make the payments not because monthly payments have gone up but because they don't have a job however the thing that's different now than before is we have home values that keep going up so even if you're struggling to make a payment and you're not in forbearance you can sell your home because home values have gone up or you can refinance your home because interest rates have gone down and people have more equity in their homes just because home values have gone up for housing prices to crash in 2021 we have to look at two things remember supply and demand first we need a supply of homes to go up because in 2020 there's a very small inventory of homes so we could see the supply of homes go up if foreclosures start to take up because right now we can't foreclose on anybody so foreclosure start to go up in 2021 we could see a bigger inventory of homes and we need buyers to go away that could happen if home prices go up to the point where people don't have enough money to buy homes anymore so if that happens if home prices keep going up and people can't afford to buy a home and we have this higher inventory of homes available this could cause the housing market to crash but i'm getting ahead of myself right now because there's three different things that could happen in 2021 option one which is the best case scenario which is what the government wants is by 2021 we have this forbearance program which comes to an end however the economy recovers so people have to start picking their payments again on their mortgages but this jobless number has gone down drastically so people have money to make their home payments and if that happens we're not going to see a huge uptick in foreclosures because people have the money to make the payments and home prices can continue going up option two is that in 2021 this forbearance program ends and now we have all these people that have to start making payments on their homes however the economy has not fully recovered so we still have all these people out of a job and that cannot afford to make their monthly payments and so foreclosure start to go up however there's still a lot of buyers out there so home prices don't completely crash because people are still buying these foreclosures option three which i kind of hinted at earlier is this forbearance program ends in 2021 and the economy has not recovered so we still have all these people out of a job who cannot afford their monthly payments anymore and so we have foreclosures going up and hope prices have gone up so much into 2021 that buyers can't afford to buy homes anymore so we have this huge inventory of homes and we don't have any buyers because people can't afford to buy homes and now we're gonna see housing prices crash but we're still not done yet because even if option two or option three happened you have to remember we're talking about real estate we're not talking about the stock market in the stock market prices move every second in real estate it's much slower it can take months or even a year to conduct a whole real estate transaction remember the 2008 crash started in 2005 and we didn't actually bottom out until 2012. so i drew a new line here so in 2021 that's when people are gonna start making their mortgage payments again and if people start to get behind on their mortgages that's when the foreclosure process oh my god my handwriting's so bad starts that means in 2022 home prices are gonna have to come down in order to find buyers to buy these homes and if home prices continue to come down into 2022 that means people are going to start to be underwater on their homes in 2022 and maybe enter 2023 and now if people are underwater on their homes and they're making payments onto a home where they don't think they're ever going to get their equity back then you're going to see people walking away from their homes so if we start to see this real estate crash happen in 2020 2021 we're not going to really see the full effects of it until 2023 because of how slow this process actually works so if option 2 or option 3 happened like i talked about and home prices do crash in 2021 we're not going to really see the full effects of that crash until 2022 or 2023 until these foreclosures actually happen and until people start walking away from their homes again this is just a hypothetical things could completely change between 2020 and 2023 but what i want you to understand is everyone's talking about this 2021 real estate crash but the way real estate works it's not like your hundred thousand dollar home today is suddenly gonna be worth fifty thousand dollars tomorrow it's a much slower process i can't predict the future i don't know what's gonna happen i don't know if it's gonna be option one option two or option three i mean there's so many different scenarios that could play out between now and then which is why i'm paying attention to jobs i'm paying attention to these forbearance numbers i'll pay attention to home values and i'm paying attention to interest rates because these four things are going to determine what happens in 2021 2022 and 2023. now while i cannot predict the future in real estate one thing that i can help you do is stay up to date on what is happening in the finance and business world because we have created the free market briefs newsletter by minority mindset where our team first breaks down the top finance of business news and then we show you how this news affects your wallet that way you can be smart with your money our market briefs news that it is completely free and you can subscribe to our marketplace newsletter by clicking the link up here or by clicking the link in the description below by the way our financial news emails are separate from our financial education emails thank you for watching if you enjoyed this video share it with one friend that way we can help spread the word if you want to learn more about what you should be buying during this 2020 economic crisis to build wealth i already made a video on this and you can watch this video on youtube by clicking this button right over here thank you for watching and as always keep hustling

Channel: Minority Mindset

Views: 558,491

Rating: 4.9496536 out of 5

Keywords: minoritymindset, minority mindset, minority123, jaspreet singh, get money smart, housing market crash, housing market 2020, 2021 housing crash, 2021 housing market, 2021 housing market predictions, real estate market crash, 2021 real estate crash, real estate crash, real estate bubble, 2020 real estate crash, real estate bubble 2020, real estate bubble 2021, housing bubble, housing market bubble, real estate crash 2021

Id: ocr9PcxkN1g

Length: 20min 24sec (1224 seconds)

Published: Thu Oct 15 2020