Why the US Housing Bubble will Crash: Inventory Deluge (Pt. 1)

the housing shortage that the us is experiencing right now the appreciation it's experiencing is a complete mirage it's a complete magic trick basically caused by some temporary dislocation in the market caused by covid that is not going to continue into the future [Music] how's it going everyone this is nick i'm super excited to be back here with you guys and let me just tell you this is an episode that you are not going to want to miss i know a lot of you out there your prospective home buyers uh your prospective real estate investors you're looking for a property right now in 2021 so you can get into real estate investment you can take your cash that's sitting on the sideline and buy real estate so a lot of you really excited about that prospect but you're finding that in 2021 it's super difficult to do that prices are going up out of control 12 year-over-year the highest in 20 years there's absolutely no inventory inventory is the lowest it's been in 20 years so if you're a real estate investor or home buyer it frankly it sucks right now there's not a lot of options you're competing with multiple offers you're having a bit over asked it's really not a good environment so i feel like i need to make this video for you guys because when i look at the data in terms of the u.s housing market i see one thing very clearly and that's that the housing market in the united states across the country is in a massive housing bubble that is set to pop by the end of 2021 or early 2022 and that is just quite simply what the data is saying specifically in relation to inventory and listings there is going to be a deluge of new homes coming on the market over the next 12 to 18 months that people quite simply aren't prepared for and when that deluge of new listings come it's going to be a much better situation to buy real estate if you're a home buyer or an investor than it is right now and so let me just say this is the first in a three-part series that i'm putting together for you guys on basically what the data is saying about the u.s housing market on this episode we're going to explore inventory on the next episode we're exploring home buying demand and the third one we're going to explore how prop tech is inflating the housing bubble so make sure to subscribe so you're not going to miss any of these future videos and without further ado let's get into it so let's just start by getting a lay of the land what is going on in the u.s housing market over the last 12 months well these two lines the blue line and the green line on the graph they really tell the entire story the green line is the active listing count this is the amount of active home listings on the housing market across the us meanwhile the blue line is the median listing price for new homes in the us if we go back to 2017 we can see that there was roughly 1.3 million homes on the market at any given time in early 2017 1.2 1.3 maybe it goes up to 1.4 in certain months and the median listing price was around 270 280 000. but then basically in 2020 and actually even starting in late 2019 there was a big divergence between these two lines basically the green line listings active listing count has plummeted over the last year going all the way down to now half a million there's only 500 000 homes on the active market in the housing market in the u.s only 500 000 homes are available for purchase right now and of course because of that lack of supply prices have spiked they've gone all the way up to a meeting median list price of 370 000 in march 2021 so it's really the the divergence between the blue and the green line the green line is plummeting inventory is going down and that's causing the price and listing price of homes to go way up because when you only have 500 000 homes on the market at any given time you can bet that there's definitely more buyers in that at any given time and that's just gonna push prices up so that's why you're seeing all the craziness uh in the current u.s housing market now the one mistake that people make and i see it happen all the time a lot of realtors a lot of investors and homeowners make this mistake and they look at that 500 000 in active inventory and they say whoa nick what are you talking about that means there's no housing supply like that means that the market is just going to continue to appreciate and it's actually the exact opposite when active inventory drops as low as it is now you know that very soon in the future it's going to shoot back up basically the reason that active inventory is so low and that there's no listings and that prices are going up is because not really the demand for real estate's increased that much but the supply of new listings has gone down over the last year there's a phenomenon where fewer and fewer people who currently own homes are listing their home for sale so if you have less and less people listing their home for sale well that's going to of course lower active inventory so it's really this component of people who previously would have listed now not listing that's driving the housing market and you can get a sense of what i'm talking about when you look at this graph the great listing shortage so if you look at 2017 2018 2019 you can see that like clockwork there were 5.3 million new homes listed for sale across the united states this is data that comes from realtor.com 5.3 million new homes listed each year 2017-2018-2019 i put a lot of time into these videos i love sharing this content with you guys i love talking about real estate uh if you could please just like the video if you like the video that helps more people see it helps me get more exposure please just like the video and maybe comment on it too i want to hear your thoughts do you agree with me do you disagree what are your thoughts on the real estate market please make sure to comment down below and of course subscribe if you haven't done that yet already all right let's get back to the video and let's just talk for a second why do new homes get listed why is it such a consistent figure it's because there's always people who want to change their situation people want to grow into a bigger home they want to upsize some other people want to downsize some people want to move closer to family other people get a new job in a new city there's a whole variety of kind of cyclical transient reasons why people would list their home for sale and this is a good thing because it kind of restores equilibrium and balance in the market there's always people moving listing their home for sale but then what do you see in 2020 we had a massive decline in listings by about hundred thousand so uh listings went from five point two seven million in 2019 to 4.45 million in 2020. so a decline of 800 000 listings in 2020. so again 800 000 people who would have normally listed their home didn't list their home in 2020 and that's really the principal cause of the existing housing shortage that we're experiencing right now think back to that 500 000 active inventory figure it's really driven by this decline of 800 000 in 2020 of people listing their home and now i think the next logical question is what is driving this decline in listings and there's really two principal causes so what we're looking at on this graph is the year-over-year decline in listings over the last 15 months and uh you could see right off the bat april 2020 there was 227 000 fewer listings than in april 2019. it doesn't take a rocket scientist to figure out that kovid had a big impact on that may 2020 minus 160 000 so you know covet hysteria is at its peak and people are scared you know i don't want to list my home for sale i don't want to move i don't have to try to find a new house i'm not going to list and then what's really actually concerning is that january 2021 february 2021 march 2021 that decline in listings is still occurring year over year listings are still going down even as we exit the covet situation and so right now if you tack on the 2020 declining listings to the 2021 we're down about 1.1 million listings over the last 15 months 1.1 million people who would have listed their home have not listed their home and again this is what is driving the huge shortage of housing on the market there is a gap of 1.1 million people over the last 15 months who have not listed but normally would have now i think we need to ask the question this is the elephant in the room what are these people thinking what are they doing right are they just not going to list their home forever or did they merely delay listing their home because of the covet situation in the really frothy market to begin 2021 and i think any reasonable person would say it's more the latter right you know over the last year the fundamental dynamics for why people move hasn't really changed right uh you know people still want to move uh people still want to upsize they still want to downsize they still want to maybe get into a nicer neighborhood or move closer to family like all those pressures still exist so i think it's very likely that these 1.1 million people have simply delayed their decision to sell and now it's getting even more drawn out in early 2021 because the markets of frothy more and more people are getting scared and delaying their decision to list but you really have to ask yourself how long is that going to go on for as prices get higher and higher and higher and higher the incentive for these people to sell gets greater and greater and greater and greater and here's my prediction basically i think at some point by the end of 2021 the juice in the real estate market is going to start to subside a little bit we're going to start to see those your year-over-year price increases go down and maybe stabilize and it's at that point where this backlog of 1.1 million people who haven't listed will start to decide to list and it's going to happen very fast right because these are people who wanted to list a year ago maybe but still haven't so there's all this pent up demand to push new homes on the market for sale and this is something that amazingly no one is talking about like it's crazy how many economists i see real estate economists they just blindly look at the active inventory number and they say oh my god we need so many new homes those new homes are here they're they're already here and they're gonna come on the market pretty soon when prices get high enough and maybe the future momentum slows down enough that people finally say all right i've waited 12 to 15 months to list my home i want to now upsize i want to downsize i want to move closer to friends i want to move for my job i was putting that off now i'm going to do it and i'm going to list and those 1.1 million listings are going to come fast and furious however there's more to it than that so we got the 1.1 million shortfall right so active inventory is now 500 000. if we were to add 1.1 million to that we get active inventory of 1.6 million oh crap now the market's starting to get saturated but there's even more coming 5.3 million that's the baseline for listings each year we were down to 4.4 in 2020. so in addition to the 1.1 million backlog we're also gonna have an increase of eight to nine hundred thousand in listings just to get back to what the normal listing baseline is so we have the 1.1 million backlog and then we have another 800 to 900 000 of you know getting back to baseline so that if you add those two together that's now 2 million listings that's 2 million new home listings this is this is not newly built properties this is people who you know own their homes but want to move for some reason uh two million is what the market is going to see over the next 12 to 18 months you can start to see now how the real estate dynamics are going to shift when that happens all of a sudden we add 2 million new listings to the market the supply and demand dynamics change considerably we're going to go from a situation where there's more buyers and sellers to where there's more sellers than buyers and all the euphoria in the housing market of the last nine months all the people getting so jazzed up all their energy oh my god housing is back housing is great anytime you have that level of euphoria do you know what it turns into when the inflection point hits it turns into hysteria euphoria always turns into hysteria if you study market bubbles throughout history going back to the south sea bubble the british bicycle bubble the great depression the dot-com bubble there's always the same type of behavior where people get euphoric but then when the inflection point hits they become hysterical and that then perpetuates a crash and that's what's going to happen in the u.s housing market simply based on the deferred plans from people to sell their home into maybe late 2021 early 2022. if you guys love this content but are disappointed that i only post two videos per week then you're definitely going to want to follow me on instagram it's at reventure underscore consulting on instagram at reventure underscore consulting i post every day on instagram i post a new graph a new map a new chart based on real estate data economics and i also post stories of me explaining what this content means every single day so if you want more of this content if you want to learn more about real estate please make sure to follow me on instagram at reventure underscore consulting however there's an additional factor that we need to talk about here so we've been talking so far just about existing homeowners putting their homes on the market but there's another thing going on that's also going to increase new home supply in the next 12 to 18 months and that's the crazy levels of new permitting and construction that are occurring across the us basically home builders are now permitting and building homes basically at the level they were prior to the housing crash in 2006-2007 we are now getting back to those levels of new building and new permitting and i think that's welcome news for anyone that's looking to buy a home or investment property so you can see what i'm talking about in this graph where we're tracking the amount of permits pulled by month by home builders and apartment developers across the us and just a little history lesson you can see here early to mid 2000's this number got really high right 2005 2006 it peaked and then it just crashed by you know crashed by like 70 80 percent uh into the housing crash in 09 2010 2011 and then it kind of rebounded through the mid 2010s but it never really got back to those same levels you could see you know we were a hundred thousand per month 110 000 per month less than those 150 160 levels that you're seeing here but then let's pay special attention to the last year and a half starting in mid to late 2019 home building started spiking back up after a brief decline in april b's of covid it's now up uh new permitting up to about 140 to 150 000 permits pulled per month across the u.s that's getting pretty close to the levels of 2003 2004 2005. so what does that mean in terms of new inventory well if we were around a hundred to a hundred ten thousand a month in 2018 2017 now we're up to 130 140 150 that's going to be probably an additional 500 000 new homes hitting the market over the next year compared to the prior year so we're going to be delivering an extra 500 000 new homes to the market right that's a lot especially when you consider again active inventory right now is 500 000 so just in new homes alone we are going to double active inventory just from the new homes getting permitted which are going to get then built over the next 12 to 15 months all right so let's just recap what we got so far we have the 1.1 million resale units which are simply the backlog of people that haven't listed over the last 15 months who will list then we have about the 900 000 resale units we need just to get back to the pre-coveted baseline then we have another 500 000 extra new units that are coming from builders building new homes that is 2.5 million housing units that are very quickly going to hit the market over the next year to year and a half 2.5 million new housing units above what has occurred over the last year so now you guys are seeing how the current home price appreciation situation the current lack of inventory and supply it's a complete mirage it's a magic trick it basically is a magic trick that was caused by covid right people got scared to list their homes because of covet that lowered inventory and that has tricked people into somehow thinking that inventory is permanently lower in fact it's the exact opposite there's going to be a glut and a deluge of home inventory that hits the market over the next year and no one is prepared for it and me creating this video and recommending this to you guys is me potentially hurting my business because i make money by recommending to people where to buy property so i'm recommending to you guys to wait to buy property so my i'm going against my financial incentive and that's because when i look at this data like it's the only logical conclusion and no one's talking about it and it needs to be talked about so i think a lot of people are walking into making mistakes in terms of their real estate investment decisions being led astray by really unscrupulous realtors brokers homeowners economists a lot of people are really misrepresenting the realities of what the housing market is going to look like over the next year so like i said this was part one this was covering how inventory is going to increase over the next 12 to 18 months and that's going to change the dynamics in the housing market part two is going to talk about the other side of the equation home buying demand and why we've already reached a peak in home buying demand and home buying demand is going to decline over the next 12 to 18 months so you're not going to want to miss that video make sure to subscribe so you don't please also make sure to like this video i spend a lot of time putting this content together for you guys i really enjoy it it just makes it easier for me to do that if you guys can interact with the video so please like it please leave a comment let me know your thoughts do you agree with me do you disagree i want to hear what you think all right until the next video this is nick from revenge consulting signing off you

Channel: Reventure Consulting

Views: 63,209

Keywords: Real Estate Crash, Housing Market 2021, Housing Crash 2021, Housing Crash 2022, Housing Bubble 2021, The US Housing Bubble, US Housing Crash in 2021, Are We in a Housing Bubble?, Is there a Housing Bubble?, Housing Bubble 2.0, Housing Bubble Explain, Why we are in a Housing Bubble, Housing Bubble Data, Housing Crash 2008, Great Financial Crisis, US Housing Crisis, US Housing Market Forecast, US Housing Market 2021 Forecast, America Housing Bubble, Housing Bubble in America

Id: VZfFM3Hcnz4

Length: 19min 29sec (1169 seconds)

Published: Sun Apr 18 2021

Reddit Comments

[u/BlueskyPrime]

Lots of misinformation in that video. The guy in the video uses too much oversimplification of housing market trends based on just a few graphs.

He doesn’t address any of the counter arguments. I think people need to disentangle the fantasy of a systemwide “crash” in the housing market from a region based slowdown of prices. The latter is more likely than the former. These crash videos might as well be titled “Rural housing market will crash and hot markets will stay hot”.

Housing starts are up, but prices will continue to remain high for new homes. Most builders pre-sell before construction is complete, which means most builders are selling at currently inflated prices.

There’s still a shortage of home listings, and demand is actually increasing from institutional investors and commercial capital that is entering the residential market at a higher rate, replacing individual people who are exiting the market due to high prices. This is leaving demand unchanged. New mortgage applications might be down, but large investors don’t need traditional mortgages.

Rents are skyrocketing in cities and other desirable markets. That trend is not reversing. Which means housing prices will remain sticky at their current values as rent equivalent goes up. Things will inevitably level off, and year-over-year increases in home prices will go back down to 2-3%, but that’s not a crash…

[u/ichbinladen]

youtube commentators are as credible as street corner preachers

[u/Patmcgroin303]

Curious to see what others think of this channel. Just started watching his content and not sure what to think. I’ve been watching Randy Patrick more than this channel, he has some really good info on forbearance/foreclosure activity.