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good evening how are you this well it's freaking 10 o'clock at night here in St Louis uh I you know that you can make all kinds of money on YouTube If you say that the housing Market's going to crash right people always like oh my God oh my God if we can instill fear we can get clicks and we can make good money I've kind of tried to not be that guy and um there's a couple reasons for it one like I want to be around for a while so when the market does change uh I don't want you know I don't feel bad about saying that the market will be good like it just seems to be obvious are the crash brows going to change when when things get better I don't know but I just I just think that's that's more of a way to do plus I feel like everyone's right at some point okay so like uh you could argue that the people that say the housing Market's been great I mean look at the numbers right look at the numbers look at the uh average uh the median sale price in the United States right now it's it's stupid high so there hasn't been a crash right now are there are there headwinds absolutely but I just I just haven't been that way and I try not to do click baity titles and stuff like that um maybe one slips through every once in a while but I I mean what it's it's not a big it's not a big part of the viewership let's put it that way so I lived through 2007 and um I don't I don't think it's 2007 I I don't think it's 2007 to 2009 I don't I don't think so uh but I do remember things that were very similar and here's a couple of things that were similar one I can remember people having extra houses okay so like your friend would have two or three houses and only lived in one and like the other two were houses is that they were going to get around to fixing up at some point in time but but never did and then they ended up eating it when the the market turned so so that's something that's that's that's stuck with me the other thing that stuck with me is I was I was in Detroit Michigan at the time and the auto manufacturers were going under and they had to be bailed out by the government uh during Bush um and then Obama but it was a like everybody stopped buying things up there like that's where I kind of came up with an idea of you know at least seeing behavioral economics like in real real time like people had been uh stretched creditwise their small business has been stretched and and you know because they're always trying to build more they're always trying to be bigger and bigger and growth and show growth and when they were overleveraged uh when things went South and the and the and the people stopped going to the stores or stopped buying the services it was amazing to see how many businesses collapsed like quickly now there are things in this economy that are concerning um obviously we haven't had the energy uh prices as far as gasoline ramp up yet I think they will uh we have record credit card debt I don't think that's great um the average price of a home is I think way too high and the increase has gone too quickly but um again I don't think that the 20072 2008 is the right barometer and so I saw this article on Yahoo it's a reprint from Fortune but here's the headline it says buckle up for more turbulence in the housing market Bank of America says it's a house recession the 1980s style now um I was born in 1977 okay so I was three I've heard stories about the uh the uh you know Jimmy Carter and then moving on to Reagan and um but I didn't live it okay but I wanted to go over this kind of in depth and uh just kind of see if we can can make the parallels I'm concerned that we're not in a situation like uh 1980s uh United States I'm concerned we're in a situation like Japan in the mid 90s like where there was just stagflation and nothing for years and years and years that's my big concern so here it goes it says housing market pessimists have sounded the alarm for years about a pending crash in the US residential real estate market now let's just be fair why would somebody say there's going to be a crash well the word crash in genders fear right and if we can get enough people you know to be afraid maybe they'll click our videos maybe they'll click our posts and uh we'll get engagement and we'll make money and it'll be great uh but when somebody defines a crash so is it down 20% it's not going to be down 20% in a day or a week or a month maybe over a couple of months the prices may go go down but uh anyway even before the Federal Reserve began hiking interest rates to fight inflation last year pushing mortgage rates to a 23-year high this month years of surging home prices left some experts warning that the housing market was a massive bubble ready to pop now look I was saying in January of like two years ago look we got to raise rates just a little bit inflation's coming in too hot we need to do something it isn't transitory okay now this is me a guy basically on the street I I don't have I mean I've taken economics classes but I don't have the um the a of uh of I what I say invincibility that the FED has we're not allowed to you know we're not allowed to question the fed and uh I I was I was like we don't have to raise the rates much but we just have to like cool this thing off and that was my hope it didn't happen however despite a widely bearish Outlook in the industry most real estate veterans have avoided arguing that home prices will drop like they did during the 2008 crash that kicked off the global financial crisis and so far that's been a wise decision now does that mean that I'm a you know a wise old person I don't know anyway it says still a Bank of America team led by us Economist Jess o Park warned this week that there's more turbulence coming for the housing market due to high mortgage rates they explained that they're getting an eering feeling of deja vu but it's not 2008 that's coming to mind it's the 1980s looking back at previous housing recessions we think the 1980s are a better analogy for today's market than the 2008 housing crft they wrote in Thursday now now look I don't know that this fellow was alive in in 1980 and I just I would I would offer that I mean like we didn't have cell phones and we we may have had personal computers but they were not as strong as a calculator uh information was much more limited and I and I do believe that the information uh is is vastly different the sources I mean the the amount of information one can get um Now versus then is absolutely unbelievable so I I get uncomfortable with the idea that we can take the numbers from then and the numbers from now and compare them equally because I think that it's it's how things are calculated and things have changed since the 80s says this is in 2008 while the housing crash of 2008 fueled by the collapse of subprime mortgages haunts the memories of many Americans the real estate market of that era was very different from what Bank of America's experts see today now now I don't I don't 100% agree with the subprime mortgages were the culprit I I there were other things that were going on um so I I I mean was it a contributor sure but you know it wasn't the only thing Parkin's team noted that there are no noticeable signs of excess Housing Development today like there were back then and households aren't nearly as burgeoned by The Mortgage Debt okay so there's no noive signs of excess Housing Development today like there were back then than 2008 and I would just say that it just depends right people say that we're we're lacking Supply in the marketplace I've argued that there are people right now that own hundreds of homes right quote quote unquote small mom and pop investors so we have many many homes that are owned by uh you know landlords institutions so I don't know that that's necessarily true if things were to go south and those people were to sell then there'd be much more Supply quickly and it says household Mortgage Debt represented roughly 65% of us consumers disposable income in the second quarter compared to 100% before the great financial crisis um and the ratio of America's mortgages debt to their real estate assets also called loan to value was just 27% in the second quarter compared to over 40% in 2008 and rly 50% in 2010 Bank of America data shows now look household Mortgage Debt represented roughly 65% of us consumers dispos ible income in the second quarter compared with 100% before the great financial crisis now look I don't remember it that

way I'm sorry it's not how I remember it new legislation was also enacted since the great financial crash to help prevent worst case scenarios in the housing market yeah we had to get our as real estate agents we had to get our fingers

printed one of the most obvious effects of these news laws is there are fewer risky adjust adjustable rate mortgages today adjustable rate mortgages can lead to higher default rates when interest rates rise but they now represent less than 5% of the total purchase and refinance loans compared with over 35% at the peak of the pre great financial crisis housing cycle now look there's two things I have a problem with on that one uh you're not going to get an adjustable rate mortgage when your mortgage is 3% so historically so many people have moved in the past two years three years they didn't need to get an adjustable rate mortgage because they were doing so well just on a regular 30-year fixed and second you know they say well the subprime mortgages are gone you don't have that problem now but to secure short-term rental properties people are are using just income alone as the basis for getting loans if you think that's not a problem when vacancy drops to 50% on those places then we just just simply disagree it says is it a repeat of the turbulences of the ' 80s according to Bank of America today's housing market looks a lot more like the early ' 80s than it does 2008 back then just like today home prices had boomed for years before fed officials were ultimately forced to hike interest rates aggressively in attempt to fight inflation well I wasn't around I wasn't around I know that there was high inflation okay but I don't know that the housing prices were you know exploding like they are now I just don't know the rise in Consumer Price Index peaked around 14% in 1980 before then fed share Paul voker haish policy sent mortgage rates to 18% in a year's time cooling inflation but sparking a recession this caused a serious downturn in the housing market in which home sales and building levs craters building levels cratered however National home prices actually remain

stable so I don't think they calculate the Consumer Price Index like they do now so I don't think we can use that as a good comparison and

um you know I don't see that they I'm not saying that National home prices um couldn't couldn't remain stable I'm just saying there's an awful lot of of stuff going against it at the start of the vulker tournament's FED share in August of 1979 the median us home sales price was $64,500 and after a near doubling of mortgage rates that figure Rose to $69,500 by the second quarter of 19 1 all right and and so here's here's where we have these kind of I would say issues like as a real estate agent right transactions are terrible historically bad okay applications for mortgages not great historically bad okay without transactions uh can't feed can't can't feed the family lot of and you may say well that's great I don't like real estate agents anyway and I and I get that but um I don't see

I don't see this the same way in the sense that housing prices have shot up so quickly and so fast and I know they're kind of sticky on the way down so I just I mean you know as a percentage share 64,500 to 69,4 to me is not the same as $200,000 house two years ago $450,000 house now I I just think it's a much different situation over the past 18 months the fed's current chair Jerome pal has been following a very similar game plan to vulker raising interest rates aggressively to quash inflation the average 30-year fixed mortgage rate the most common type of Mortgage in the US has soared from 3.8% in March of 2022 to over 7.5% today as a result this in turn has slowed mortgage P purchase applications and caused home sales deployment just as it did in the 80s but home prices echoing the dynamic of that era had led have yet to collapse well and then what how we going to Define collapse right is it the same as a crash I mean I I I'm not I'm not trying to do word play for you I'm just saying look you know are prices going down in the future probably probably says one of the key and this is where I had a little bit of of a a confused uh confusion with this article it says one of the key reasons for the resilience of the housing market in both these periods is demographics noticeably demographics were favorable by back then with Baby Boomers having entered the prime home buying age Park and his team wrote Thursday arguing Millennials are in a similar position today some sales activities should be supported by Millennials reaching the prime home buying age and single family building permits have steadily held up this can help the housing market retain some of its momentum without falling apart and so I would just refer to this this is on this is on Twitter this is ch um economica um the implication of exploding housing rental prices can be seen in the collapse of young adults willingness capability and desire to form families and have children in a single generation the tide has turned from Perpetual population growth to secular population Decline and degrowth so this is California since 2009 uh 0 to 20 year olds are down 924 th000 or 9% 20 to 40 year olds are up 56 2,000 up 5% so the idea is that people of childbearing age are not having children nearly at the rate that they were before so what I would say is if this is if this is true right that Millennials are right perfectly set up for buying homes well what's going to happen after when there aren't as many

people just by the demographics so you know I just don't I don't agree it says with rates likely staying higher for longer we are cautious of potential turbulence ahead Bank of America has previously forecasted 0% home price price growth and falling home sales for the full year in 2023 but it didn't offer a new prediction in slatest note look we're in the middle of October we have two months I just don't see their prediction working out it says eventually as inflation Fades leading the FED to cut interest rates housing affordability will improve at that stage we should see a more stable and healthy housing market Park and his team wrote until then hang tight it may be mmy right now

look I don't I don't see it that way okay you say well how do you see it well I see it like this at some point in time we're going to have to manage the debt okay we have student loan debt we have credit card debt right and the banks are holding Mortgage Debt okay they're holding 3% mortgages right and the current interest rate is like 7% or 8% that can't be good right and you say well why are the banks holding all that mortgage well they very very little that they can actually invest in the FED has got them so wrapped up up they can only really buy mortgage back Securities which is you know questionable so I see that as a problem I see um inflation not I mean when they say inflation is lowered they mean like month over month but it's still increasing so right so they'd say oh was only 3.7% last month and now this month it's 3.2% well that's 6.9% over two months it's not good it's not good and then you had Paul Krugman with his wonderful uh chart a few days back that excluded I think it was food energy and uh rents for him to argue that the inflation has been solved there's no issues whatsoever um and he's a very horrible disingenuous person um he works for the regime and he always will and that's where he makes his money so I don't I don't expect I don't I don't expect anything other than that um you know what could cause I mean house prices are going to come down at some point right are they going to collapse I don't know have no idea but the idea that this is like the 80s to me um not not accurate and here's something kind of fun is do we have to compare it with another time period couldn't it be on its own I mean we've got a situation where it looks like there's well the United States is financing two conflicts in the world right now or will be um it's just I just don't I mean I just don't see I mean the amount of money being paid just to pay down the debt right just to make payments on the debt and not paying it down uh they're not even there yet I mean it's we are in some financial problems now how will that how will that fall the main street I don't know I don't know but I don't think it's like the ' 80s I think it's its own problem and I think that uh we will see uh some things going forward that indicate that maybe you know prices will go down enough enough so with that I'm going to head on out thank you for watching thank you for listening I'll catch you on the next one