Mortgage Rates EXPLODE. 50% Price Declines Coming?

Home Prices are Crashing across America. And Jerome Powell just made it worse. But how much will they decline in your city? This video, and a metric called P/E Ratio, answers the question.

Jerome Powell just announced that the Housing Market needs to go through a Correction. Yet another sign the 2022 Housing Crash is about to get even worse.

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Powell is aggressively increasing interest rates at the Fed and the result is that Mortgage Rates have now surged all the way to 6.7%. That's the highest level in 15 Years and a sign that Americans simply can't afford to buy homes. In fact - they can't even quality for Mortgages.

I believe the Housing Markets that will Crash most from these Powell Rate Hikes are ones like:

Austin, TX
Dallas, TX
Miami, FL
Tampa, FL
Atlanta, GA
San Diego, CA

Home Prices in markets like Austin, Miami, and Atlanta have surged way above what locals can afford. And thus some combination of Home Price Declines and Wage Growth is needed to return affordability and homebuyers back into the market.

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#HousingCrash #powell

[angelrogers]

If house prices drop, I’d be willing to pay a higher interest rate. I can always refi later. But I’m not about to overpay on a house by $100k or more. Then I’d be upside down for years!!

[joshpower]

Around the corner from me here in FL:
house sold for 365k in 2019
Sold for 575k in 2020
Sold for 675k in august of this year (2022)
Three weeks later, its back on the market for 875k
I'm so sick of that

[goingblind]

Hey there is nothing wrong with going to a used car lot and buying the cheapest good used car. And it's better to be comfortable than stretched financially.

[NorthAmerican-zoob]

I need to show my boss this video and ask for a 20% raise

[dougsmith]

Glad you said it! Wealthy people are completely blind to the issues and decisions of the middle and upper middle class

[rwdchannel]

Home prices doubled from 2014-2020. To get back to fair value home prices need to drop 65%. Baby Boomers took all the cheap land in the 1970's where I live in Ventura, California. They bought the cheap land on their high school diploma level jobs such as VONS clerk while their wives worked part time at minimum wage jobs such as Wendy's. That's what my uncle was doing. Then he adopted 2 kids, had 1 kid naturally, paid $10, 000 cash for his daughter's wedding, paid cash for cars, gave his kids all the latest Nintendo video games, took summer vacations and retired by age 62. Today Gen X and Millennials are expected to have college degrees in STEM, dual income of $125, 000+ to have the same lifestyle as the high school grad with a VONS job in the 1970's.

[jdgarcia]

All I can say is that me and my young family of 6 are struggling... hard.

[drsnooz]

The problem with bottom fishing the housing market is all the outlier risks. In 2008, for instance, housing became affordable only after the banks had stopped lending, and everyone had lost their jobs/businesses. It was a great time to buy. Too bad no one could. Worst of all, the banks were busy stealing all the existing housing stock through their fake and criminal foreclosures (that went entirely unpunished). Then they held all that inventory off-market while their hedge funds scooped it up on the cheap, which has created the current dearth of housing inventory and the stupid-high prices everyone is struggling to afford. If you think they're going to share anything more with you this time when the elite class is completely psychotic...wow. You're gonna learn a painful lesson. When you've lost enough money playing the bankers' game, you realize that there's no way to outsmart a criminal racket. At the end of the day, they'll simply knock you on the head and take your stuff, no matter how good your metrics are.

[straightdrive]

Time to buy is the time when everyone has thrown in the towel and you will feel no urge to invest in real estate. that's when you should buy.

[jessicahayes]

When I was a kid I remember when interest rates were at 18, 22, 27 percent.

But houses back then also cost about $50, 000.

If we continue down this road with interest rate, housing will go down extensively. It would be nice to see houses in key cities under $100, 000.

[mcginnnavraj]

I've said for years that basing inflation numbers on durable goods was idiotic. My kids can't eat a toaster, go see how much milk has gone up. Luckily corporate America bases their increases on the CPI number, so the CEOs are doing okay.. Comes down to the question, where else should I put money besides the financial market

[thealternativecontrarian]

The data regarding median household income was excellent. Hardly any markets are "affordable."

I think this is because when is the last time you saw huge swaths of land being developed for entry level starter homes? It's probably been 20-30 years since I last saw this. Every new home seems to be luxury and overpriced which forces two incomes to afford them.

[Missionmtman]

You’re the best real estate analyst on YouTube bar none. You minimize any internal bias, use real factual historical data, have a clear game plan for the way ahead and do an amazing job sharing your analysis. Thank you for everything you do.

[jordanbakerbk]

Nick, I think we need to compare the residual income to home prices because if wages go up 50% but goods jump 2x, that will decrease p/e ratio and make homes more affordable but that will not be correct as in reality the residual income will decline and people will have less money to spend on buying a home.

[jamiestein]

“…so for the average American who wants to buy a home this isn’t about finding the coolest city with the best air quality and the warmest weather and the nicest smoothie shops…” Hahaha, thank you for saying that, Nick, that was the best!

[Getitright]

Been waiting for a new video from you. You do the best on housing, real estate!

[nicolegayton]

Thank you for re-educating your viewers of your last video. Your videos are very informative!

[llew-AZ]

Here is to your point on new home sales. Mustang Oklahoma. New construction small lot, 1200 sq ft 3 / 2 / 2 car garage, brick exterior, comp roof. Last week 208K just looked today 199K. Same house

[sokolmihajlovic]

Your approach has some merits.

But 2 things I would like to add,
1. Taxes must be taken into account plus health care costs, and most important energy and food costs. On top of that, rising interest rates affects the cost of loans, so people will be more encouraged to pay back debt, especially expensive credit card debt, than to invest.
So the free available money on the monthly basis, after paying taxes and duties and health care and paying for energy and food and after paying back debt, that is left for spending on a house.
In a economic downturn with falling wages this number on average can turn actually negativ. If governments not heavy-handed intervene, this can lead to an economic meltdown.

2. Things are not static, but it is a dynamic system. If prices start falling people start being more cautious which leads to even more falling prices (negative perceived wealth effect). At some point banks kick in and start foreclosing in a grand scale which leads to even more rapidly falling prices.

Long story short, this huge (worldwide) economic downturn can lead to complete collapse of the housing market, or to use your preferred metric, that house prices fall to a p/e- ration below 1.

[nealhamilton]

What's you opinion for us that are trying to buy a house with a little land ..say 20 acres in east Oklahoma and Arkansas? Not even two years ago you could get a 3bdr home with 20/30 acres for about $225-300 but now they all want $500-600. I'm starting to see prices go down a little but they are really holding on still. I'm curious when rural areas with a little land will start to come down compared to the cities?