Warren Buffett: 'A Storm is Brewing' in the Real Estate Market

Billionaire investor Warren Buffett is warning about a major storm that is about to strike the US real estate market. This 1.4 TRILLION dollar debt fueled tsunami has already started to hit the real estate market as we speak. However, this is just the beginning of the quote “consequences” Buffett sees of this real estate bubble. The real impact is set to start in just a few months. Here’s what Buffett had to say.

Over the last 15 years, the US real estate market has been fueled by massive amounts of cheap debt. Take a look at this chart of the US federal funds effective rate, a proxy for interest rates in the economy. We can see here that interest rates spent the better part of the last 15 years at 0%. These low interest rates incentivized the use of massive amounts of debt and pushed real estate values to sky high levels. Let me explain.

Imagine someone is buying an office building in your hometown. For a nice round number, let’s say the cost of this building is 1 million dollars. The buyer of this building likely doesn’t have an extra 1 million dollars of cash sitting in his bank account to purchase this building outright. Likely what this buyer is going to do is go to a bank to get a loan to fund the majority of the purchase price. In this example, our buyer here is contributing 350,000 dollars of the purchase in the form of what is referred to as “equity”. Think of this as just a fancy word for downpayment like when someone is purchasing a house. Our buyer then goes to a small, local bank to get a loan for the remaining $650,000. How profitable this purchase is for the buyer is dependent on many things, but one of the most important is the interest rate on the loan.

*Disclaimer: Neither this video, not any content produced on this channel should ever be considered investing advice or official financial advice. All content is made for entertainment and educational purposes.

[aaronwright]

You left out the best part. What happens after the crash? When small banks struggle and the economy crashes, the trillion-dollar banks will be the ones buying everything at low low prices and consolidate even more wealth. This is exactly what happened in 2007-08. While everyone else got wiped out, the gazillionaires used their access to capital and zero interest rates to buy everything. This is exactly why the wealth gap has become so dramatic over the last decade or so.

[Williamsmthe]

The fact that there is already an excessive amount of demand awaiting its absorption, despite how everyone is frightened and calling the crash, is another reason why it is less likely to occur that way. 2008 saw no one, at least not the broad public, making this forecast, as I'll explain below. The ownership rate was noted to have peaked in 2004 in the other comment. Having previously peaked in the second quarter of 2020, we are currently at the median level. Between 2008 and 2012, it dropped by 3%, and by the second quarter of 2020, it had dropped from 68 to 65.

[tahirisaid]

I predict a housing crash due to people buying homes over asking price, lacking equity if prices decline further. Foreclosure becomes likely if they can't afford the house, and selling won't yield profits. With anticipated layoffs and rising living costs, many individuals may face this situation.

[ElliotFelix]

Transfer of wealth usually occur during market crash, so the more stocks drop, the more I buy, in the meanwhile I'm just focused on making better investments and earning more as recession fear increases, apparently there are strategies to 3x gains in this present market cos I read of someone that pulled a profit of $350k within 6months, and it would really help if you could make a video covering these strategies.

[ryanburchett]

Don't forget that politicians didn't outlaw corporate ownership of homes to prevent this problem.

[hankmarks]

The effects of the downturn are beginning to sink in. People are being impacted by the long-term decline in property prices and the housing market. I recently sold my house in the Sacramento area, and I want to invest my lump-sum profit in the stock market before prices start to rise again. Is now the right moment to buy or not?

[lawerencemiller]

In 2024, Don't set new year financial goals without consulting a financial adviser. Their expertise ensures a solid plan for success. Building wealth involves developing good habits like regularly putting money away in intervals for solid investments.

[questcore]

all they have to do is pass a federal law that prohibits companies and firms to buy residential estates, then release the estates that companies/firms already owns back to the banks gradually

[jrbland]

They need to BUILD houses for people on SOCIAL SECURITY. Low income and MIDDLE CLASS people.
Make having a house AFFORDABLE.
Right now it's Not for the average person.
RENT IS WAY TO HIGH FOR APARTMENTS.

[JosephReynolds]

A crash in the stock or real estate markets has less of an immediate impact on people's standard of living than inflation. That the market is so negative at the moment shouldn't be shocking. If we are to survive in this economy, we need assistance right away. The ETF and stock markets are still quite volatile, just like the property market. Now all that's left of my $370, 000 portfolio is ruins.

[Alexanda-Mc]

This is making me a bit wary about my property investments.💔

[ltkreg]

You can ignore reality, but you cannot ignore the consequences of ignoring reality. 🤔

[Susanne-zuku]

Nobody can become financially successful over night. They put in background work but we tend to see the finished part. Fear is a dangerous component, hindering us from taking bold steps we need in other to reach our goals.

[EmiliaEnglerth]

Engaging in an individual option is fair but its performance level can’t generate high dividends. Diversification is the secret to optimal performance, that’s why I have my interest set on options based on projected growth and performance.

[OOICU]

Warren Buffet is one of those guys that you wonder who's side he's on.

[killyourtvnotme]

Another crisis that harms smaller lenders and consolidates more power in the big banks.

Never let a good crisis go to waste

[SharonD.Spiker]

Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor does too, jokingly..

[skittles]

I’m about halfway through and gotta say, this information is very well presented in a way that makes it easy to follow and understand. Well done! 🌟 New sub earned

[woundedwombmindoflilith]

That's why corporations are buying up single family homes.

[nyxehxt]

Success depends on the actions or steps you take to achieve it. Building wealth involves developing good habits like regularly putting money away in intervals for solid investments. Financial management is a crucial topic that most tend to shy away from, and ends up haunting them in the near future.., I pray that anyone who reads this will be successful in life!!