Another 2008 Housing Crash - Or Worse? Real Estate Bubble Explained

In this video, Patrick Bet-David breaks down whether or not the housing market is going to crash.

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[Beatricegove]

Asking a real estate agent whether you should buy a home right now is like to asking an alcoholic whether they think you should have a drink lol. Homes in my neighborhood that cost around $450k in sales in 2019 are now going for $800 to $950k. Every seller in my neighborhood is currently making a $350k profit. Simply unreal. In all honesty, deflation is what we require. The only other option is for many people to go bankrupt, which would also be bad for the economy. That is the only way to return to normal.

[Riggsnic_co]

I think a housing crash will happen because all those people who bought homes over asking price, although it was at a low interest rate, they are over their heads. They have no equity if the housing prices continue to go down, and if for whatever reason they cannot afford the house anymore and it goes into foreclosure because even if they try to sell, they will not make any money. I think this will happen to a lot of people especially with the massive layoff predicted for the future and the cost of living rising at a high speed.

[mamafane]

Exactly, I’ve been saying this for a long time we should stop worrying about what is coming instead prepare for when it comes .The market always recovers, take for example the 08 crash the market still bounced back, it might take long but it will definitely.

[elvismark]

Is it a good time to buy stocks right now? How long will it take for us to recover? I know everyone claims that equities are now inexpensive. the fact that other professionals in my sector often earn six figures. Although there are tactics to be applied in this market, the typical individual cannot access these strategies, hence I would be better off investing my money elsewhere. I am well aware of the costs associated with working more to get more money.

[StanleyHoffmann]

Having been in the Real Estate industry as a Lender and Investor for over 30 years, here is my 2 cents... The Housing market has been out of touch with reality for one reason, the cheap cost of money.

A homebuyer does not look at a prospective home and say yep that home is worth 500, 000. Instead, they say that home is going to cost me 2, 500 per month and compare it to other homes in the same price range...

As the cost of borrowing increases due to higher rates, that same homebuyer continues to look for the same payment. 1 of 2 things happen at this point....1. The homebuyer removes themselves from the prospective homebuyer category or 2. The Homebuyer lowers their expectations on what level of home they are willing to accept.

Eventually, the home sellers begin to reduce prices to accommodate the Homebuyers payment requirement.

You must also keep in mind the other related pressures that will begin to affect a persons individual finances. When the Fed raises interest rates it immediately impacts personal debt including auto loans and Credit cards. This in turn affects the consumers ability to even afford the 2, 500 mortgage payment they originally earmarked. In addition a very unsettling precedent was set in the 2005-2008 crash, banks began to reduce limits on credit cards even if the person was making all the payments on time and as a consequence credit scores began to drop adding further pressure to potential homebuyers.

Putting it all together:

The snowball begins

No matter what else is going on in the world, Politically or Economically, Life goes on....People get Married, have Children, Get sick, loose jobs, get Divorced, Die etc.

Financial delinquency's for Mortgage loans and other personal debt remain low due to having equity in a home and using it for a piggy bank as needed. If you removed this safety net from the equation the delinquency numbers would be elevated significantly.

Unfortunately, many people who purchased a home or refinanced at these elevated values will see their equity all but disappear. This is important to understand because it is the tip of the spear so to speak. When people are faced with one of life's negative events and carry a heavy debt burden, the only way out is to eliminate the debt and the Bankruptcy commercials will once again reign.

As people begin walking away from their homes and Foreclosures start to present themselves in neighborhoods, further downward pressures on home values will ensue and if it's bad enough can trap people into becoming upside down on the homes value even if they purchased at a much lower price point.

I have never heard any Financial guru/Economist other than ‘Dr. Doom’ Roubini accurately call the size and speed of the snowball before it gets halfway down the hill.

So, with that, take my input with a grain of salt and conduct research for

PS. One of the little known reasons for the shortage of single family homes was not that builders were not able to keep up with demand. In reality, many studies were conducted focusing on Millennials and Gen Z as they pertain to housing, mainly conducted by Hedge funds. The analysis showed that both groups but especially Gen Z would become life long renters and the big money began to flow to Multifamily housing. I guess they were wrong.


Peace and prosperity to all....

[timeforachange-is]

There NEVER has been and NEVER will be a free lunch. My niece is a section eight tenant with six children from five fathers. For approximately two years she claimed every benefit she could while she still worked part-time at Uber Eats. (She drove and the children brought the food to the front door.) Her $2, 300 per month HUD house was paid 100% by HUD, new hardwood floors, stainless steel appliances, granite countertops, 4 bed/3 baths. Along comes Jerome, Joe and Janet's printing press and she claims every benefit known to mankind. She made over $40, 000 in free cash when nothing changed for her. Then HUD audited her and found out that she received all this free money as a GIG worker, so she now has to pay $500 per month for her home instead of $0.00. (She told HUD she didn't work in order to pay $0.00 for the home she was given. HUD also gave her a utility allowance to pay for utilities.) She sold the free car that I gave her, and bought a new to her car that has now been repossessed. The landlord is kicking her out because he wants to charge $2, 800 per month and the HOA was constantly complaining about the grass not being cut, fights, items left in the yard, etc. She is now moving back into the gang infected area, without a car, and with very, very little money ($50). She thought the days of the government raining money on her would last forever and now she is in WORST shape than before the pandemic started. LET ME REPEAT SHE IS IN WORSE SHAPE THAN BEFORE THE PANDEMIC STARTED. The free money was good while it lasted and now, she has no hope of a car, a career or every getting into another HUD home again. This is what happens when you give tens of thousands of dollars to people that have no financial acumen at all. The two great years of free money will probably be followed by 10 miserable years for her, it not 20 years. FREE MONEY IS NEVER WORTH IT IF YOU DON'T EARN IT.

[jumpoffstake]

A housing "crash" should be expected just like everything else. The massive increases in value on almost every asset is obviously unsustainable. About a year ago I refinanced my house to a 10 yr mortgage at an absurd lower rate. My monthly payment went up $150/month and I shaved 8 years off my mortgage. All I did was cancel my TV provider and I was even lol. Live at or below your means, talk less, listen more and think for yourself.

[keishaofthe]

I appreciate your approach to teaching.. To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn’t good enough, we just need to hold onto our hopes and wait to see how things turn out because market movements are almost always unpredictable. In my portfolio, I'm noticing more red than green.

[mesutserim]

We are currently in the jaws of the worst bear markets I have seen, the average stock has been cut in half, and the only way to make money this year has been to either short or to trade long in very short time frames. I'm still at a crossroads deciding if to liquidate my dipping $117k stock portfolio, what’s the best way to take advantage of this bear market?

[alcantra]

I was too young to see what happened in 2008 but as someone who has been working as an underwriter in the mortgage industry since 2010, he is spot on about the mortgage industry. The quality of mortgage applicants has never been this low in my career and a majority of my acquaintances and former co-workers are all out of work. My mother also worked in the mortgage industry for 30 years and her friends went from making 40k+/mo to having no job. My bonus plan was eliminated two weeks ago and we were told we were lucky to have a job. I also sold my home 6 months ago because it is going to be bad. I don't care if housing makes one more rally to 15% or even 30% higher, once real estate falls, it falls hard.

[summaryjudgment]

Isn't the 700% increase in foreclosures compared to 2021 a bit inflated since foreclosures were essentially halted during the pandemic?

[charlotteoldbury]

When you invest you're buying a day you don't have to work

[stephaniea.mitchell]

We work for years to have, $1million while some people I know put thousand of dollars in some meme coins and they are millionaires.

[instinctively_awesome]

Real estate crashing 40% wouldn't even be a crash… it would be 2019.

[ivankrushensky]

Another factor to consider that many people aren't talking about, which was caused by the extremely low interest rates, is the fact that many people are in homes that they can't afford routine maintenance on, as well as many of the bills (insurance, A/C, heat, electricity, etc.). As Pat pointed out in the beginning, a low interest rate makes an expensive home much more affordable. The issue is, those homes also have much higher monthly expenses in terms of the routine bills. Many people walked in thinking "heck, I can do $2k a month. I was already paying close to that for my smaller home or apartment." But they don't realize that their electric bill is now going to be triple what it was. Along with property taxes, insurance and nearly everything else. Then tack on this inflation, and next thing you know they are way out of their league in terms of expenses.

[lathamwilfred]

Not real estate again, The stock market is one of the most enticing sector to invest your money; however, investing in stocks is often risky due to the constant fluctuations that result in huge gains and losses for investors; however, if you can manage the risk, you can use the stock market to secure your financial position and generate income.

[yaadmangaming]

Elite content, this was well put together

[t-bonesteak]

Great video, but lose the background fear music.

[alexnickla]

PBD, appreciate you and the video. Disclaimer, I am a RE Sales Team Leader. We met at SLS at The Breakers. Thanks for all you do brother.

A few months ago I would have said this headline is complete BS. With rates rising at the pace they are, much of what you’re saying is definitely possible or probably with the rates continually rising. However, there are parts of the data I think you are missing. You REALLY should get David Childress who’s the President of Keeping Current Matters (KCM) on PBD Pod. KCM is the world leader in all RE data. There’s a few points I think that are missing to paint the big picture. Some of those include percentage of homes that are owned free and clear (35%), and the number of homes with a mortgage that have at least 50% equity (1 out of 2 homes), among others. David on PBD Pod would be phenomenal.

Overall, values HAVE to slow down. It has not been sustainable. In some markets, they must come down and will be heavier than others. I just think a PBD Pod with David from KCM would be incredible for the show and for a great debate. Completely unbiased, factual knowledge. See you at The Vault, brother.

[MichaelCallender]

Great content. Thanks. And Cool fish tank.