America's Biggest Housing Bubble is HERE

Which state is in the biggest Housing Bubble in 2021? Home prices in America are at all-time highs relative to inflation, with annual price appreciation reaching 18% year over year according to the Case Shiller Home Price Index. Could a Housing Crash be around the corner?

To understand which state is in the Biggest Housing Bubble, it is helpful to go back to the last Housing Crash from 2007-12. Which markets did home prices decline the most? Which markets stayed steady?

Areas like Phoenix, Riverside, and Las Vegas experienced 50-60% price declines in the last Housing Crash. Other Sun Belt markets in states such as California, Florida, and Arizona also got hit hard. What as the consistent theme that these markets shared?

One was that they became very expensive, with high Value / Earnings Ratios in 2007 right before the crash occurred. When Value / Earnings Ratio is high, that means that locals are being priced out of the local Housing Market. This creates a destabilizing force in the market, leading to huge potential price downside.

The other trait that these previous crash markets shared was a high level of new home and apartment building (proxied by Permit %). A significant amount of new building means that housing supply is high, which potentially creates downward pressure on home prices and could cause a crash.

Applying these data points to today's markets shows that Utah is the state with the #1 Housing Bubble in America. All of the major metros in Utah - Salt Lake City, Provo, Ogden, and St. George - meet the criteria of a high V/E Ratio and Permit %. This means that there could be a lot of potential downside to home prices across the state in the short-term (2-3 years).

But over the long-term (10+ years) Utah could still be a good area to invest in real estate given how strong the underlying demographics across the state are. For instance, the median age in Utah is 31 compared to 38 in the US and 42 in Florida. A young population means that Utah (and particularly cities like Salt Lake City and Provo) have a high number of births compared to deaths.

In fact - Utah's birth / death ratio of 2.5x in 2020 is by far the highest in America. This means that the state's organic population growth will be the highest in country over the next several decades, providing strong long-term support for the Utah / Salt Lake City Housing Market.

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0:00 Which State is #1?
1:02 2008 Housing Crash: Learning from History
3:22 Predicting Bubbles with this Model
4:51 The Biggest Bubble! Where is it???
7:08 High Prices and Lots of New Building
9:41 Utah: Look Out Below!
11:07 QUESTION: Short v. Long Term Investor?
12:36 Birth / Death Ratio: Utah is #1
14:46 Why Do Babies Matter?
17:15 But it's a Still a Bubble!
18:47 Reventure Newsletter Available to Members!

#HousingBubble #HousingMarket #HousingCrash

[TheInterwebzMan]

I mean we can scream "bubble" all day long but the bottom line is the Fed has printed nearly 40% of the dollars that exist in the last 2 years alone. We're getting massive stagflation so the price of everything (including homes) is absolutely bound to go up and stay up. Not to mention China's largest property developer (Evergrande) is days away from default, which means we'll undoubtedly be dealing with more foreigners looking to park their money in American real estate as a hedge. Will prices eventually drop? In some areas, sure. But not like '08. If anyone doubts that then keep your (rapidly devaluing) money in the bank and keep waiting. I won't be.

[jeffmelodia]

Fantastic explanation. I am a renter, previously a homeowner, waiting in the wings in California. There still is a housing shortage and it baffles me how people can afford the homes at a average price of 750k. We have great income and wonder how it is possible that so many would have such a high income needed to qualify. Is everyone making over 250k a year?

[frank]

I agree that select markets are overvalued. Compare the USA market to Canada and actually it almost seems undervalued.

Certain Areas such as Florida is seeing a drastic increase but with an economy unable to support the price appreciation (Low wages.)

Florida doesn’t factor in the Climate change risk, Corrupted HOA’s and lack of reserve funds in the Condo association in general.

On the flip side Missouri, Illinois (although high property taxes) seems fairly valued.

Denver / Utah / Az also have increased but has the jobs or companies relocating there to support some price increase IMO.

If you compare the loss of buying dollar over the last 14 months, the USD did lose about 12% of it’s power vs other currencies.

Many Foreign Investors are Exiting the US market right now.

What is truly driving the market is A: LOW rates.
B: The fact that you can lock in your rate for 25-30 years.
C: Many homeowners in Forbearance that would no longer qualify for another mortgage deciding to stay Put because they are afraid from falling off the homeownership ladder.

Personally I think if you buy with the lowest risk of natural disaster, lock in a great rate, don’t get emotional or too picky, you can do well right now.

[davidvasquez]

I really like 👍 you're videos very well informed 👍 thank you 😊

[shadowsilvey]

In tampa fl, rent went from avrage of 1, 200 to 1800 for a 1 bedroom apartment. my job only offered a 20 cent rais 🤦‍♀️

[preparing]

You are right. We are in Elk Grove, California and prices have gone from 400, 000 to 650, 000 in just about two or three years. we are retired and on a good salary but we are priced out of this area. So we are looking to buy and our options are Pioneer, California or another State. We have family here and would like to be as close as possible, so we were looking at Pioneer. The prices are somewhat high, but affordable for us; it’s hard to know if they will crash in that area.

[karenclabaugh]

What about the Land lords and renters? Where does this come in your graph?

[kenschauer]

When is a good time to buy a home in the Phoenix area? Is it better to get in now before interest rates go up, or if the rates go up will the housing prices drop? If they do is it a wash?

[drscopeify]

UTAH is tons of IT jobs. For my job there are only 20 positions in Boise (awful compared to how high prices are lots of risk if I moved there), 41 in Spokane (under valued?) 700+ in Seattle (as usual) but 300+ in Salt Lake area (pretty impressive). A lot are in military tech industry so I am not sure that would apply to me so ehhh I am little iffy about that but I have been to Salt Lake recently and just everything is brand new there compared to Seattle so I can see it being a tech hot spot for sure. Seattle always feels like a bubble but one of the major issues is the lack of new homes here, there are a few large thousand unit projects but they are crap, they are far away from Seattle and other cities with offices, there are no highways so mostly surface roads or old state routes with 2 lanes, a real crush during commute. I think city centers in the Seattle area will see some people move back from further away areas they ran away to during COVID but who knows. My friends mostly told me that were informed to go back to the office in January so that might be the date to look for for some strange movement of people and prices around the area but I have no idea if that will happen or not. Maybe a lot of these people are permanent working at home

[collinE]

yesss. I was hoping for some Utah talk. My wife and I were saving and positioning ourselves to buy responsibly with hefty down payment, but then EVERYTHING shot out of our price range. I’m really hoping to see prices drop back to an affordable range. We don’t want to have to move.

[chrisperkins]

I think your video misses one point for long term viability of UT housing. Water availability is going to become a major constraint in the next decade. The Great Salt Lake is already drying up. Technologies like desalinization could tilt the constraint, but would also add substantially to the cost of living as the water would need to be transported from over a thousand miles away.

[AB-fqmr]

Just a thought:

If the US government can force landlords to accept that a lease agreement with a tenant is invalid for over a year and force the landlord to allow the tenant to live there for free without right to evict or give proper compensation, what makes you think that the government will faithfully honor your 2.5% fixed mortgage rate on your shiny new $500, 000 overpriced home for the next 30 years? Sure, you're getting it from a bank, but that bank is getting the base rate from the US government.

If they can screw you over as a landlord just because they back an FHA loan, what makes you so sure they won't screw you over once you're a homeowner?
Clearly, they've shown that they don't honor contract law or the constitution. All it takes is for the FED to get stuck in their quantitative easing, a major depression, and the first thing they'd do is find some bogus excuse to raise everyone's interest rate on any government-backed loan just to "save the economy." I would never get an FHA loan after what happened this year, I'd only feel safe getting a conventional loan from this point forward. And even then, there's nothing stopping my property taxes from going from $2, 000 a year to $12, 000 in a year overnight. If home prices can go up that quickly, why wouldn't property taxes too?

[AprilClaytonflute]

I sold a house in Utah this June. It had gone up in price almost exactly $400, 000 during the 5 years since I bought it. I've been thinking about downsizing for years, and I felt it HAD to be the right time this spring/summer. Now there are already SOOO many price cuts listed in Utah on Zillow. I'm renting for now - looking at homes, but every one I go into these days, I feel in my gut: "THIS is all I get for $650, 000??? This is a HORRIBLE DEAL!" So.... I'll buy something when I can stomach the idea, which I think won't be for at least a few months!

[jamesq]

RE still crazy in So.Cal . We bid on a house and it went for 180k over ask. This market maybe like the RE market from the late 80's. Then it was the Japanese taking over now it's the Chinese. California did a slow grind down into 91 or so. Evergrande news now and capital is getting real nervous.

[jaebehrmann]

Thanks for creating this video…great analysis. How does the 2021 permit % compare to the 2007 permit % in Utah?

[TheIntriguingii]

I was in the mortgage business from 2000 into 2007. I was doing loans in 5 states, MI, TN, CO, FL and CA. That was the order of crashing markets based on them being upside down in their loan to value ratios. The high number of foreclosures dragged prices even lower. The eviction moratorium aftermath will continue to build momentum.

[JohnTurner]

Just a comment on Youtube, but as someone in the Seattle area...one can hope prices come down. Fingers crossed! The housing market is CRAZY here!

[mclassie]

I grew up in Utah, moved away over 20 years ago and every time I go back to visit my heart breaks a little more at how crowded and chaotic the Wasatch Front has become. Air quality gets worse every year, I-15 is so treacherous, there is barely a fingernails width between houses in the new developments. And the canyons are just crawling with people. It’s lost so much of it’s clean, wholesome goodness over the last two decades. We’ve always planned to move back. This would have been the year but we’re priced out. I’m not sure I want to go back now anyway. Just too crowded!

[LadyMaryanne]

Wow!⚡⚡⚡ Great information. Thank you so very much for this video! 👍

[rhettshipp]

How is that affordability metric calculated? If it's looking just at price/income, it's missing the fact that with such low interest rates households can afford more debt. Have you looked at all what debt service ratios look like?