The Housing Market Is About To Go INSANE - Why Buyers Are DISAPPEARING In 2022

what's up everybody nate here and january 2022 has barely even started yet and we've already seen the stock market near correction territory bitcoin and cryptocurrency markets shed nearly 50 of its value and inflation hit a new 40-year high and like i said we're barely three weeks into january but not every market in the united states is actually tanking right now i mean the stock market and the cryptocurrency market are effectively going down and slashing a lot of their values but as of recording this video it seems like the housing market is still going strong in the united states at least it was going strong and while the housing market hasn't completely collapsed yet it's starting to show some signs of going down like for instance in december 2021 sales actually hit a new record low while in november we know the prices for new homes and existing homes were actually continuing to rise but don't worry some sites like bloomberg are saying that there is no housing bubble in the united states right now and what we're seeing is nothing like what we saw back in 2008. the only problem with that is like back in 2008 nobody thought we were in a housing bubble which is one of the biggest similarities to what is going on right now so with everything seemingly crashing around us in the business and financial world i wanted to take a moment to talk about the housing market why it hasn't crashed yet and what is going to happen to it in 2022 because while it hasn't sank yet with the stock market and the cryptocurrency market nothing can hit record highs forever but before i get into all of that do me a quick favor and smash hit or destroy that thumbs up button below that helps me to know that you like this video and that you want to see me make even more here on youtube thank you so much for doing that now i want to rewind just a little bit to november 2021 and talk about some of the numbers in the housing market now according to the s p corelogic case-shiller national home price index home prices increase at a rate of around 18.8 percent year-over-year that is a huge gain because if your home was only worth around a hundred thousand dollars at the start of 2021 now it's worth around 118 000 and remember you didn't do anything to that house what's really crazy about that though is that home prices typically go up by around three to five percent year over year now that's the average and they went up almost three times that home prices however have started to slow down they were at around 19 in october 2021 but they slightly decreased in november and we're anticipating that they decreased even more in december 2021 and finally november's 18.8 increase was the sixth highest month ever that index has recorded for home prices increasing and you had some of your biggest real estate markets in the united states like phoenix arizona and miami florida increasing even more so the home values in those particular locations went up by around 32 chicago minneapolis and washington dc showed the smallest amount of gains their home prices only went up by around 11 so even that is higher than what we're typically used to seeing so for the entirety of 2021 specifically in october and november the prices of homes were continuing to rise at record rates but that leads us to december 2021 where we saw that home sales actually dropped by around 4.6 so you have home prices going up but sales actually going down so what does that mean well the median price of an existing home sale in december 2021 was around 358 000 now that's for the entire united states that's an increase of around 15.8 percent when compared to december 2020. but for the entire month of december 2021 there were only 910 000 homes available which is an overall drop in the inventory of homes by around 14.2 percent sales for the entire year are actually down by around 7.1 when compared to december 2021 to december 2020 this is the first problem that we're having in the housing market right now houses are just way too expensive for the average home buyer you have to ask yourself what is a home actually valued at is the value come from the homeowner that sets the price at whatever they want or does it come from when the home is actually sold value and the price of the home ultimately becomes what it's sold for so a home buyer can set up a price of five hundred thousand dollars but if home buyers aren't willing to pay that price and the house really isn't valued at that the house becomes valued at whatever somebody's willing to pay for it right now that dynamic is playing out in the housing market almost every single day the increased median home price was 358 000 in the entire united states for december 2021. that's a 15 increase however the price of homes actually went up by around 19 so that means there is around a four percent difference between what people are willing to pay what the price of a house actually is so essentially sellers are putting their homes on the market right now but they're having to decrease their price because buyers just don't have the money to purchase that home but not every seller is willing to do that though not every seller is willing to drop the price of their home by four percent so at that point you actually have homes not going for sale at least not selling even close to as fast as they were at the start of the pandemic or even during the summer of 2021. what this is doing is actually pricing people out of the housing market in general so now you have millions of people who want to get a mortgage but they just can't afford the overall price of a home rates in the united states stuck around the 3 to 3.25 mark in november and december of 2021 however even though your rate is super low the price of the house that you want to buy is still way too high so you're getting a low interest rate but the price is super high so it doesn't really matter that your interest rate is low anymore home buyers are still going to have to pay a ton for their mortgage so a lot of them are just skipping out on that altogether not to mention that houses are kind of in short supply right now i mean literally there are way more buyers than there are actual houses for sale so your supply and demand equilibrium is not much of an equilibrium you have way too much demand and not enough supply in order to correct that a few different things will need to happen for one we can start building more houses which we definitely have started doing all throughout the united states however those new houses are very expensive mainly because they're super expensive to build because there's a lack of workers and a lack of supplies to actually create the houses they're taking a super long time and two demand needs to go down in the housing market or else prices are going to continue to rise we don't have enough houses right now but if we have less people looking for fewer homes then the price will actually start to go down if you are a seller of a home and you set the price of your house at a certain amount well you want people to buy that home nobody's buying that home then you need to price it to actually sell that might mean dropping the price down and that's something that we're starting to see but if things happen in the opposite direction and you have demand start to really fall but supply starts going way up because people now want to sell their house well that could end up leading to a massive problem in the housing industry in this situation you have homes for sale but nobody really wants those homes so the prices are going to go through the floor we could see the values homes pretty much start to lose all of the gains that they had over the last two and a half years but that's not the only thing that's going on with the housing market right now we also have a ton of other economic problems from the federal reserve to inflation that could end up tanking the housing market in 2022. i mean we all know the inflation problem in the united states if you've gone to the grocery store over the last year then you know the price of everything is going up right now and the reason for that is because of inflation our inflation problem is twofold because when the pandemic first started we had supply chain issues and those supply chain issues have lasted all the way until today we also have the federal reserve and the united states government over printing money this money printing has caused inflated prices because there's just way too much money going around the wealth in the united states has gone up as the wealth goes up though people are able to buy more things and if they're able to buy more than companies have to produce more and all of that comes at a cost and the cost is eaten up by the american consumer but how exactly has this inflation hurt the housing market or benefited it in the last two years well with everything costing more housing prices and housing in general is costing more too people got a ton of money over the last two years from bonuses at work to bonuses from the united states government and the federal reserve our economy has been bleeding money over the last two years and all of that money eventually was given to the american consumer americans went out and they spent this money on homes and needs and whatever they really wanted to which was one of the biggest problems in our housing market before that kept people from getting a home a home is a massive commitment it's a massive commitment of money you have to have top-notch finances in order to get a home because you have to put down a large sum of money this large sum of money is going to cover your down payment and your closing costs you have to have this in order to get a home in the 21st century that can sometimes mean thousands of dollars that you need to save and the majority of americans didn't have thousands of dollars to put down on a home because of the pandemic and the stimulus measures from the united states government they did so people bought homes and that's where the supply issues come in because now we didn't have enough supply on the market so people went out and ordered brand new homes they were going to build their home but that created a problem with lumber we saw lumber prices hit an all-time high in 2021 so it started to cost more to build a home and now the price to build a home and the price to buy a home are eerily similar so you can't escape inflation and this is why it's a problem in the housing market right now you see it wouldn't matter too much if housing prices went up but wages and salaries continue to rise in the united states however that is definitely not the case in fact wages in the united states have decreased by around 2.4 percent all because of inflation that is massively hurting the housing market because all of that free money and stimulus has pretty much gone away and now americans are relying on what they make at their jobs in order to afford a home but they can't do that because wages are falling even though wages have technically gone up they have not gone up nearly fast enough in order to meet inflation and remember inflation hit a new record high of around 7 in december 2021 while americans lost around 2.4 percent in their wages so what does that mean well people aren't going out and getting a home they're only buying the things that they absolutely need they don't have free money to save for a down payment anymore they only have money for their necessities so much so that americans are actually now going back and using their credit cards and getting back into debt that we haven't seen since 2019. in 2020 and 2021 because of all of the money printing a lot of americans actually paid off a lot of their credit card debt or their debt in general but now americans are starting to stretch themselves again they're starting to get even more in debt because there isn't that money to go around plus they still need to buy things and if they can't afford that from their job then they still have to have it and they have empty credit cards to use so now americans are using them but the more debt that you add the lower the chances you will be approved for a mortgage so americans are starting to get a lot tighter on their spending they're starting to get a lot tighter on their debt so they're not going out and getting a mortgage right now that in itself is going to drop the prices of homes because again demand is going to drop you're going to have a lot less buyers than you do sellers the final piece of the puzzle here is the federal reserve now the federal reserve plays a massive role in how our housing market and economy is going to fare in 2022 and if we go back in time again for a second we can talk about what the federal reserve did in 2020 and 2021 that actually made the housing market explode not only was there all of this free money circulating throughout our economy there was also record low interest rates so the federal reserve is in charge of a lot of the monetary policies in the united states they basically have a benchmark interest rate to show how much they want people borrowing throughout the country if they have super high rates then you know that they don't want people to borrow a lot of money but if rates are super low and they want people to go out and spend money spending money is how our economy grows because we have more money in circulation and more money for people to use that means we can pay more people and we can grow our businesses so when the pandemic was starting all the way back in march of 2020 which honestly doesn't feel that long ago the federal reserve decided to drop its benchmark interest rates to near zero percent that made it super easy for anybody to go out and get a loan including a mortgage so you had millions of people going out and getting a loan because a low interest rate means that you could save hundreds of thousands of dollars over the lifetime of your loan and it can make the difference between you affording a home and not being able to buy one again that was to incentivize people to go out and spend money spending money makes our economy grow so if people are going out and getting a loan from a bank then that bank can use that money to give more people loans and have more money to employ more people and so on but now the federal reserve is kind of going backwards because they know that we have an interest rate problem in the united states which is increasing inflation because if anybody can go out and spend money then they're going to and if anybody can buy anything they want then the price of everything is going to have to increase and if that continues then you have a cycle of people making more money and getting more money and the price of things increasing shortly after that will pretty much go on continuously until people are going to their local grocery stores with a wheelbarrow of cash so how does the federal reserve do that well they lower demand by raising their benchmark interest rates and they've talked about doing this multiple times in 2022. raising their benchmark interest rates means that fewer people will have access to money you can't go out and get that same home anymore because you can't afford the mortgage the interest rate is just way too high remember before you were saving hundreds of thousands of dollars over the lifetime of your loan now you'll be spending hundreds of thousands of additional dollars so you don't go out and get a loan which means you're about to see a lot of buyers exit the housing market but those homes are still for sale so they're either going to have to drop their price significantly or we're going to have to start seeing some other places where money is being given to the american people and they can go out and buy more homes however if the federal reserve does this way too fast and they raise rates way too fast in order to curb inflation even more well you could see the housing market tank super quickly if way too many buyers exit the market then that means values are going to go down significantly which means the home you own is about to get a price deduction so basically you have kind of the perfect housing market storm right now you have people making a lot less money so their spending is shrinking you have inflation basically rampaging all throughout our country making the price of everything go through the roof making americans spend even less and you have the federal reserve starting to raise their benchmark interest rates which is naturally going to lower demand and force americans to spend even less that is the financial side of it but you have to think about the human perspective from it too that americans still need to live somewhere just because they can't afford a home they still have to live somewhere problem is the availability for housing right now is super tight because if millions of americans can't afford a home like a physical house then that means they're going to be forced to rent an apartment but rent prices are already at record highs in the united states right now pretty much everywhere you go not only is it hard to find an apartment it's hard to find an apartment in your price range which means housing costs in general in the united states are beginning to explode and that is something that millions of americans can't avoid so this problem is a lot bigger than just the housing market because the housing market is not just a market that is autonomous by itself the housing market is actually people and people are running the market but if people have to start spending even more money on everything because of inflation and our housing costs start to go up you're going to start to see millions of americans start to either default or leave their homes americans not paying their bills which means we could see a transfer of wealth in 2022 americans are losing money because of inflation so even if you bought a house over the last two years you still need to make sure that you're well invested and that you have enough money to afford your home for the long term everything is costing more so if you're losing money year after year after year then eventually that house you bought is going to be out of your price range and that could lead us into a collapse like we saw in 2008 now to be clear the situation is very much different than we saw in 2008 there are a lot more safeguards in place for banks and other financial institutions to make sure that people can't afford their mortgages back then you didn't need any income or any proof of income in order to buy a home today it is definitely not like that however banks and financial institutions are working with the united states government right now as well they know that the price of houses is getting even more expensive and then it could possibly stay like that we saw freddie mac basically raise the amount that they're going to guarantee to banks to nearly 1 million dollars in 2021. that means that they know that the price of houses is going up in the united states not going down and with the price going up but fewer and fewer americans being able to actually purchase a home well that could lead to the collapse of the housing market and again none of this is set in stone it really just depends on what the economy does with wages and jobs and what the federal reserve does with inflation if rates are raised in a conservative level then you could continue to see more people continue to buy houses because right now people are piling into houses because rates haven't raised yet but if they're accelerated in order to battle inflation even more then things could continue to drop but now i want to hear from you on this issue what do you think is going to happen with the housing market in 2022 do you think that housing prices are going to continue to reach new record highs or do you think the housing market is going to crash as always whatever your thoughts are leave a comment below before you go but that is it for me everyone if you like this video be sure to hit that subscribe button below be kind out there and i'll see you all in the next one

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