I’m going to move to Austin for a new job next month. After seeing the data you showed, I decided to rent for a while until the 50k-100k premium is gone. Inflation, short supply, QE, labor cost, even just one of the factors changed, the price might be more friendly to buyers
Thanks for the comment Eefun! I think you made a good decision on Austin. I've lived here for a year and the buying market is nuts. On the contrary - renting is quite friendly. One to two months free in a lot of places.
This is golden analysis! Thank you so much. I'm in Sacramento, and I see how insanely market is overextended from VE standpoint, at the same time every regular Joe rushing to buy in, houses are 1-3 days on market max. Insane bids over asking price. Majority of ppl I work with do not believe in huge off cliff drop and buying in, they think I'm crazy when explaining this bubble to them...
I'm binge watching every video. Thank you. I'm wanting to Buy and Hold properties with an eye on retirement. Thank you. I've got so much to learn. Thank you thank you
This also makes sense. In 2008 I was renting in Long Beach, CA, and one out of every three houses in my neighborhood became vacant. I ended up moving and renting in a safer area which also got hit hard. I bought a house 10 years later.
Hey Brother...Im an investor and pay cash for the homes and your info and chanel are right on! Love seeing and hearing someone tell the truth without flip flopping like other channels. Keep it up
To put things in perspective where I live in CA, the median household income is 68k in 2020. House prices are in the 900k. There's some truth to what this mans data points are. Good video.
@RickReviews Now that Oracle, HP, and other tech companies are moving away from the bay area, prices will begin to take a nose dive. Better to sell because these overpriced homes will come down to reality pretty soon.
One thing you may not take into consideration. I bought 15-20 years ago where RENTS were HIGHER than MORTGAGES. And the vacancy rate was horrible. Everyone kept moving to buy a house. I bought low end houses where average rents were $700 and mortgages were $600 to $650 including escrow. But every move out was expensive ($2000+) for paint, carpet, etc. I bought several houses and it got very costly. Finally the mortgage cost is MUCH higher than rent and I have almost no vacancies.
Thanks for the perspective. Based on your last sentence - would you say that's a sign that households are feeling priced out of the housing market currently?
Thank you! I'm so happy to hear Boise is a red dot...I'm a native and yet to become a homeowner. It's heartbreaking that us natives are getting pushed out of the market by the steady influx of cash buyers from out of state. The rental market is in complete shambles as well...prices doubling in the past two years. I keep thinking this can't be sustainable but the general consensus from the real estate sector is that prices will continue to rise. I very much appreciate your take! 🤞
Also a lot of people that moved here are now having to get two jobs to pay their high/inflated mortgages... because at the end of the day it's still North Idaho and $14.50hr is a high paying job... they really thought they come from the city and get a $20+hr job in North Idaho and a lot of the work-from-home people are now getting called back to the cities they came from or they have to resign....I Love it
Great point about Wages - the BLS average hourly wage in Boise has not increased by much in the last five years. Concerning in relation to home prices.
Same here. They will go back. People are paying top dollar from out of state to live in areas they know nothing about. Just wait once the Pandemic calms down and they hate the area and miss home. There will be discounts
Any buyer being a hedge fund company buying up multiple homes or individual homebuyers that pay 10k to 300k over list for a house many times forgoing appraisal and inspection is very very unwise and will regret it in the near future. You never overpay for homes, cars, etc.
It is true that people in our area (Seattle) who purchased rental properties recently rarely have any positive cash flow. They are depending on appreciation in the future. It is a risk strategy.
Been listening to many opinions on whether we are in a bubble that will burst or not... some say this is not a bubble basing that opinion on 2008 crash, citing that burst because bad lending practices were rampet which is not what is driving this bubble. I'm not sure what to believe right now but this guy does make sense in comparing home prices to income.
Thanks for the comment Karen! Those who focus solely on subprime and bad loans are missing the big picture on the real estate market right now. Right now we a nasty combo: deep recession, lots of job losses, lower population growth, and spiking real estate prices.
The thing is, we live in a time now where "local jobs" doesn't have the same meaning that it did ever before. People can now bring their big city salaries to other parts of the country because they are working remotely. This changes everything.
@@josheatsbananas4373 My understanding is that the BLS data pulls directly from income tax data. So if I'm living in Buffalo, but my job is in Manhattan, the earned wages should be the same.
Many co's did the same thing in the dotcom bubble. That didn't last either. When people work remotely, communication and innovation both decline. Google the Allen Curve.
This is great data! Love the graphs. It takes a lot of time and an excellent grasp of how things work together to build the RIGHT graphs and you do a fantastic job!
I live in one of those risky bubbles. I bought in 09 and my primary residents is worth three times what I paid for. I've considered selling and waiting out the bubble so I can buy property in 1-2 years but everything thinks I'm crazy.
I recall home prices in San Jose in the seventies. Average home cost 3,5 years annual average salaries. home loans interest rates were about 6-7% and inflation was 15% so it made sense to buy a home on credit.
This is really the only data driven analysis of housing market. You need to be on TV. BTW, can you share this list of cities in the last slide in a spreadsheet or something?
agree with you 100% and thank you for a very valuable video!!! Makes total sense!! Not buying a house at this time. I sold last year, and renting) sitting on my money until the bubble pops) Thanks again!!
May work against you. By time you think is right to get in mortgage rates may rise...just 30 years ago typical 30 year mtg was 8 percent....run some numbers and take risk of pricing yourself out the market forever imo
It's just like stocks. The formally high-flying growth stocks with high price-to-earnings valuations like the ARKK innovation fund are coming down to earth while value and dividend stocks are performing much better.
Great stuff. The only thing I'd add is to consider a geographic component. Some markets draw from larger hinterlands (e.g. Chicago), some markets are major transit hubs with ports, rail, and major highways (Houston, Jacksonville), and some have really nothing geographically unique (e.g. Boulder). A three-dimensional map of value, rental yield, and some sort of a composite score showing natural geographic infrastructure and perhaps business climate would be really interesting.
Thanks for the insightful comment, Cornelius! I think those geographic components are very interesting. In the end they will likely impact job growth, which is a metric I do keep track of in composite scoring. Stay tuned for future videos where I talk more about that.
We signed with a builder (DFW area) in Jan 2021 and the price for our floor plan has increased $100k. We would be priced out if we paid what they are selling the same home for, 5 mos later. The housing market in Dallas is ridiculous. Our builder has 100 ppl on a waitlist for the next phase that they haven’t even started building yet. Our realtor has 150 ppl on a builder wait list. Something has to give at some point. It’s not unusual to drive by an open house and see a line in the driveway; some ppl get turned away.
ah that sounds super dangerous. i hope they wont collect all that money and then declare bankruptcy and disappear. Have not heard a first hand story like that in the US, but heard from some people from other countries
Best real estate analysis that I’ve seen recently; great data driven analysis. My question is how does the significant trend toward remote working (telework) affect these numbers?
Thank you! Good question on remote work. I think it will have a bigger impact on real estate within metros than across metros. Meaning - demand shifting from urban NYC to suburban NYC, but not necessarily that demand moving to Austin.
@@ReventureConsulting It feels like “musical chairs” at the moment; I wonder what the outcome will be when “the dust settles”. With so many workers liberated to live wherever they please by their employers and by the growth of online entrepreneurs, where will they decide to relocate given the choice?
I got killed in the Arizona market in 2008-2010. I was planning to buy and hold, but the rental market became flooded where a landlord offered $100 to move in and two months rent for signing a two year lease. Rents dropped up to 50%. I believe we are seeing a repeat of 2008. I am waiting and watching. I am already seeing price reductions on approximately 30% of listed properties.
I keep hearing that what we are in is NOT like the 2007 crash at all. That 2007 saw too many people in situations that they could not afford along with other corrupt dealings. Today, banks are more strict on lending and the landscape is much different.. That is what I am being told.
Thanks for the comment Patrick! I hear that a lot too. I would suggest taking a look at the 5 Survival Cities video that comes out today - I discuss that topic.
Why are Hawaii & Alaska excluded in your analysis? I am 2nd generation Cali. One daughter lives here and the other in Maui. Selling now Ventura County planned golf community home of 30 yrs and considering multi offers on the table. That being said, vision is to sit this next bubble burst out in Maui and then reevaluate investing options when the dust settles. Yes, I can not wait for a video on how the possible exponential increasing inflation plays alongside this Realestate bubble bursting. I know that is a slippery slope to ask you to navigate, but somehow I think your up to the task! Lol. You know the possible time lines for each as they reveal themselves. I will calculate and do my due diligence/homework per your recommendation regarding Maui. I know the last time it sank it went very low for quite awhile. Makes 1000% sense and kudos to you for your amazingly high far reaching perspective. I love your graphs btw. Thank you for all your insights and teaching applications. Appreciate & Grateful !
I live in San Francisco. I will use your numbers that you quote here. In 2007 a home is 795k and in 2012 in hit rock bottom at 538k which is a loss of 257k. The homes in 2021 here are at 1.5m. If you bought your house in 2007 and kept it you would have profited 962k. Even if the bubble crashes again and we lose 35% value you still make a profit of 180k.
The big difference between 2007 and today is there were massive unqualified buyers getting into bad loans. They eventually defaulted and caused the crash.
Interesting analysis, The 2007 crash was in large part caused by the inappropriate valuing of Mortgage backed Securities and lenders selling off fraudulent loans to uninformed investors. Many buyers had little to no money actually invested in the properties they purchased with little or no money down. As a result when the market began to fall people just walked away from the investments in which they had little or nothing to lose. In contrast the market today has investors actually using real money with significant down payments and as a result to walk away this time they will actually lose significant wealth. I do agree that the markets will adjust significantly in some markets as you have identified, however, with so much to lose I have a hard time believing that a market like 2007 will happen this time around. Especially when much of the financing used today is a fixed rate loan at historical lows and inflation beginning to become a significant factor. If inflation continues to climb then rents and property values are likely to also increase. As long as we can continue to maintain a reasonably strong employment market here in the U.S. real estate is going to be a relatively safe place to park significant amounts of money.
Nick, great presentation. Your graphical analysis is fantastic. My only critique is about the stark white background when you're in frame. It's a little uncomfortable on my old eyes. Suggest light-medium blue or grey-brown for your complection. First time viewer, and I sub'd and rang the bell.
We are still a few years away from the bubble busting. When these folks offering $100k over asking need to refi, they’re gonna figure out they’re stuck. They’ll regret that offer once they get their property taxes too.
We are not in a housing bubble, we are in A housing deficit of 3.8 million homes and homes need to be far less affordable to balance the market when you have 20 buyers to a single house for sale.
Very good video and appreciate your specific geographic market analysis, however you didn't mention Phoenix? Could you please comment on the security of the Phoenix marketplace now compared to back in '07. Thanks Nick
The issue with Ratios and Averages is you miss out on all the deals under and over. If a street has 5 families, 1 of them have House hold income of 1mil, and the other 4 have a house hold income of 150k. The avg doesn't reflect the actual street. The 1mil income could sell the best house on the street for 150k more than what the other 4 ordinary homes sell for. The avg of those sales don't reflect the actual market. You are better off comparing size, quality and serviceability, and to look for the demand for your potential purchase, and find a good deal. 100 10 3 1 rule. Look at 100 house, create a short-list of 10, put an offer in on 3 and buy 1...... that 1 you buy will be the best deal for that type of property in that particular street etc. If you buy on Avgs then you make average investments.
I bought a condo in Florida in 2006 for $360K and it fell to Value of $190K in 2008 I got wiped out by this and s few other such investments. Scared me out of RE investments up to today. Once burnt is twice learnt.
So here in Boise, Idaho our house prices have been driven up mostly by out of state money from more expensive markets (California, Washington, etc). What all of us locals here thought was people wanting to move to a red state with some of the most conservative views.... After watching this I am almost certain it is just people cashing out and "getting more bang for their buck" in a cheaper market. I bought my house brand new build almost exactly a year ago and value has already gone up about 100k... Boise market has been ridiculous!
Congrats Richard! That's the dream. And that's the opposite of what most people are doing right now (buying at elevated prices with minimal cash flow from rental).
I have been in real estate for 31 years and have seen 3 cycles in my career. A huge part of this increase in real estate prices is the affordability due to interest rates being at record lows. For example; when rates were at 7%, a $2,000 Principle and interest payment would buy you a house for about $301,000. Rates were about 7% in the early to mid 2000's. Now, in 2021, at 3% interest rate, a $2,000 principle and interest payment would buy you a house for about $475,000. (Based on 30 year mortgage). That is $174,000 higher price house for virtually the same payment. So, a person could buy a home for $301,000 in 2005 and $475,000 in 2021 without a change in income, and have virtually the same payment. When rates start to rise, we will see the affordability go back down, and therefore prices go down to where people can afford them again. I think that this plays a huge part in this current housing price situation. If interest rates go up, prices will come down! Thanks for your video!
@@ReventureConsulting Good question. I think that the down payment is definitely a factor. A person can buy a house with as little as 3% down for first time buyers and 5% down for non-first time buyers. I am sure that there is a point where some people are priced out based on coming up with the down payment. With 5% down, every $100,000 would mean another $5,000 out of their pockets plus a little bit in closing costs. both down payment and interest rate are factors when buying a home. BTW, many cities, counties and states have first time home buyer assistance programs to help with the down payment. Some are good and some are not so good. They could help people get into homes that they couldn't get into otherwise. Make sure to learn about the whole program before agreeing to them because there are stipulations. These programs are usually posted on their websites.
Nick. Loving your channel. One thing to point out in your Austin analysis -- the median home price and median rent is probably calculated on different spectrum of homes so the analysis is probably not so convincing. No wonder Austin is overpriced though.
Thanks for the comment Chenguang! 4.3% is a pretty accurate rental yield for central Austin - and perhaps even high. If you get out further into Williamson and Hays County the yield goes up to 5-5.5%.
@@ReventureConsulting what percentage did you use to calculate property tax for the Austin analysis? The figure amount seems low for that mortgage amount.
Great analysis. As a real estate appraiser, investor, and property manager I agree with much of what you've stated however the 2007 downturn was due mostly due to lenders loaning money to unqualified borrowers. We are not seeing that today as lending is much tighter than in the mid 2000's. Also new home building between 2000-2010 totaled 25 million whereas between 2010-2020 new construction homes totaled 5 million. Add that to the fact that the largest home buying generation, the millennials, are at their peak home buying age. In short what do you think will cause the next downturn?
Thanks for the comment Scott! Agreed that there are some key differences between now and 2007. However, I've seen the infographic with the 25 --> 5 million data you're referencing, and it's flat out wrong. Tune in to my channel on Sunday where I will be breaking down the real data on home building.
I'm in Austin. I made the difficult decision last year to sell or keep my house as a rental. This was *before* the huge run up. The house I sold for $410k could probably fetch $500-600k (due to crazy offers over asking price) today. But even at $410k, the numbers didn't make sense. At best, I could get $2k/mo in rent. I did a pro forma like the above and concluded that I would likely be in a negative cash flow situation. We're renting for the time being, so I have a bit of regret over letting it go. On the other hand, I feel this market is extremely unsustainable.
Thank you for the insight Nate! That's interesting how even at the previous sale price you couldn't make the figures work. Says a lot about the current state of the market.
@@ReventureConsulting Most "investors" -- especially the ones renting out their former residences -- don't underwrite with realistic assumptions about vacancies, repairs, etc. Especially with the soft rental market here I felt I had to be conservative.
I’m have taken a beating having to sell in bad markets. With prices steadily rising around Denver, unless I’m planning to hold a property long term, it makes no sense to buy anything.
Fair points. However, you can't argue with the rent and value appreciation in a those central California markets. It's interesting how, despite that, they aren't building new housing.
In my vast experience, a higher yield is not a good indicator of a good investment, nor can it predict the future market. Hi yield hi risk, low yield almost guarantees no risk.
I’m a realtor in the Reno, NV market. The price growth is concerning, but there is also a lot of job growth since Nevada is very business friendly. Price growth is being fueled both by inventory shortage (exacerbated by COVID) and influx of people moving from CA, including a lot of retirees. I’m not sure how it all balances out.
FANNIE MAE, FREDDI MAV AND HUD SHALL STOP SELLING THEIR REO'S TO REAL ESTATE SPECULATORS. THESE ENTITIES WILL KNLY SELL TO OWNER OCCUPIED HOME OWNERS ONLY
Thanks for the comment Sonia! Reno is one of those markets that looks better in 2021 than it did in 2007. You're spot on about the job growth. Another major crash in Reno doesn't seem as likely. With that said - don't be surprised if we see a price correction. Prices in Reno are higher than in SLC and Austin according to Zillow.
There are people from High RE price area are buying lower RE price area. That created price bid war and pushed that local RE price higher. For example: a CA person can easily buy TX property by selling CA high RE. and may buy in cash in lower RE area and still leave some cash in his/her pocket. That is what I joked with my SD friend who would have $800k cash if she sells her SD house and easily to buy in lower RE area ( such as my area-suburban Chicago) similar house in cash and bank maybe half old hs cash. Local people are suffer instead.
I own two single family homes in Miami..& two apartments on the beach in Spain & my rental inflow allows me to live without working for 20 years here in DR.!!🕶🏊♀️🚣♂️🏖🚣♂️🏊♀️
In cases where many houses are not bought by people with local earnings, how would you factor that? Not many who’s earnings are derived from the local economy can afford the houses where I live. This is a sparsely populated mountain town and many homes are second home getaways.. The market is fueled by big city second home buyers and or VRBO investors. Add to that the recent expansion of work from home and that has pushed up the demand from those looking to leave the crowded suburbs. We simply don’t have enough houses and building is prohibitively expensive right now.
That's a great question! Any time real estate demand comes non-locals that makes a market more volatile. It juices prices in the short term, but likely will result in a bigger crash in the long-term.
One thing you missed. Capital gains taxes will likely be retroactive if they get implemented so it's too late if they do that. You're stuck with the capitol gains tax increase
Living in the Boise area I’d say we are good. Everyone is paying cash from Cali and or they have a 800 FICO. I think it will level in 12-18 months but it won’t crash like it did in 2007.
Nick, but markets are also stratified by home price and income level. For example, in California, CAR just announced that homes over $2M had the highest percentage appreciation while homes less than 250k went up the least or declined. I think this stratification reflects the worsening of inequality after Covid-19. Different market segments may fair worse or better in any crash scenario based on the relative income/wealth ratios to house prices.
It's an interesting point. Last time the crash primarily impacted lower income areas with affordable prices. I suspect the next one will hit the upper end of the market hard too.
@@ReventureConsulting the last crash had a lot of foreclosures coming onto the market, which were i guess mostly from lower income areas. Most wealthy neighborhoods like atherton or los altos in the bay area were told to withstand the crash last time (i did not check the data myself though)
This is the most informative and realistic analysis of what is going on now with the ratio of earnings to value. It's interesting to see how things play out as the economy reopens
I own 3 properties (OWN - paid off!) I'm wondering if I should sell them now and replace them after the crash. I might be able to buy 5 or 6 properties later if I sell now. Do you have a video that talks about when to buy and when to sell rentals?
Great question! It's a very market-dependent question. If you're getting great cash flow from your rentals then there probably isn't a huge reason to sell. But if you're in a market where cash flows are low, and appreciation is the main driver of return, it might be smart to consider selling.
I fear for what these ridiculous house prices (BTW, I own a house free and clear) will do to low-income peoples' housing costs and standards of living. I don't want a deluge of homelessness in my city. I don't want to live in a country where most people are miserable. I don't care about the price of my house because I have no intend of using its equity anyway and should I sell to move, I'd then have to buy at inflated prices anyway - net zero gain!
Same here. We own our house free and clear. I want to see everyone doing well. The world is a much happier and pleasant place when everyone benefits not just a few.
Don’t waste your time trying to time the market, work to master your money instead. One thing you can do is learn how to use money as a tool by investing for passive income.This way whether the market goes up or down, you keep getting paid.
Thoughts on southern New Hampshire? Prices have gone up in low to medium housing market substantially, beyond what the local business salaries can support. However we are getting flooded by out of state buyers because they can work from home permanently without paying employment tax. Because NH is tax free do you see our housing market actually holding higher for the long term even though local salaries don't support these prices?
In the San Francisco Bay area we have known that rent was really high and the tech people moved out last summer. So the rentals in San Francisco and to San Jose corrected last year. Then others have sold their house in those markets and bought in Sac, Stockton, Fresno, etc. For cash. Yet prices around here continue to rise much to my surprise. Is there going to be a correction yes, but not this year. I planning for next spring
What's your take on lakefront / vacation properties - I am specifically thinking about Lake Tahoe (in California) and similar destinations that are close to expensive hubs, but have generally been "affordable" (relatively speaking), but during COVID just skyrocketed. One reason could be, all the rich folks in SF Bay Area were getting jittery sitting at home and couldn't travel anywhere and a road trip to Tahoe was the best option. Another possibility is, with remote-work possibilities, they could enjoy the Tahoe / skiing / lake life throughout the year and only come into work (a few hours drive) only as necessary. At least during COVID, the rental / Airbnb market in this area has been super good. I guess the question is - when things go back to "normal" and people feel comfortable flying and border restrictions go down, what will happen? Will rich people be like "hey, time to drive 3-4 hrs to Tahoe!" or "hey, let's fly to Hawaii / Cancun!". I personally think it's the latter, but what do you think? Also, if they have the option, the number of people who will relocate their family permanently to Tahoe versus some other cheaper state is an interesting point also. Would be great to hear your thoughts on this.
Hi! Your data and insight is refreshing! Curious to see what you think of the housing market in the Lehigh Valley here in Pennsylvania. It consists of the Allentown and surrounding areas! It's pretty competitive to buy but curious on the value/income and your opinion on stability of this market and its ability to withstand a crash going forward!
Thanks for the comment Marta! Allentown is one of those markets that looks better today than it did in 2006. With that said - I'm skeptical of markets that saw big influxes of demand post-COVID. Will that NYC/Philly exodus demand hold? Not so sure.
My real-estate brother great content 👏 but your missing the dollar devaluation, inflation, government need for low interest, lack of inventory that will last because building cost don't make sense in some areas..I build sell Tampa FL. I also think when it does blow were looking at 50-80 percent drop with the this market...it will be nasty scary..specially with dollar collapse..window 5-15 years..to long to rent hence why the frenzy
Yes! You'll need to download home value data from Zillow and hourly wage data from BLS website. Then convert hourly wages into annual wages by multiplying by 35 hours in a week and 50 weeks in a year. Then divide values by annual wages.
Keep making videos man, you're gonna really be a great channel I can tell! I'm in Boise- trying to buy a 4plex as owner occupied rental. I've been concerned of overpaying for a property, but I also need a place to live. The two variables you seem to omit are 1) general inflation across all asset classed due to money creation 2) migration. I'm sitting on my down payment in cash, knowing that what I can buy with that cash is less everyday. Is it possible we have an invisible crash, nominally housing prices do not collapse, but a loaf of bread costs $20?
Thanks for the comment Josh! I agree that migration is a key variable to consider. And Boise is a top in-migration city (18k in 2020 across the metro according to US Census data). But, at the same time, Boise also permits and builds more new housing than almost any other market. How will that balance itself out? Boise went through a similar experience with this high migration, high building in the mid-2000s. Good question on inflation. I will be putting out a video soon analyzing this. Short answer: deflation could be just as likely as inflation right now. Bond yields are near historic lows. Economic recovery is not great.
@@ReventureConsulting I ran the numbers you talked about for median home price divided by median income. In Ada County (Boise) it's now 481,208 median home price and 32,937 median income last survey (2019). So that's a 14.6X valuation! I think that's enough to make me sit out a little longer..
Great data here. Curious about your thoughts about first time home buyers that have a large sum of money in savings and worried about the inflation without any guarantee that there would be a significant deflation in the future. Historically, haven’t home prices always gone back up after a crash/recession, and and then some. Would one option be to put as much down payment down to keep monthly mortgage as low as possible and ride out the crash and wait for things to start rising again? Just weighing the chances of deflation after significant inflation vs chances of home prices bouncing back up again after a crash in the long term
Great questions Edward! Home prices have become increasingly volatile over the last 30 years, detaching from inflation. As a result, I think the housing market has lost some of its inflation hedge ability, and that it is now a market that is prone to swings up and down, much like the stock market. I will be posting a video about this very topic Sunday. Make sure to watch!
In 2007 it was the no document loans, now we have this huge backlog of unlisted properties because of people being anxious about listing. Will people cause a listing tsunami when things stabilize?
Thanks for the comment Greg! It will be interesting to see what banks do when listings surge and demand dwindles at current prices. They will likely feel pressure to start loosening lending restrictions. I'll be watching the MBA mortgage availability index for changes each month.
Great question Jamal! I will be doing a video on this in the near future. Short answer: homes are a great inflation hedge historically. However, most relevant indicators (CPI, Treasury Yields) aren't showing much concern about inflation.
Great video and important considerations for those who want to be rental investors. Does this apply for those of us who just want to buy for our own primary residence? I’m in Los Angeles.
Ultimately the home purchase decision is about what you want as a individual/family as well as personal finances. A potentially good rule of thumb: if you can find the home of your dreams, and can afford it, then do it. But if you have to compromise, and are buying because of FOMO, might be smart to wait.
I've been looking for someone like you. I've had my reservations about the market. Everyone knows we're in a bubble but the argument always seems to be "when will the market crash?". Of course no one really knows. However having the data and number driven factors to stand on rather than opinions is so much more useful. I'm tired of the titles "market crash" only for the person to say it's not going to happen this year or next and don't listen to the fear mongering yata yata. That opinion is based on the moratoriums being kicked down the road and the fact that foreclosures take years to play out. BUT what it something else tips the market before that happens. My opinion (which isn't worth much) is once people start to feel the top, it's going to tip and crash fast while everyone tried to save themselves at the same time, especially investors. I think it'll be worse than 08 because when that happened no one saw it coming and housing was always considered a safe appreciating asset with only mild swings comparable to other investments. This time, people know it's possible for a home to depreciate by 50% or more.
Thanks for the post Kristine! I like your perspective a lot. People are focusing so much on how now is different from last time (less subprime loans, etc.), but ignoring the obvious similarities in irrational behavior and wild price appreciation.
@@ReventureConsulting I totally agree. 5-10 years from now they will explain the cause of this market crash and 10-15 years after that maybe it'll run up again for a different reason and none of today's factors or 08s factors will have anything to do with it. Things happen for different reasons, just because the main catalyst last time isn't present today doesn't mean there won't be a catalyst at all. The fact is the behavior is the same, even though the causal factors are different.
Thanks for the awesome video, I think there are other very important considerations though. How would you temper the Value/Earnings ratio comparison to 07/08 with the fact that the underlying fundamentals of each buyer are much stronger? I'm thinking record high savings rates, people aren't pulling equity out of their homes (at least nowhere near the same rate), people with bad credit aren't buying houses, etc. Also important to note is the fact that the government is pumping an enormous amount of dollars into the market right now, which will keep asset prices suspended and it doesn't seem like that is going to stop anytime soon. They were also in 08 but nowhere near the same extent. No doubt we are in a bubble now, but it seems there are so many other factors at play now compared to the last crash. Bad debt (i.e. subprime mortgages) caused 07/08, but we've got a much better mortgage system now. Just my thoughts, what do you think?
Thanks for the comment Conner! You bring up great points about why the situation in 2021 is different than in 2007. But as Mark Twain says: "History doesn't repeat itself. But it often rhymes." A wave of foreclosures is unlikely going forward. But a wave of listings due to COVID backlog, pent up forbearances, and new permitting reaching mid-2000s levels? Into a market that is hampered by a large recession and record high prices? That's certainly possible, if not very likely.
Its weird why does redfin continue to stay homes are still be sold so quickly. But, in my city there are several homes that go on redfin, and then are removed but are still for sale.
That's a great question! I think a lot of realtors try to manipulate the listings since it looks bad if something is on the market for an extended timeframe and doesn't sell. Then they relist at a later date.
Very well done, I really appreciate your thorough evaluation. I would love to have a closer look at individual cities, do you have this data available on a website? I would especially like to look at the chart that shows earnings vs home prices. Thanks again!
2007 was mainly a subprime bubble, 2021, such loans are virtually nonexistent and low inventory…so yes it’s a bubble but it will not crash like in 2008 but rather a more realistic adjustment.
So how does one find or calculate the value to earnings ratio? Or is that a service you all provide? I'm in Henderson NV, specifically the 89002 zip code and our house just in the last couple of months got back to it's original sale price of 506,000 in 2004 though we purchased it in 2017 from the original owner for quite a bit less. My guess is that it would have sold for even more in 2007 or 2008 so is this market just slower than some of the other markets in the US?
Value / Earnings at the metro level (in you case, Las Vegas-Henderson metro) can be calculated by using data from Zillow and BLS linked to in the description.
The example of a property in Austin is exactly what I've been saying as well! Good stuff! VE / rental yields /operational costs /taxes. You could probably use condos as a leading indicator but I haven't had the time to dig into it.
Welcome home It doesn't matter if you're buying, renting, selling or just dreaming - we want to help you find your way home. Here's how to make the most of your Zillow experience. You can Email Us Directly Zillowrealestatee@gmail.com Zillowrealestatee@gmail.com Zillowrealestatee@gmail.com
Your knowledge of real estate is amazing. You explained the current market, better than anyone I've heard before.
Thank you Glenn!
I’m going to move to Austin for a new job next month. After seeing the data you showed, I decided to rent for a while until the 50k-100k premium is gone. Inflation, short supply, QE, labor cost, even just one of the factors changed, the price might be more friendly to buyers
Thanks for the comment Eefun! I think you made a good decision on Austin. I've lived here for a year and the buying market is nuts. On the contrary - renting is quite friendly. One to two months free in a lot of places.
This is golden analysis! Thank you so much.
I'm in Sacramento, and I see how insanely market is overextended from VE standpoint, at the same time every regular Joe rushing to buy in, houses are 1-3 days on market max. Insane bids over asking price. Majority of ppl I work with do not believe in huge off cliff drop and buying in, they think I'm crazy when explaining this bubble to them...
Thanks for the local commentary Dmitry! It's funny how the "prices will always go up" argument has somehow seeped back into the mainstream discourse.
When you have people FOMOing and ignoring all the warning signs...that's why history tends to repeat itself.
I'm binge watching every video. Thank you. I'm wanting to Buy and Hold properties with an eye on retirement. Thank you. I've got so much to learn. Thank you thank you
Thanks for the kind words Kathryn! Glad you're finding the content valuable.
This also makes sense. In 2008 I was renting in Long Beach, CA, and one out of every three houses in my neighborhood became vacant. I ended up moving and renting in a safer area which also got hit hard. I bought a house 10 years later.
Hey Brother...Im an investor and pay cash for the homes and your info and chanel are right on! Love seeing and hearing someone tell the truth without flip flopping like other channels. Keep it up
Thank you for the kind words!
It will crash real estate gas price goes up eventually people will not able to afford gas to commute to work for expensive gas summer $7
To put things in perspective where I live in CA, the median household income is 68k in 2020. House prices are in the 900k. There's some truth to what this mans data points are. Good video.
Thanks Manila! California is crazy, especially LA. Did a recent video talking about the exact situation you're describing there.
As a general rule, the size of your mortgage should be equal to or less than 2x your income. 3x is doable. Your local situation is nuts.
@RickReviews Now that Oracle, HP, and other tech companies are moving away from the bay area, prices will begin to take a nose dive. Better to sell because these overpriced homes will come down to reality pretty soon.
One thing you may not take into consideration. I bought 15-20 years ago where RENTS were HIGHER than MORTGAGES. And the vacancy rate was horrible. Everyone kept moving to buy a house. I bought low end houses where average rents were $700 and mortgages were $600 to $650 including escrow. But every move out was expensive ($2000+) for paint, carpet, etc. I bought several houses and it got very costly. Finally the mortgage cost is MUCH higher than rent and I have almost no vacancies.
Thanks for the perspective. Based on your last sentence - would you say that's a sign that households are feeling priced out of the housing market currently?
Thank you! I'm so happy to hear Boise is a red dot...I'm a native and yet to become a homeowner. It's heartbreaking that us natives are getting pushed out of the market by the steady influx of cash buyers from out of state. The rental market is in complete shambles as well...prices doubling in the past two years. I keep thinking this can't be sustainable but the general consensus from the real estate sector is that prices will continue to rise. I very much appreciate your take! 🤞
Im in CDA,Idaho.....we got it worse.homes are going for 600k that are worth 350k.....there is nothing below 320k for sale.
Also a lot of people that moved here are now having to get two jobs to pay their high/inflated mortgages... because at the end of the day it's still North Idaho and $14.50hr is a high paying job... they really thought they come from the city and get a $20+hr job in North Idaho and a lot of the work-from-home people are now getting called back to the cities they came from or they have to resign....I Love it
Thanks for the local insight Jessica! It's unfortunate to hear about the state of the market in Boise right now.
Great point about Wages - the BLS average hourly wage in Boise has not increased by much in the last five years. Concerning in relation to home prices.
Same here. They will go back. People are paying top dollar from out of state to live in areas they know nothing about. Just wait once the Pandemic calms down and they hate the area and miss home. There will be discounts
Any buyer being a hedge fund company buying up multiple homes or individual homebuyers that pay 10k to 300k over list for a house many times forgoing appraisal and inspection is very very unwise and will regret it in the near future. You never overpay for homes, cars, etc.
100%. Thanks for the comment!
Smaller channel but i love how you are backing things up with real data! Glad I found your channel.
Thanks James! Much appreciated!
Yeah the data part is great!
I'm was so happy when I heard you say " Orlando, FL " That's where I live and that's where I'm planning on buying next year.
It is true that people in our area (Seattle) who purchased rental properties recently rarely have any positive cash flow. They are depending on appreciation in the future. It is a risk strategy.
Thanks for the local perspective! I agree that it's a risky strategy. Once the market peaks there is little incentive to hold.
Risky Risky Risky in the 9th Inning! Burned into my brain! Lol. Thanks for another insightful video :) Keep up the great work. Cheers!
Been listening to many opinions on whether we are in a bubble that will burst or not... some say this is not a bubble basing that opinion on 2008 crash, citing that burst because bad lending practices were rampet which is not what is driving this bubble. I'm not sure what to believe right now but this guy does make sense in comparing home prices to income.
Thanks for the comment Karen!
Those who focus solely on subprime and bad loans are missing the big picture on the real estate market right now. Right now we a nasty combo: deep recession, lots of job losses, lower population growth, and spiking real estate prices.
The thing is, we live in a time now where "local jobs" doesn't have the same meaning that it did ever before. People can now bring their big city salaries to other parts of the country because they are working remotely. This changes everything.
Which means even less demand for big cities, which means the bubble in those cities is even more severe.
@@jellyman1735 yup, those big cities will certainly suffer.
I think that's a really good point, I'd like to hear the response to this.. it doesn't take into consideration people's migration.
@@josheatsbananas4373 My understanding is that the BLS data pulls directly from income tax data. So if I'm living in Buffalo, but my job is in Manhattan, the earned wages should be the same.
Many co's did the same thing in the dotcom bubble. That didn't last either. When people work remotely, communication and innovation both decline. Google the Allen Curve.
This is great data! Love the graphs. It takes a lot of time and an excellent grasp of how things work together to build the RIGHT graphs and you do a fantastic job!
Thanks Sophia!
I live in one of those risky bubbles. I bought in 09 and my primary residents is worth three times what I paid for. I've considered selling and waiting out the bubble so I can buy property in 1-2 years but everything thinks I'm crazy.
Thanks for the comment Alicia! Congrats on your appreciation.
Make it real and sell it rent for 3 years that's the wind
I recall home prices in San Jose in the seventies. Average home cost 3,5 years annual average salaries. home loans interest rates were about 6-7% and inflation was 15% so it made sense to buy a home on credit.
This is really the only data driven analysis of housing market. You need to be on TV. BTW, can you share this list of cities in the last slide in a spreadsheet or something?
Thank you Amin! Maybe one day!
agree with you 100% and thank you for a very valuable video!!! Makes total sense!! Not buying a house at this time. I sold last year, and renting) sitting on my money until the bubble pops) Thanks again!!
Thanks for the comment Natalia!
May work against you. By time you think is right to get in mortgage rates may rise...just 30 years ago typical 30 year mtg was 8 percent....run some numbers and take risk of pricing yourself out the market forever imo
Great content! Love the data, numbers, and insight you bring! Thank you so much for doing this!
Thank you for watching and commenting HP!
I live in Buffalo the last 60 years your analysis of real estate is spot on
Thanks Bill! Buffalo is great for cash flow.
It's just like stocks. The formally high-flying growth stocks with high price-to-earnings valuations like the ARKK innovation fund are coming down to earth while value and dividend stocks are performing much better.
Great point! Cathie Wood would be all over Austin and Boise.
Great stuff. The only thing I'd add is to consider a geographic component. Some markets draw from larger hinterlands (e.g. Chicago), some markets are major transit hubs with ports, rail, and major highways (Houston, Jacksonville), and some have really nothing geographically unique (e.g. Boulder). A three-dimensional map of value, rental yield, and some sort of a composite score showing natural geographic infrastructure and perhaps business climate would be really interesting.
Thanks for the insightful comment, Cornelius! I think those geographic components are very interesting. In the end they will likely impact job growth, which is a metric I do keep track of in composite scoring. Stay tuned for future videos where I talk more about that.
We signed with a builder (DFW area) in Jan 2021 and the price for our floor plan has increased $100k. We would be priced out if we paid what they are selling the same home for, 5 mos later. The housing market in Dallas is ridiculous. Our builder has 100 ppl on a waitlist for the next phase that they haven’t even started building yet. Our realtor has 150 ppl on a builder wait list. Something has to give at some point. It’s not unusual to drive by an open house and see a line in the driveway; some ppl get turned away.
Thanks for the feedback Anna!
What's interesting is that the re-sale market in Dallas, at least near the urban core, seems to have a lot of inventory.
ah that sounds super dangerous. i hope they wont collect all that money and then declare bankruptcy and disappear. Have not heard a first hand story like that in the US, but heard from some people from other countries
Best real estate analysis that I’ve seen recently; great data driven analysis. My question is how does the significant trend toward remote working (telework) affect these numbers?
Thank you! Good question on remote work. I think it will have a bigger impact on real estate within metros than across metros. Meaning - demand shifting from urban NYC to suburban NYC, but not necessarily that demand moving to Austin.
@@ReventureConsulting It feels like “musical chairs” at the moment; I wonder what the outcome will be when “the dust settles”. With so many workers liberated to live wherever they please by their employers and by the growth of online entrepreneurs, where will they decide to relocate given the choice?
Phoenix is the hottest real estate market in the US. My Step-daughter and son-in-law sold their home $30,500 over asking price. Sold as is.
It sure is 🔥🔥🔥 I can only handle 1 weekend in 10 years , yikes.
Thats nothing compared to Coeur d’Alene ID
I got killed in the Arizona market in 2008-2010. I was planning to buy and hold, but the rental market became flooded where a landlord offered $100 to move in and two months rent for signing a two year lease. Rents dropped up to 50%. I believe we are seeing a repeat of 2008. I am waiting and watching. I am already seeing price reductions on approximately 30% of listed properties.
I keep hearing that what we are in is NOT like the 2007 crash at all. That 2007 saw too many people in situations that they could not afford along with other corrupt dealings. Today, banks are more strict on lending and the landscape is much different.. That is what I am being told.
Thanks for the comment Patrick! I hear that a lot too. I would suggest taking a look at the 5 Survival Cities video that comes out today - I discuss that topic.
Excellent! I’m in the Salt Lake market; most helpful analysis
Thanks James!
Glad to see this channel grow in views from when I first started viewing. Well deserved!
Thank you! Let's keep on trucking!
Why are Hawaii & Alaska excluded in your analysis? I am 2nd generation Cali. One daughter lives here and the other in Maui. Selling now Ventura County planned golf community home of 30 yrs and considering multi offers on the table. That being said, vision is to sit this next bubble burst out in Maui and then reevaluate investing options when the dust settles. Yes, I can not wait for a video on how the possible exponential increasing inflation plays alongside this Realestate bubble bursting. I know that is a slippery slope to ask you to navigate, but somehow I think your up to the task! Lol. You know the possible time lines for each as they reveal themselves. I will calculate and do my due diligence/homework per your recommendation regarding Maui. I know the last time it sank it went very low for quite awhile. Makes 1000% sense and kudos to you for your amazingly high far reaching perspective. I love your graphs btw. Thank you for all your insights and teaching applications. Appreciate & Grateful !
Thanks for the comment Karee! Already did a video on Inflation about 3 weeks ago. Check it out in video history!
I live in San Francisco. I will use your numbers that you quote here. In 2007 a home is 795k and in 2012 in hit rock bottom at 538k which is a loss of 257k. The homes in 2021 here are at 1.5m. If you bought your house in 2007 and kept it you would have profited 962k. Even if the bubble crashes again and we lose 35% value you still make a profit of 180k.
The big difference between 2007 and today is there were massive unqualified buyers getting into bad loans. They eventually defaulted and caused the crash.
Thanks for the comment! I agree - borrower quality looks to be a lot stronger than than 15 years ago.
Interesting analysis, The 2007 crash was in large part caused by the inappropriate valuing of Mortgage backed Securities and lenders selling off fraudulent loans to uninformed investors. Many buyers had little to no money actually invested in the properties they purchased with little or no money down. As a result when the market began to fall people just walked away from the investments in which they had little or nothing to lose. In contrast the market today has investors actually using real money with significant down payments and as a result to walk away this time they will actually lose significant wealth. I do agree that the markets will adjust significantly in some markets as you have identified, however, with so much to lose I have a hard time believing that a market like 2007 will happen this time around. Especially when much of the financing used today is a fixed rate loan at historical lows and inflation beginning to become a significant factor. If inflation continues to climb then rents and property values are likely to also increase. As long as we can continue to maintain a reasonably strong employment market here in the U.S. real estate is going to be a relatively safe place to park significant amounts of money.
It was caused by Democrats forcing mortgage lenders to offer low down payment and interest only loans.
Good point!
I’m near Sacramento. Hope I chose right to sell now. I’ll sit it out and buy during the drop.
Prices in Sacramento are near all-time highs! Could be a smart move.
@@ReventureConsulting I suspect that Sacramento prices have been pushed up by people moving there from the Bay Area. And these are less risky buyers.
Almost bought this year in Denver but the market smells fishy. Glad I am waiting after hearing these stats. Can't see the market continuing to pump.
Thanks for the comment Josh! Agreed that it smells very fishy.
17:50 investors are a big reason prices in my area are skyrocketing.
I see listed homes sell fast then immediately listed for rent
Exactly! Investors are fueling a lot of short-term demand. The question is: will this demand stick around as the market peaks?
Nick, great presentation. Your graphical analysis is fantastic. My only critique is about the stark white background when you're in frame. It's a little uncomfortable on my old eyes. Suggest light-medium blue or grey-brown for your complection. First time viewer, and I sub'd and rang the bell.
Thanks for watching FC! Appreciate the visual feedback.
This is the MOST valuable video I've watched on this market so far! Great video!
Thank you so much!
We are still a few years away from the bubble busting. When these folks offering $100k over asking need to refi, they’re gonna figure out they’re stuck. They’ll regret that offer once they get their property taxes too.
Interesting point Francisco!
We are not in a housing bubble, we are in A housing deficit of 3.8 million homes and homes need to be far less affordable to balance the market when you have 20 buyers to a single house for sale.
Interestingly, the US is producing more homes relative to population growth than it was in the mid-2000s. Tune in Sunday to learn more.
Thanks for the insight man! Much appreciate the analysis in Austin.
Thanks for the comment Siva!
Very good video and appreciate your specific geographic market analysis, however you didn't mention Phoenix? Could you please comment on the security of the Phoenix marketplace now compared to back in '07. Thanks Nick
The issue with Ratios and Averages is you miss out on all the deals under and over. If a street has 5 families, 1 of them have House hold income of 1mil, and the other 4 have a house hold income of 150k. The avg doesn't reflect the actual street.
The 1mil income could sell the best house on the street for 150k more than what the other 4 ordinary homes sell for. The avg of those sales don't reflect the actual market. You are better off comparing size, quality and serviceability, and to look for the demand for your potential purchase, and find a good deal. 100 10 3 1 rule. Look at 100 house, create a short-list of 10, put an offer in on 3 and buy 1...... that 1 you buy will be the best deal for that type of property in that particular street etc. If you buy on Avgs then you make average investments.
As a good investor we always remember the inherent risk in investing.
Yes! Can never forget that.
You are the best analyst!
Thank you!
I bought a condo in Florida in 2006 for $360K and it fell to Value of $190K in 2008 I got wiped out by this and s few other such investments. Scared me out of RE investments up to today. Once burnt is twice learnt.
So here in Boise, Idaho our house prices have been driven up mostly by out of state money from more expensive markets (California, Washington, etc). What all of us locals here thought was people wanting to move to a red state with some of the most conservative views.... After watching this I am almost certain it is just people cashing out and "getting more bang for their buck" in a cheaper market. I bought my house brand new build almost exactly a year ago and value has already gone up about 100k... Boise market has been ridiculous!
Thanks for the local perspective! I'll be doing a video on Boise soon, so stay tuned for that!
I bought 5 homes in 2008,2009 at 1/2 price equal to new truck for cash still have them & able to give cheep rent to keep long term rental.
Congrats Richard! That's the dream. And that's the opposite of what most people are doing right now (buying at elevated prices with minimal cash flow from rental).
I have been in real estate for 31 years and have seen 3 cycles in my career. A huge part of this increase in real estate prices is the affordability due to interest rates being at record lows. For example; when rates were at 7%, a $2,000 Principle and interest payment would buy you a house for about $301,000. Rates were about 7% in the early to mid 2000's. Now, in 2021, at 3% interest rate, a $2,000 principle and interest payment would buy you a house for about $475,000. (Based on 30 year mortgage). That is $174,000 higher price house for virtually the same payment. So, a person could buy a home for $301,000 in 2005 and $475,000 in 2021 without a change in income, and have virtually the same payment. When rates start to rise, we will see the affordability go back down, and therefore prices go down to where people can afford them again. I think that this plays a huge part in this current housing price situation. If interest rates go up, prices will come down! Thanks for your video!
Thanks for the post Kendell!
At what point do you think higher prices begin to price people out on the downpayment side?
@@ReventureConsulting Good question. I think that the down payment is definitely a factor. A person can buy a house with as little as 3% down for first time buyers and 5% down for non-first time buyers. I am sure that there is a point where some people are priced out based on coming up with the down payment. With 5% down, every $100,000 would mean another $5,000 out of their pockets plus a little bit in closing costs. both down payment and interest rate are factors when buying a home. BTW, many cities, counties and states have first time home buyer assistance programs to help with the down payment. Some are good and some are not so good. They could help people get into homes that they couldn't get into otherwise. Make sure to learn about the whole program before agreeing to them because there are stipulations. These programs are usually posted on their websites.
Nick. Loving your channel. One thing to point out in your Austin analysis -- the median home price and median rent is probably calculated on different spectrum of homes so the analysis is probably not so convincing. No wonder Austin is overpriced though.
Thanks for the comment Chenguang!
4.3% is a pretty accurate rental yield for central Austin - and perhaps even high. If you get out further into Williamson and Hays County the yield goes up to 5-5.5%.
@@ReventureConsulting what percentage did you use to calculate property tax for the Austin analysis? The figure amount seems low for that mortgage amount.
Great analysis. As a real estate appraiser, investor, and property manager I agree with much of what you've stated however the 2007 downturn was due mostly due to lenders loaning money to unqualified borrowers. We are not seeing that today as lending is much tighter than in the mid 2000's. Also new home building between 2000-2010 totaled 25 million whereas between 2010-2020 new construction homes totaled 5 million. Add that to the fact that the largest home buying generation, the millennials, are at their peak home buying age. In short what do you think will cause the next downturn?
Thanks for the comment Scott! Agreed that there are some key differences between now and 2007.
However, I've seen the infographic with the 25 --> 5 million data you're referencing, and it's flat out wrong. Tune in to my channel on Sunday where I will be breaking down the real data on home building.
I'm in Austin. I made the difficult decision last year to sell or keep my house as a rental. This was *before* the huge run up. The house I sold for $410k could probably fetch $500-600k (due to crazy offers over asking price) today. But even at $410k, the numbers didn't make sense. At best, I could get $2k/mo in rent. I did a pro forma like the above and concluded that I would likely be in a negative cash flow situation. We're renting for the time being, so I have a bit of regret over letting it go. On the other hand, I feel this market is extremely unsustainable.
Thank you for the insight Nate!
That's interesting how even at the previous sale price you couldn't make the figures work. Says a lot about the current state of the market.
@@ReventureConsulting Most "investors" -- especially the ones renting out their former residences -- don't underwrite with realistic assumptions about vacancies, repairs, etc. Especially with the soft rental market here I felt I had to be conservative.
I’m have taken a beating having to sell in bad markets. With prices steadily rising around Denver, unless I’m planning to hold a property long term, it makes no sense to buy anything.
Nothing worse than selling in a bad market. Agreed on your assessment of Denver.
Fresno, Bakersfield, Baltimore have problem with drugs and crime. Not the best tenants.
Fair points. However, you can't argue with the rent and value appreciation in a those central California markets. It's interesting how, despite that, they aren't building new housing.
In my vast experience, a higher yield is not a good indicator of a good investment, nor can it predict the future market. Hi yield hi risk, low yield almost guarantees no risk.
You have great educational content! Thank you so much for sharing your knowledge.
Thank you Maria!
I’m a realtor in the Reno, NV market. The price growth is concerning, but there is also a lot of job growth since Nevada is very business friendly. Price growth is being fueled both by inventory shortage (exacerbated by COVID) and influx of people moving from CA, including a lot of retirees. I’m not sure how it all balances out.
FANNIE MAE, FREDDI MAV AND HUD SHALL STOP SELLING THEIR REO'S TO REAL ESTATE SPECULATORS. THESE ENTITIES WILL KNLY SELL TO OWNER OCCUPIED HOME OWNERS ONLY
Thanks for the comment Sonia!
Reno is one of those markets that looks better in 2021 than it did in 2007. You're spot on about the job growth. Another major crash in Reno doesn't seem as likely.
With that said - don't be surprised if we see a price correction. Prices in Reno are higher than in SLC and Austin according to Zillow.
Rents here in Phoenix is at record high with supply is low. They are now building rental homes here to help the rental market.
Great point Roy! That's one of the reasons that Phoenix looks like a more fundamentally sound market now than 15 years ago.
There are people from High RE price area are buying lower RE price area. That created price bid war and pushed that local RE price higher. For example: a CA person can easily buy TX property by selling CA high RE. and may buy in cash in lower RE area and still leave some cash in his/her pocket. That is what I joked with my SD friend who would have $800k cash if she sells her SD house and easily to buy in lower RE area ( such as my area-suburban Chicago) similar house in cash and bank maybe half old hs cash. Local people are suffer instead.
Good points Grace! The interesting thing is that these recent transplants are still a relatively small share of the local population.
I own two single family homes in Miami..& two apartments on the beach in Spain & my rental inflow allows me to live without working for 20 years here in DR.!!🕶🏊♀️🚣♂️🏖🚣♂️🏊♀️
Congrats Juan! You got it made. When did you buy in Miami?
@@ReventureConsulting
Juan got it all during yesterday's dreaming...
In cases where many houses are not bought by people with local earnings, how would you factor that? Not many who’s earnings are derived from the local economy can afford the houses where I live. This is a sparsely populated mountain town and many homes are second home getaways.. The market is fueled by big city second home buyers and or VRBO investors. Add to that the recent expansion of work from home and that has pushed up the demand from those looking to leave the crowded suburbs. We simply don’t have enough houses and building is prohibitively expensive right now.
That's a great question!
Any time real estate demand comes non-locals that makes a market more volatile. It juices prices in the short term, but likely will result in a bigger crash in the long-term.
One thing you missed. Capital gains taxes will likely be retroactive if they get implemented so it's too late if they do that. You're stuck with the capitol gains tax increase
Lol, not many red dots when the ‘07 is compared to ‘21. Not even close. We more stable now because there are no subprime loans
Definitely! The market is healthier this time around in aggregate.
But not necessarily in places like Austin and SLC.
Living in the Boise area I’d say we are good. Everyone is paying cash from Cali and or they have a 800 FICO. I think it will level in 12-18 months but it won’t crash like it did in 2007.
Will be covering Boise next Wednesday! Make sure to tune in!
Nick, but markets are also stratified by home price and income level. For example, in California, CAR just announced that homes over $2M had the highest percentage appreciation while homes less than 250k went up the least or declined. I think this stratification reflects the worsening of inequality after Covid-19. Different market segments may fair worse or better in any crash scenario based on the relative income/wealth ratios to house prices.
It's an interesting point. Last time the crash primarily impacted lower income areas with affordable prices. I suspect the next one will hit the upper end of the market hard too.
@@ReventureConsulting the last crash had a lot of foreclosures coming onto the market, which were i guess mostly from lower income areas. Most wealthy neighborhoods like atherton or los altos in the bay area were told to withstand the crash last time (i did not check the data myself though)
This is the most informative and realistic analysis of what is going on now with the ratio of earnings to value. It's interesting to see how things play out as the economy reopens
Thank you!
Great content Thanks again for your knowledge.
I have come under the assumption that the 08 crash was mainly due to subprime lending not overpricing.. can someone enlighten me on if this is true
I own 3 properties (OWN - paid off!) I'm wondering if I should sell them now and replace them after the crash. I might be able to buy 5 or 6 properties later if I sell now. Do you have a video that talks about when to buy and when to sell rentals?
Great question!
It's a very market-dependent question. If you're getting great cash flow from your rentals then there probably isn't a huge reason to sell. But if you're in a market where cash flows are low, and appreciation is the main driver of return, it might be smart to consider selling.
I love the information you are really good best look for you business I will share to my friends very unique information.
Thank you Abel! I appreciate it.
I fear for what these ridiculous house prices (BTW, I own a house free and clear) will do to low-income peoples' housing costs and standards of living. I don't want a deluge of homelessness in my city. I don't want to live in a country where most people are miserable. I don't care about the price of my house because I have no intend of using its equity anyway and should I sell to move, I'd then have to buy at inflated prices anyway - net zero gain!
Same here. We own our house free and clear. I want to see everyone doing well. The world is a much happier and pleasant place when everyone benefits not just a few.
Totally with you Phil. There are a host of negative societal impacts from this runaway increase in home prices.
where did you get the numbers for the typical rent at $1500/month in austin? that seems very low!
Zillow's rent index.
Don’t waste your time trying to time the market, work to master your money instead. One thing you can do is learn how to use money as a tool by investing for passive income.This way whether the market goes up or down, you keep getting paid.
What are your best tips for passive income investments?
Thoughts on southern New Hampshire? Prices have gone up in low to medium housing market substantially, beyond what the local business salaries can support. However we are getting flooded by out of state buyers because they can work from home permanently without paying employment tax. Because NH is tax free do you see our housing market actually holding higher for the long term even though local salaries don't support these prices?
I'm generally skeptical of markets that appreciated with sudden surges due to COVID. Especially ones with lots of room to build.
In the San Francisco Bay area we have known that rent was really high and the tech people moved out last summer. So the rentals in San Francisco and to San Jose corrected last year. Then others have sold their house in those markets and bought in Sac, Stockton, Fresno, etc. For cash. Yet prices around here continue to rise much to my surprise. Is there going to be a correction yes, but not this year. I planning for next spring
What's your take on lakefront / vacation properties - I am specifically thinking about Lake Tahoe (in California) and similar destinations that are close to expensive hubs, but have generally been "affordable" (relatively speaking), but during COVID just skyrocketed. One reason could be, all the rich folks in SF Bay Area were getting jittery sitting at home and couldn't travel anywhere and a road trip to Tahoe was the best option. Another possibility is, with remote-work possibilities, they could enjoy the Tahoe / skiing / lake life throughout the year and only come into work (a few hours drive) only as necessary. At least during COVID, the rental / Airbnb market in this area has been super good. I guess the question is - when things go back to "normal" and people feel comfortable flying and border restrictions go down, what will happen? Will rich people be like "hey, time to drive 3-4 hrs to Tahoe!" or "hey, let's fly to Hawaii / Cancun!". I personally think it's the latter, but what do you think? Also, if they have the option, the number of people who will relocate their family permanently to Tahoe versus some other cheaper state is an interesting point also. Would be great to hear your thoughts on this.
Great question!
I would be very skeptical of any vacation-type property market that boomed during COVID.
Hi! Your data and insight is refreshing! Curious to see what you think of the housing market in the Lehigh Valley here in Pennsylvania. It consists of the Allentown and surrounding areas! It's pretty competitive to buy but curious on the value/income and your opinion on stability of this market and its ability to withstand a crash going forward!
Thanks for the comment Marta! Allentown is one of those markets that looks better today than it did in 2006. With that said - I'm skeptical of markets that saw big influxes of demand post-COVID. Will that NYC/Philly exodus demand hold? Not so sure.
My real-estate brother great content 👏 but your missing the dollar devaluation, inflation, government need for low interest, lack of inventory that will last because building cost don't make sense in some areas..I build sell Tampa FL. I also think when it does blow were looking at 50-80 percent drop with the this market...it will be nasty scary..specially with dollar collapse..window 5-15 years..to long to rent hence why the frenzy
If the dollar collapses we have a lot bigger problems than just real estate values. Check out my video dropping today - I discuss inflation.
Waiting to hear and learn!!!!
Love your analysis! Thank you so much for sharing! 🙏Liked, subscribed and commented 👍
Thank you San!
Can you please comment on Charlotte, NC RE market based on 2021 VE ratios? Thanks and loved your content!
Thanks for the comment Dilip! I'll have a Charlotte video posting Wednesday. Will definitely touch upon that!
@@ReventureConsulting thanks so much
@@ReventureConsulting awesome. I’m in Charlotte, just got engaged and looking for a home. The market here is ridiculous
Can you show me how to calculate V/E Numbers of Seattle Spokane Boise Dallas ?
Yes! You'll need to download home value data from Zillow and hourly wage data from BLS website. Then convert hourly wages into annual wages by multiplying by 35 hours in a week and 50 weeks in a year. Then divide values by annual wages.
Keep making videos man, you're gonna really be a great channel I can tell!
I'm in Boise- trying to buy a 4plex as owner occupied rental. I've been concerned of overpaying for a property, but I also need a place to live. The two variables you seem to omit are 1) general inflation across all asset classed due to money creation 2) migration.
I'm sitting on my down payment in cash, knowing that what I can buy with that cash is less everyday. Is it possible we have an invisible crash, nominally housing prices do not collapse, but a loaf of bread costs $20?
Thanks for the comment Josh!
I agree that migration is a key variable to consider. And Boise is a top in-migration city (18k in 2020 across the metro according to US Census data). But, at the same time, Boise also permits and builds more new housing than almost any other market. How will that balance itself out? Boise went through a similar experience with this high migration, high building in the mid-2000s.
Good question on inflation. I will be putting out a video soon analyzing this. Short answer: deflation could be just as likely as inflation right now. Bond yields are near historic lows. Economic recovery is not great.
@@ReventureConsulting I ran the numbers you talked about for median home price divided by median income. In Ada County (Boise) it's now 481,208 median home price and 32,937 median income last survey (2019). So that's a 14.6X valuation! I think that's enough to make me sit out a little longer..
Great data here. Curious about your thoughts about first time home buyers that have a large sum of money in savings and worried about the inflation without any guarantee that there would be a significant deflation in the future. Historically, haven’t home prices always gone back up after a crash/recession, and and then some. Would one option be to put as much down payment down to keep monthly mortgage as low as possible and ride out the crash and wait for things to start rising again? Just weighing the chances of deflation after significant inflation vs chances of home prices bouncing back up again after a crash in the long term
Great questions Edward!
Home prices have become increasingly volatile over the last 30 years, detaching from inflation. As a result, I think the housing market has lost some of its inflation hedge ability, and that it is now a market that is prone to swings up and down, much like the stock market.
I will be posting a video about this very topic Sunday. Make sure to watch!
Great video! Thanks for the tips and links to data.
Of course! Thanks for watching!
In 2007 it was the no document loans, now we have this huge backlog of unlisted properties because of people being anxious about listing. Will people cause a listing tsunami when things stabilize?
Thanks for the comment Greg!
It will be interesting to see what banks do when listings surge and demand dwindles at current prices. They will likely feel pressure to start loosening lending restrictions.
I'll be watching the MBA mortgage availability index for changes each month.
@@ReventureConsulting The plot thickens . Interesting times we live in. Thank you for your attention to details. keep us up to date.
Can you talk about inflation and how that will impact the housing market?
Great question Jamal!
I will be doing a video on this in the near future.
Short answer: homes are a great inflation hedge historically. However, most relevant indicators (CPI, Treasury Yields) aren't showing much concern about inflation.
Good report. It is unlikely the capital gains tax will fly. However if it does. There will be a further wealth divide in this country
They have to pay for all the spending somehow, right?
Great video and important considerations for those who want to be rental investors. Does this apply for those of us who just want to buy for our own primary residence? I’m in Los Angeles.
Ultimately the home purchase decision is about what you want as a individual/family as well as personal finances. A potentially good rule of thumb: if you can find the home of your dreams, and can afford it, then do it. But if you have to compromise, and are buying because of FOMO, might be smart to wait.
I've been looking for someone like you. I've had my reservations about the market. Everyone knows we're in a bubble but the argument always seems to be "when will the market crash?". Of course no one really knows. However having the data and number driven factors to stand on rather than opinions is so much more useful. I'm tired of the titles "market crash" only for the person to say it's not going to happen this year or next and don't listen to the fear mongering yata yata. That opinion is based on the moratoriums being kicked down the road and the fact that foreclosures take years to play out. BUT what it something else tips the market before that happens. My opinion (which isn't worth much) is once people start to feel the top, it's going to tip and crash fast while everyone tried to save themselves at the same time, especially investors. I think it'll be worse than 08 because when that happened no one saw it coming and housing was always considered a safe appreciating asset with only mild swings comparable to other investments. This time, people know it's possible for a home to depreciate by 50% or more.
Thanks for the post Kristine! I like your perspective a lot. People are focusing so much on how now is different from last time (less subprime loans, etc.), but ignoring the obvious similarities in irrational behavior and wild price appreciation.
@@ReventureConsulting I totally agree. 5-10 years from now they will explain the cause of this market crash and 10-15 years after that maybe it'll run up again for a different reason and none of today's factors or 08s factors will have anything to do with it. Things happen for different reasons, just because the main catalyst last time isn't present today doesn't mean there won't be a catalyst at all. The fact is the behavior is the same, even though the causal factors are different.
I love seeing your channel growing and more views you deserve... great content and date very well explained! Congratulations!
Thanks Nancy! Appreciate the kind words!
Thanks for the awesome video, I think there are other very important considerations though. How would you temper the Value/Earnings ratio comparison to 07/08 with the fact that the underlying fundamentals of each buyer are much stronger? I'm thinking record high savings rates, people aren't pulling equity out of their homes (at least nowhere near the same rate), people with bad credit aren't buying houses, etc. Also important to note is the fact that the government is pumping an enormous amount of dollars into the market right now, which will keep asset prices suspended and it doesn't seem like that is going to stop anytime soon. They were also in 08 but nowhere near the same extent. No doubt we are in a bubble now, but it seems there are so many other factors at play now compared to the last crash. Bad debt (i.e. subprime mortgages) caused 07/08, but we've got a much better mortgage system now. Just my thoughts, what do you think?
Thanks for the comment Conner!
You bring up great points about why the situation in 2021 is different than in 2007. But as Mark Twain says: "History doesn't repeat itself. But it often rhymes."
A wave of foreclosures is unlikely going forward. But a wave of listings due to COVID backlog, pent up forbearances, and new permitting reaching mid-2000s levels? Into a market that is hampered by a large recession and record high prices? That's certainly possible, if not very likely.
Its weird why does redfin continue to stay homes are still be sold so quickly. But, in my city there are several homes that go on redfin, and then are removed but are still for sale.
That's a great question! I think a lot of realtors try to manipulate the listings since it looks bad if something is on the market for an extended timeframe and doesn't sell. Then they relist at a later date.
Very well done, I really appreciate your thorough evaluation. I would love to have a closer look at individual cities, do you have this data available on a website? I would especially like to look at the chart that shows earnings vs home prices. Thanks again!
2007 was mainly a subprime bubble, 2021, such loans are virtually nonexistent and low inventory…so yes it’s a bubble but it will not crash like in 2008 but rather a more realistic adjustment.
So how does one find or calculate the value to earnings ratio? Or is that a service you all provide? I'm in Henderson NV, specifically the 89002 zip code and our house just in the last couple of months got back to it's original sale price of 506,000 in 2004 though we purchased it in 2017 from the original owner for quite a bit less. My guess is that it would have sold for even more in 2007 or 2008 so is this market just slower than some of the other markets in the US?
Value / Earnings at the metro level (in you case, Las Vegas-Henderson metro) can be calculated by using data from Zillow and BLS linked to in the description.
The example of a property in Austin is exactly what I've been saying as well! Good stuff!
VE / rental yields /operational costs /taxes.
You could probably use condos as a leading indicator but I haven't had the time to dig into it.
Thanks Josh! It will be interesting to track Austin's market.
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