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The housing bubble is finally here. Or are we truly in a bubble?
If we are, the real question is when will this housing bubble burst?
In this video, we will focus on historic housing affordability, housing demand, median mortgage payments, and other factors.
It has been over 16 years since the 2006 bubble peak.
Adjusted for inflation, the National index is about 14% above the bubble peak. The composite 20, adjusted for inflation, is about 6% above the bubble peak.
Will this housing bubble be a buying opportunity for future investors, or will prices continue to rise?
I HIGHLY suggest you watch until the end of the video until you leave or make a comment. (Yes, I’m talking to you keyboardwarrior1994)
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⏰ Timestamps ⏰:
0:00 – Intro
0:33 – Housing Affordability Price Index
3:37 – Important Key Points (Real House Prices)
4:34 – Nominal House Prices
6:08 – Inflation-Adjusted House Prices
7:22 – FTX Spot
8:23 – Price To Rent Ratio
11:30 – Monthly Median Mortgage Payment
12:54 – My Thoughts
ABOUT ME 👇
My mission is to provide my viewers with actionable content that enables them to create financial wealth. My videos are a reflection of my real-world experience as a real estate investor, stock market investor, student of finance, and entrepreneur.
This channel allows me to share my passion for personal finance, stock market investing, real estate investing, and entrepreneurship. I produce content that I would want to watch, and because of that, I give 100% effort to every video that I make. I also believe in complete transparency and open communication with my audience.
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Hey everybody welcome back to whiteboard Finance my name is marco and i’m here to Help you master your money and build Your wealth in today’s video we’re going To go through a presentation explaining How the housing bubble is here We are above 2006 levels when it comes To home affordability and i think that This quick video will do a great job of Showing you why that is Uh so This is uh going to be a powerpoint Presentation uh these are actually kind Of fun so uh stick until the end so you Can hear my thoughts on the entire thing So the housing bubble is here um housing Affordability and crazy housing prices We’ve talked about this on the channel Before This right here is coming from bill Mcbride of calculated risk it’s a sub Stack and a blog So this is kind of like his i don’t want To say proprietary Housing affordability price index But this is a pretty unique way to look At it so i just wanted to bust out the Criteria so you know what you’re looking At in this chart um so he’s taking the Census median income he’s assuming a 15 Down payment he’s assuming two percent Property taxes insurance and maintenance And then he’s using the case schiller National index for the house prices
Itself and then he’s assuming that You’re taking out a 30-year mortgage so He’s using 30-year rates So if you look at this index the lower The number so i’ll use my laser pointer Here let’s see if this works there we go So the lower the number That’s actually more affordable so he’s Starting in 1976 so you can see right Here In the x-axis he marks 1976 as the Starting point so we’re at one to one And you can see how that changes over Time based on the criteria in the Previous slide so the lower this number The more affordable housing is okay so We’re looking at like 1999 we’re looking At 2012 2013 after the crash and that Does make sense so you’re wondering you Know if you’re looking at housing prices Right now they don’t seem to be that Unaffordable based on this chart however We all know that you know middle class Is obviously getting crushed right now With inflation and everything else but The reason for this is that During the early 80s homes were very Unaffordable due to high rates so we’ve Talked about this on the channel you Guys we’ve talked about how interest Rates pretty much dictate everything Same thing with the 10-year treasury Same thing with the federal funds rate And you can see here in the 80s interest
Rates were in like the teens they were 13 14 15 16 if you can believe that when I was getting uh 30-year mortgage fixed Rates at 2.49 Back in 2021 or the summer of 21. So you can see here that right now Housing if you get rid of the last Recession i’m not counting 2020 as a Recession that was just a blip and then We printed literally trillions of Dollars i’m talking about january 2006 Basically through 08.09 if you disregard This last recession we are at um Levels not seen since 1991 okay this is The worst since 1991 when it comes to Home affordability using this Gentleman’s price index so this data so Right here you can see on the x-axis This is just every january of every year Uh this data is actually coming from March okay so in march rates were 4.2 Percent okay rates are now sitting at 5.4 percent and it’s june at the time of This recording so this data right here That you see that my laser pointer is Circling it’s only until march okay so This i guarantee you that the next time This gentleman does this chart it’s Going to become more and more Unaffordable because of rising rates Okay that’s what we’re seeing all over The market So as we move on these are five key
Points that we need to really pay Attention to before we get into the meat Of this presentation so it’s been 16 Years since the bubble has peaked Basically since 2006 the national index The case-shiller index which i’ll Explain later in this presentation was 60 percent higher now than peak bubble In 2006 nominally however in real terms Okay we have to look at things in real Terms the national index is about 14 Peak bubble so what are real terms so When you see these crazy graphs and uh House pricing charts those are in Nominal numbers okay nominal just means Numbers okay that but it’s important to Look at prices in real terms adjusted For inflation so what does this mean Marco so as an example if a house price Was 200 grand in january of 2000 the Price would be over 329 000 today Adjusted for inflation at a 64.5 percent Rate okay housing typically keeps up With inflation over time So you’re asking you know what is Case-shiller you know what are these uh Indices you know what is what are these Indicators what does this mean so we’re Talking about nominal house prices Remember just the number so we have Anything in light blue is a recession Anything in dark blue is the Case-shiller national index anything in Red is the case-shiller composite index
This chart is comparing the case-shiller National versus the case-shiller Composite the case-shiller index is just Simply an index made up of It’s actually several indexes made up of The value of single-family houses over Time and this is detached residences Okay so the national home price index Tracks changes in the value of Residential housing by tracking the Purchase price and resale of value of Single family homes and this covers nine Major census divisions so that’s the National the uh the composite 20 Which is the red line here covers Atlanta charlotte cleveland dallas Detroit minneapolis phoenix portland Seattle and tampa plus the other nine That we talked about so that’s it’s just Adding in more cities into this number Okay to get a better um feel if you will For the pricing of homes So the national is 60 percent higher uh Since 2006 if you look at it right here Here’s 2006 uh here’s where we’re at Today the comp 20 the composite 20 Is 48 Okay it’s actually kind of crazy how High that is right now both are at All-time highs okay So Uh if we keep going here’s the real House prices okay so remember we talked About nominal just using the number real
Is adjusted for inflation if we look at Those same two uh indicators the National And the composite 20. Sa just stands for seasonally adjusted Remember selling houses in january is Not going to be the same as selling Houses in the spring or in the summer For example We’re looking at the same chart in real Terms which is adjusted for inflation Using cpi minus shelter removing that Shelter component from the cpi remember Cpi is just consumer price index this is How the government tracks inflation Inflation government keywords uh it’s Much higher than this uh but national is 14.3 percent higher than the peak Composite 20 is 5.7 percent higher so in Real terms This is housing is higher than previous Peak levels still by a lot you can see The difference right here compared to Right here okay So as we move along there’s going to be A couple of important Rent ratios that we talk about and we’re Gonna hear my thoughts at the end of the Video uh but let’s get a shout out to Today’s sponsor ftx today’s sponsor is Ftx check them out in the link below ftx Is one of the largest cryptocurrency Exchanges in the entire world and you Can trade crypto and ftx with up to 85
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That shows price to rent and then this Gentleman is plotting it over the Case-shiller house prices remember the Pricing of individual houses arms length Arms length transactions etcetera Etcetera Excluding condos this does not include Condo sales so the price to rent ratio Starting in january of 2000 uh is right Here okay this is where we can see the One to one ratio or 100 is where we Started 1.0 And you can see that basically for the Last 20 years the national price to rent The case shiller has been pretty much Flat so if you start in january of 83 it Bumps up a little bit in 89 goes all the Way down in 98 And then back to january of 2000 it’s Relatively sideways okay there’s not any Huge ebbs and flows when comparing the Price to rent to case-shiller housing Prices but as you look at 2000 right After the dot-com bubble these things Started to explode so the price to rent Got much higher it’s actually 1.4 and 1.6 times higher than it was compared to Um 0.0 which is january of 2000 1.0 if That makes sense It dipped all the way back down starting Right before the recession in 2006 to 2007 and then 0708 you know goes to down Here and then we can finally get back to 1.0 which was january of 2000 levels in
January of 2012 which you can see right Here so january of 2012 january of 2000 We’re at the same exact metric here and Then after that you know after zerp and You know money printing and all this Stuff you can start to see these start To get out of whack again so we’re Looking at um price to rent ratios at The highest they’ve ever been it’s a Record high here And then you can see the comp 20 is back To essentially you know 2005 levels if You will okay remember the blue is National it’s the highest it’s ever been Red is comp 20. that this is basically 0.506 right around here i hope that Makes sense So this is a tweet that i tweeted uh It’s kind of hard to see you guys this Is january 31st of 2022. um i said at What point can median income earners no Longer bear rent increases uh so this is A little stat from october of 2026 or Excuse me 2021 That just says rent prices have Increased an average of 8.6 percent per Year since 1980 consistently outpacing Wage inflation by a significant margin The nationwide average monthly rent is Hundred and sixty four dollars median Rent is one thousand one hundred and Four dollars seventy eight point one Percent of renters pay rent in full and On time twenty eight percent point uh
Twenty eight point four percent is their Average rent to income ratio which is Getting pretty uncomfortable You want to stay under 30 percent for Sure So the the last stat i want to throw at You the last chart this is recent this Is from goldman sachs global investment Research the median monthly payment of a 30-year mortgage is up 56 percent year Over year monthly principal and interest On a new 30-year fixed rate mortgage Since 1996. So if you look at 1996 uh you’re right Right about i want to say seven hundred Dollars monthly new mortgage payment This peaks right around 0.607 we Obviously had a crash up until 12 or 13. Uh zero interest rate policy money Printing great economy etc etc um this Is when they tried to raise rates December of 2018 january of 2019 market Crashed again uh we had a flash crash With covid and then unprecedented Stimulus which Uh the reason for this big number is Simple not only um has had mortgage Rates increased they basically went from 2.49 which is what i was locked in at All the way up to um 5.4 which is what We’re seeing right now so what this Means is okay you know the rates aren’t Necessarily exploding on a historical Basis but the price of the houses is so
Much higher that when you take those Higher rates and you put them on to a Higher priced home this is what you’re Gonna get you’re gonna get eighteen Nineteen hundred dollars uh monthly uh Median mortgage payment okay So if we move on uh let’s move on to my Thoughts okay So i’ve said in a bunch of videos before That This isn’t like 2008 okay this isn’t Like 2007 2008. um you don’t have Investment banks betting against their Own clients selling them dog crap and Then saying hey you know this is uh aaa Rated you know we’re going to sell you This and then bet against you and thus Imploding the whole financial system They were giving out ninja loans in 2006 2007. ninja loan stands for no income no Job if you can fog a mirror you can get A mortgage right um you know a lot of People’s education on this stuff comes From movies you know like the big short And things like that This is stuff that i’ve been following Documentaries where pension funds were Buying this dog crap and it was it was Literally international um it was almost Fraud at an international level what We’re not seeing in this case in my Opinion is that unemployment is not how It was when i graduated i graduated in December of 2010
Unemployment skyrocketed after that Recession to roughly 10 or 11 percent We’re sitting in the threes right now And there’s still you know people can’t Hire anybody my dad’s friend is uh or my Friend’s dad is a landscaper he owns a Landscaping company he’s hiring anyone With a pulse at this point okay he used To do the wheelbarrow test where he’d Fill up the wheelbarrow with rocks and Have the guy go around the truck He’s not doing that anymore he goes Marco i see anybody with you know a Heartbeat i hired them on the spot so Unemployment isn’t high and then also Banks have gotten much more stringent in Their lending process and their Underwriting process they’re not just Giving out these loans left and right so Are we gonna see you know 2006 2007 all Over again 08 all over again probably Not at that systemic scale but we’re Definitely going to see people that Aren’t going to be able to afford to Service this debt if their income goes Away so i’m sticking to my guns i made a Video about this last year i said within 12 to 24 months once all the stimulus And all this bs Ends we’re going to see a correction of Maybe you know 10 15 20 if that However the other Factor is obviously supply and demand There’s so much more demand for housing
Than there is supply which is what’s you Know fueling this fire it’s like the Perfect trifecta um you have people that Are my age that are millennials um that Are that want to start a family you know Want to get married want to buy a home They’re sick of running they’re sick of You know quote unquote lighting money on Fire and rent every month or quote Unquote making their landlord rich they Want to invest in something and build Equity right so that’s the biggest Population demographic out of all the Populations out of all the generations Now is millennials okay then you’re Gonna have gen z as they start to get Older and then you’re gonna have you Know generations after that So a lot of demand not enough supply um Lower unemployment rates than 2007 2008 You know up until you know 11 or 12 2011 Or 12. And then also you know mortgage rates Are going up which is going to slow Everything down because people simply Can’t afford it into their monthly Budget you know how americans think oh I’m going to squeeze it into my monthly Budget my monthly budget my monthly Budget that’s how they that’s literally How they make every financial decision And that’s why most people are living Paycheck to paycheck so i hope you got Value out of this video please share it
With anybody anybody with a pulse Youtube is not showing my videos i don’t Know what it is i said or did uh maybe I’m not clickbaity enough maybe i don’t Post 37 videos the same thing every week With you know the ridiculous thumbnails But at the end of the day i’m one of the Few youtubers that has a degree in Finance worked in finance and i’ve been A student of finance i’m not doing it Because it’s cool i’m doing it because i Genuinely love finance macroeconomics And history you are following one of the Best finance channels on youtube i don’t Care if this sounds pompous it is the Truth thank you for watching You