The housing market correction has begun, with more and more big price cuts coming.
Here’s how we know it’s coming, and what you can do to benefit.
Mortgage payments are skyrocketing.
The average 30y fixed-rate mortgage payment rose by more than 40% last year – this is unsustainable and unrealistic for the average American homeowner based on current prices.
Prices became too elevated – too quickly.
The Case-Shiller U.S. National Home Price Index is rising at the same pace as before the Great Financial Crisis. When prices are too elevated – too quickly, demand deteriorates.
Mortgages and home prices are both lagging indicators – usually about 18 months behind.
What leading indicators have been pointing towards this correction?
The National Association of Home Builders shows us that potential home buyers are disappearing rapidly.
Each time prospective buyers have dropped precipitously – home prices collapse the following year.
New Home Sales seem to peak 12-18 months before a major housing downturn.
Building Permits top-out shortly after New Home Sales – what do you notice today?
We seem to be topping out in permits, with sustained declines in reported levels over the last few months.
The icing on the cake.
More price drops on homes up for sale than any time since 2015 indicate a STRONG reversion to the mean for the housing market.
With all of these price cuts happening in the housing market – how can you position yourself to benefit?
Watch until the end of the video, of course 🙂
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⏰ Timestamps ⏰:
0:00 – Intro
0:18 – Mortgage Payments Are Skyrocketing
1:36 – Prices Too Elevated Too Quickly
2:30 – Leading Indicators Demand Destruction
4:16 – PRICE CUTS
5:00 – Increasing Inventory
6:14 – How Can You Benefit?
8:12 – My Thoughts
11:29 – WBF University
12:23 – LOL
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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 be talking about the housing market Correction happening right now we’re Seeing price cuts all over the place so Let’s get into this presentation that me And my research analyst joe consorti put Together so right away here we’re seeing Mortgage payments skyrocketing so if You’ve been following my channel for any Period of time you’ll know that i’ve Been talking about this since january if You look at this chart right here this Is the 30 year fixed rate mortgage Average in the united states and right Around since january we’ve seen it spike Up just above five and a half percent Getting almost close to six percent Right here so uh this is up 41.8 percent So if we look at the gray line right Here this is from redfin uh you can see Basically the four week rolling average Of median asking prices uh this is the Mortgage payment based on those asking Prices you can see here that we started In 2020 under 1500 Uh you can see in 2021 it creeped up all The way to roughly 1750 kind of Stabilized right there uh we continued The year in 2022 just under 17.50 and You can see what’s happened since January we are now sitting at roughly 2
336 dollars at 5.3 percent according to July 24th this is completely Unsustainable for the average american Homeowner because your pay didn’t go up That much that’s for sure uh maybe in Some rare cases it did and not only that The price of houses remained high but we Are seeing a correction in pricing as Well as well as the interest rates going Up So we’re talking about prices being too Elevated too quickly so if you’ve been Following my work you know that we talk About the case-shiller us national home Price index uh you can see how much it’s Gone up just since basically 2014 uh but It’s really gone up since 2020 okay uh This is almost like unprecedented times That we’re seeing this index basically Takes a bunch of different metropolitan Statistical areas it takes the home Prices in those areas and it comes up With this index so the home price index Is rising at the same pace before the Great financial crisis uh when prices Are too elevated too quickly demand Deteriorates that’s what we’re starting To see right now Prices are being cut uh days on market Is being uh increased however we are Seeing mortgages and home prices both as 18 month lagging indicators so let’s get Into this next slide that shows the Leading indicators okay and what we’re
Seeing here is demand destruction Meaning demand is going down so this Right here is the nahb this is the National association of home builders uh It’s starting to show that potential Home buyers are disappearing rapidly so Every time we see prospective buyers Drop okay this home buyers index drop We’re seeing home prices correct right After so if you look at this right here Um this was basically in the early mid 90s uh it happened in the mid 2000s Obviously with the great financial Crisis we reached the bottom right here We saw a huge one in 2020 march of 2020 Everything shot back up and now we’re Going back down so with this being said We are typically seeing home prices Correct lower that next year basically 12 to 18 months so what are these Leading indicators showing so if we look At new home sales that’s what this chart Is showing They seem to peak 12 to 18 months before A major housing downturn or correction So this was in the mid 2000s if you look At the x-axis right here this is 2005 2006 and you can see what happened after That if you look at early mid 2020 uh This peaked right here and you can see What happened after that as well we Almost had another peak right here Earlier this year and then interest Rates went up and you can see what
Happened to new home sales the others Chart i want to show you are building Permits so these top out shortly after New home sales so what are we seeing Today We can see here that in the mid 2000s Before the great financial crisis Building permits were at an all-time High Or a high for the period i should say And it went all the way down after the Crisis and then we’re starting to see That again today and then again we’re Starting to see a little dip there as Well at the end of the chart if you can See that Uh also this is from redfin this is Pretty interesting charlie bolello Literally just tweeted this this morning Um we had this in the slide deck before He even tweeted it So i think we’re ahead of the curve here Even in front of the best if you will no I’m joking i use a lot of charlie slides He’s great so more uh price drops than Any time since at least 2015 so this is The four week rolling average share of Homes with sale price drops meaning the Prices have been cut the whole point of This presentation uh so you can see here In 2019 there was 5.2 percent now we’ve Shut up all the way to 7.5 percent uh For july of 2020 excuse me july 24th of 2022
So we are starting to see more and more Price cuts happening So another important chart here is a Growing backlog of homes so on the left Y axis right here we have year over year Change in inventory you can see how Inventory shot up all the way uh during The great financial crisis or right Before it uh peaked or excuse me we hit A trough or a valley over here in 2013. This was a great time to buy a home in 2013 And then we see here on the right y-axis In red is the months of supply on the Market okay so existing home Year-over-year change in inventory is Rising as less homes are selling which We can see here and then we have Existing home sales month over month Falling by 5.4 percent so the cycle tops Out prior to every housing market Contraction uh we saw this here before The great financial crisis uh we saw it Here in 2011 uh we saw it here in 14 we Saw it here in uh 18 late 18 early 19 This is when the market crashed this is When feds were actually raising rates For the first time in a long time Everything crashed and then now we’re Going back up so is this going to be the Next um Green or teal circle however you’re Seeing that on your screen So uh how can you position yourself as
Always this is not a fear-mongering Channel i just give you facts and Opinions you can figure out what to do On your own we’re all big big boys and Big girls here Number one is wait for the storm to pass So according to that slide we’re seeing Leading indicators point to declining Home prices and mortgage rates over the Next 12 to 18 months we’re going to wait Until rates and prices normalize around Their historical trend to buy in finance So if you’ve been following my work joe And i think that we’re going to see Rates increase all the way up until Quarter 1 of 2023 And then after that I believe the bond market is already Pricing in Rate cuts after 2023 So when you buy stay away from variable Rate mortgages these are your arms your Adjustable rate mortgages this is what Everyone fell into the trap of before 2008 before the great financial crisis The trap of a low starting rate will Come back to haunt you if rates do rise Which i do see that happening until Quarter one of 2023 most likely just Based on the implied rate So fixed rate mortgages are your friend I’ll touch on this later number three is When rates do fall you may want to Consider refinancing some of you may
Have entered into that you know four Five six percent 30-year mortgage well That’s because you may have been itching To get into a home and you know you’re Sick of renting or for whatever reason It could be you know lifestyle whatever The case may be it all depends on your Credit score the higher your credit Score the lower your interest rate is Going to be So you may want to consider refinancing Down the road if you’re a rock star Credit score And you’re an 800 plus you’re going to Get better rates than someone who has a Lower credit score your credit score is Just your risk profile to the lending Institution the higher your score the Less risk you are perceived risk you are The lower rate you’re gonna get okay so When rates do fall you may wanna finance Or refinance back at that two or three Percent that we talked about here So let’s get into uh my thoughts okay as Always i end these videos with my Thoughts so what we’re going to talk About here is stick to the basics okay i Know this sounds like common sense and Child’s play but a lot of people need a Reality check they get excited they want To get into a house they have a growing Family or they move for a job or you Know for whatever reason they’re sick of Running they want to you know they want
To own or build equity in a home so Don’t buy too much houses number one i See so many people that you know they Emotion takes over and facts and logic You know they get thrown out the window You know you can download my home Affordability spreadsheet uh you can get It uh through patreon you can do Whatever you want the numbers can tell You one thing but you know when you Start you know making it your own kind Of like taking the puppy home You know you throw the dollar amount out The window just don’t buy too much house We’re talking about big wins on this Channel cars houses you know big Purchases like that that is going to Affect your financial future way more Than a three dollar latte or an avocado Toast okay Number two is low interest fixed rate Loans they’re a great hedge against the Dollar if you think that the dollar is Going to inflate or if you think that The dollar is going to lose its Purchasing power a 30-year fixed-rate Mortgage is essentially an effective bet Against the dollar uh you know how does That make sense or why do i say that It’s also a hedge against inflation as Well uh because real estate has Historically kept up with inflation if Not uh outpaced it uh so say for example You’re looking at a house it’s uh for
Easy numbers 500 grand you have 500 Grand sitting on your kitchen table in Cash you can use that 500 grand to Deploy it into investments into things That are going to appreciate over time Or you can take that 500 grand and plop It into a house well obviously the Smarter financial move would be to Put down as little as possible or at Least 20 percent that’s what i’m an Advocate of um and avoid pmi and Decrease in your housing values and Stuff like that just in case we do hit a Recession here but that’s another that’s A topic for another video uh i would Take that 500 grand i would put down 100 Grand 20 And i would invest that 400 000 over Time so a 30-year mortgage is Effectively a hedge or a bet against the Dollar and against inflation because You’re not tying up all your 500 000 Into the walls of your house with dead Equity You are deploying it elsewhere and Allowing those um soldiers if you will To make you more money elsewhere so Number three these cuts are coming off All-time highs so yes we are seeing more Price cuts yes we are seeing higher days On market however there’s still a long Way to go down um i think that we’re More in correction territory you know 10 15 percent maybe a little bit more in
Over-inflated markets maybe on the Coasts if you will um but we are Starting to see more price cuts however We’re seeing price cuts from all-time Highs it’s not like we’re seeing price Cuts from you know median or average Home prices for your area um so Still you know i think there’s a way to Go down but again i guess 10 15 20 max Just because people still have jobs Again as long as people have jobs we’re Not going to see 2008 we’re not going to See 2007 But if we do start to see higher Unemployment and we do start to see People who simply cannot service this Debt that’s when the bubble truly pops So keep that in mind Alright guys i hope you got value from This video i’m building my school out Whiteboard finance university we have Professors for stocks etfs options real Estate Macro economics weekly live streams with Me I’m a full i’m fully transparent in that Group uh this will be private and it Will be a monthly fee uh if you think This content is good wait until you see What’s behind the curtain in the school It will truly be one of the best Financial products out there um you have The choice of you know taking a finance Class or going for a finance degree
That’s 50 60 70 80 grand uh or you can Start building your wealth for uh it’s Probably going to be someone in the Neighborhood of like 40 50 bucks a month It’s a ridiculous value it’s probably Comically underpriced to be quite honest So check that out in the link below Whiteboard finance university it will be Coming out in the next month or so i’m Just putting everything together and Getting all the professors in place Thank you so much everybody have a Prosperous day hey so instead of me Doing something dumb and funny at the End you guys got to see this clip i Don’t know how old you guys are but i’m 34 i grew up with the chappelle show uh Best comedy show of all time by the way Um this was an old skit from the Chappelle show where they’re talking About oil and going into the middle east And this basically goes it’s dubbed over Almost perfectly uh in this clip so uh Check this out you guys over the course Of your career uh has your husband ever Made a stock purchase or sale based on The information No Absolutely not Okay I love it