Are we in a housing bubble right now?
Is the real estate market going to crash?
Should I invest in another
property right now?
If these are questions that are running
through your mind, then stick around to
the end of the video, because
I'm going to help answer them.
The last housing bubble popped in two
thousand and eight, which dropped housing
prices by 18 percent with real
estate at an all time high.
It seems like it may be time for another
housing bubble, pop or real estate crash.
Let's answer the question of should I get
into real estate right now before prices
go even higher or should I wait for a
little bit for that housing bubble to pop?
I am Tiffany Thomas with WealthyTiffany.c
om, and I currently invest in real estate.
I have created over a seven figure
portfolio investment through real estate,
and I became financially free at age
thirty eight, mostly due to real estate.
I bought my first property in 2005 and
bought my last property just a
couple of years ago in 2018.
And if you are curious to know how I've
done that, I did create a video for you, I
will leave a link above and below in the
description and you can check it out.
So I like to keep my eye on the real
estate market so I can see when to make
another real estate property investments.
All right.
Hit that like button and the subscribe
button and we're going to dive right in.
Let's first define what a housing bubble
pop or a real estate crash actually means
when the real estate market has been
rising over time, which it has, prices
increase because there is more demand than
supply, meaning more people want to
buy than there are houses for sale.
Now, the actual pop or burst or crash,
whatever you want to call it, actually
happens when demand
decreases or stagnates.
At the same time, supply increases,
resulting in a sharp drop in prices.
And that's when the bubble bursts.
Before I go into more detail,
put in the comments below.
If you think there is going to be a real
estate crash or a housing bubble pop any
time soon, and when you think it's going
to happen in order to see what can create
this housing crash, let's take a look at
the last housing crash that happened,
which was in 2008, because people who were
caught in the 2008 crash maybe spooked
that the pandemic will
lead to another crash.
But the 2008 crash was caused by
forces that are no longer present.
One of the main issues that I want to talk
about from the housing crash of
2008 is that people were approved for
mortgage loans they
actually couldn't afford.
They didn't understand how
the mortgage really worked.
The restrictions for getting approved
to purchase a home were very loose.
Most of them were not getting your
standard conventional 15 or
30 year fixed rate mortgage.
And to give you a little back story,
higher interest rates preceded that
housing collapse in 2006 many borrowers
then had interest only loans
and adjustable rate mortgages.
Unlike the conventional loan, the interest
rates rise along with the Fed funds rate.
Many also had introductory teaser rates
that reset after three years
when the Federal Reserve raised rates.
At the same time, they reset,
borrowers found they could no longer
afford those housing payments.
Home prices had fallen so these mortgage
holders couldn't make the
payments or sell the house.
As a result, default rates rose.
Essentially, those that took out the home
mortgage loans never should have been
approved for those loans
in the first place.
And they didn't really understand
how those loans worked.
They didn't realize they would have a huge
increase in their mortgage payment within
just a few years or when
the Fed raised rates.
All right.
So what was done to turn that
2008  crash back around?
For one, stricter lending
policies were put in place.
You can no longer go in and get approved
for a really high mortgage loan without
good credit or a good income rate
or a low debt to income ratio.
Rates have also been dropped.
So you can now get a good rate on a
fixed 30 year or 15 year mortgage.
It seems as though the main causes
of the 2008 crash have been fixed.
And I know there are other causes than the
one that I have mentioned, but I'm not
going to get into all
of them in this video.
Let's talk about now what could
cause a real estate crash now?
What could cause the housing demand to
decrease or stagnate while supply
increases, creating that huge
drop in real estate prices?
I want to talk about some of the worries
that people have right now that they think
could cause a real estate crash or the
real estate bubble to pop
because of the pandemic.
A lot of mortgage payments
have been put on hold.
And I've heard people talk about, oh,
well, when those payments come due, are
they going to have to
foreclose on the home?
And that will increase the
supply of homes on the market.
But here's what a lot of people don't
know those payments can actually be.
Added to the end of the loan, so they
won't have to make up for all of those
missed payments at once if they are able
to start paying their mortgage payments
again on time, then their mortgage loan
will continue on like normal, and they can
just make up for those missed payments
at the end of their mortgage loan.
But if you're thinking, oh, will,
what if people are still unemployed?
So they still aren't able to make
their mortgage payments on time.
Under the CARES Act, it states that
you will have 12 months to start
making your payments again.
So will people be able to make their
mortgage payments in that
12 month time frame?
Well, unemployment rates have been getting
lower and lower since
the pandemic started.
And that trend should continue because
businesses are able to open up again,
they're increasing their hours.
They are figuring out creative ways to
bring back their employees
or to hire more people.
So I don't really see a lot of
foreclosures coming onto the market,
increasing our supply so much that it's
going to make our prices
drop really quickly.
And what about interest rates?
Increasing mortgage loan interest rates
are at an all time low right now.
They've dropped to 3.13 Percent.
And I've even heard of people getting
a lower mortgage rate than that.
This is another reason that demand is
increasing so much for
real estate property.
People can get so much more house
for a lower mortgage payments.
If rates increase, then mortgage
payments will be higher.
People often look at their monthly budget
to determine how much house they can
afford, how much mortgage payment
they can actually afford to pay.
Let me give you an example of this.
If you have a three hundred thousand
dollar mortgage at an interest rate of
three point one three percent, you would
pay one thousand two hundred and eighty
six dollars each month for
your mortgage payment.
Now, if we were to increase that interest
rate to five percent, you would be paying
one thousand six hundred and ten dollars
a month for your mortgage payment.
And some people may not be able to afford
that extra three hundred and twenty four
dollars each month, which means they
wouldn't be able to afford a house
at three hundred thousand dollars.
Higher interest rates make
loans more expensive.
That slows homebuilding and decreases it's
supply, but it also slows lending,
which cuts back on demand.
Overall, a slow and steady interest rate
increase won't create a catastrophe,
but quickly, rising rates will.
But remember that most people now have a
15 year or a 30 year mortgage
that is a fixed rate.
So they aren't worried about their
interest rate jumping in the next little
bit because they have a fixed rate instead
of a variable rate, unlike in two thousand
eight where they had that variable
interest rate or that low
introductory interest rate.
And when the rates changed, then their
mortgage payments jumped way up.
And if you're wondering if the Fed will
increase rates really fast, the history of
the Fed funds rate reveals that
the Fed raised rates too fast.
Between 2004 and 2006,
the top rate was one percent in June of
2004 and doubled to two point
twenty five percent by the summer.
Then it doubled again to four point two
five by December, twenty five to just one
year later, and then six months later,
the rate was five point two five percent.
The Fed raised rates at a much
slower pace since twenty fifteen.
It would make sense that the Fed would
continue to slowly raise rates over
time, seeing what happened in the past.
And there's one other point
that I want to bring up.
Who is buying the majority
of the homes right now?
Millennials are actually buying
the majority of the homes.
And how large is the
millennial population?
The millennial generation is now larger
than the baby boomer generation, which
means there are quite a few millennials.
And because of their large population,
they can continue to drive that demand for
houses up after hearing all of this
comment below and tell me if you haven't
already, if you think there's going to be
a real estate crash or a housing market
bubble burst, and when you think it's
going to happen, here's my thoughts.
Since the unemployment rate continues to
decrease and I think it will continue to
decrease over time and people are able to
put off those missed mortgage payments
until the end of their loan, we aren't
going to see a large
increase in foreclosures.
So there won't be a huge supply of houses
on the market because of foreclosures.
I can continue to see the demand increase
for houses and yet not have a
drastic increase in supply.
So personally, I don't feel like there is
a housing market crash
coming any time soon.
And of course, I could
be completely wrong.
I know there are others that definitely
disagree with me,
but as long as I stick to my strategy,
which is to buy properties in good
locations and hold them for
the long term and continue to
rent them out.
Then I'm not worried because I've run the
numbers, I know the properties work for
me, and even if the housing market does
crash, it doesn't really matter because
I'm not planning to sell that property
right away and I'm not feeling strapped
for cash or stressed about my investments.
Remember to keep that long term mindset,
which will decrease your panic or your
fear or the greed that you might have
and you will be OK over the long term.
And I'm curious to know
what you're going to do.
Are you going to wait for a while until
the housing bubble bursts or are you going
to get in right now before
prices go even higher?
Put in the comments and
tell me what your plan is.
And if you are looking to retire early or
become financially free at a young age,
then make sure you check out my free
course, The Beginner's
Guide to Financial Freedom.
At 40, I will leave the link
below in the description.
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Thanks so much for watching.
I'll see you in the next video.
