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From 1981 to 2021, bond yields fell. The yield on 10-year Treasury bonds fell from 16% to 60 basis points . A massive bull market. The rate on a 30- year fixed-rate mortgage fell from 18% to 2.625% by 2021. So, over these 40 years, falling mortgage rates have helped drive up real estate prices, right?
They work in opposite directions. And here's what happened: American homeowners got a real gift, because every few years they could refinance their mortgages, receive cash and at the same time reduce their future payments. So that was great. They could pay off their credit card debt, make repairs to their house, do whatever they wanted.
They felt the wealth effect as they became wealthier while real estate prices continued to rise. Now we are in the opposite situation , where real estate prices are not actually increasing, but may even fall significantly. But mortgage rates will continue to rise. You recently said they could drop 50% or something?
Well, no. What I said was this : if mortgage rates reach 9%, and I think we could be at that level by the first quarter of next year, then in order for the value of a house at 9% to be the same as at 3%, the price of the house would have to be cut in half so that the monthly payments would remain the same.
But there are other factors: insurance has become significantly more expensive, maintenance has become more expensive, and utilities have also increased significantly. Owning real estate is becoming more expensive across the board. But the escape route is blocked. No more cash-out refinancing, no refinancing at all, no way to reduce monthly payments.
And we are entering a new reality in America that we have never been in before. We started with low interest rates and low debt levels. It was wonderful. Then we had low interest rates, I mean low debt and high interest rates. This was acceptable. We...I'm almost done. We had low debt and high interest rates.
Then we moved into a period of high debt and low interest rates, and that's what we could afford. Yes, we had high debt, but it was cheap, so we could service it. We have now entered an era of high debt and high interest rates. And of course, this is the largest debt we've ever had, and who knows how much interest rates will go up, but they'll be much higher than the five or six percent we're at now.
Okay, Greg, continue. How high, Peter? How high, Peter, before they can't grow anymore? Because there is a limit beyond which they can no longer rise. Well, well, there's no limit beyond which they can't rise. In fact, there is a point where they become so high that everything collapses. But that in itself doesn't lower the stakes.
There may come a critical moment when the Fed steps in and says, “ You know what? We cannot allow the rates to rise any further." And then they will start the printing presses and start buying up all the debt. But then we will get uncontrolled or hyperinflation. So, you know, it doesn't matter at all.
And, of course, the only debt that stops growing is the one that the government buys. So if the government, if the Fed buys Treasury bonds, mortgage rates will still go up. You know, they have to buy mortgage-backed securities. They should buy corporate debt. They are forced to start because anything the Fed doesn't buy will continue to become more expensive as inflation rises.
So if inflation is 10% or 15% per year, I won't borrow money at a lower interest rate. Yes, but then again, it sounds like the end of the world. I didn't say the world was coming to an end. I just said the stakes are going to get a lot higher. I know, but it's always like that with you, dude. And the reality is that things are always getting better in this country.
Well, maybe they will get better, but first they will get worse. Look, I'm optimistic about AI. I think there are many reasons for optimism, but we will have to... We have to pay for everything. It's time to pay for all this cheap money. We lived lavishly, beyond our means. How long has this national debt clock been threatening you throughout your life?
forever. Look, I saw this coming for a long time, okay? since the beginning of time. I'm not that old. I'm not that old. Since there has been debt, since we have debt, my whole life, since I was ten, this debt clock has existed . And every year it was like: we have too much, I'm sorry, we have too much, we can't afford it anymore, the world is coming to an end, okay?
They said the world was coming to an end. No, no, no. Half of the homes in America, $35 trillion in equity today, are invested in housing. Listen, the world has not come to an end. We had the financial crisis of 2008, the world didn't end, right? So bad things can happen without the world coming to an end.
There will be a debt crisis, a sovereign debt crisis. If you had bought, if you had bought all, if you had bought all the foreclosed homes in 2008, '9, and '10, you would be so rich today that you wouldn't have to move to Puerto Rico. I'm richer because I moved to Puerto Rico. But Yes, no, but you wouldn't have to make that choice.
You would But I love, but I love this place. Because in years 8, 9, 10 , 11, and 12, if you had bought real estate when it was falling rapidly in price, you would have been so rich. But the difference was that Well, I, I'm rich, I'm pretty rich I'm sorry. You don't know what you don't know, okay? So, 50% of all loans in this, in this country, 50% of all loans in this country have a rate below 4%.
And they have 27, 27 years left until the end of their term. Think about the losses. There will be no discounts on these homes . No, okay, well, let me tell you two things. I'm sorry, let me just finish, please. What you will see is a lack of activity. You won't see housing prices fall , okay? You won't see a 50 percent drop in prices for any private home in this country.
Okay, so let me, excuse me, I'll finish . Okay. You will see small pullbacks. You will see small pullbacks where people are forced to sell because the housing market needs this secondary market to move, not the primary or first-time homebuyer. And half of the houses have a rate below 4%, so no one will change it to six or seven.
Yes, and, and you are right. People don't move. People don't sell. tenants in this country, by the way. Let me, let me finish what happens. First of all, you are right. A lot of people have, you know, 20-30 years left on a fixed-rate mortgage where they're paying three or four percent. This means that creditors have huge losses because they are stuck with this asset.
Banks, insurance companies— you have an insolvency problem with all those who own these worthless securities. And I, I warned about this, you know, a long time ago . But yes, because Americans have such low mortgage rates, they will stay in their homes longer. But here's what's going to happen, right?
The cost of everything else will go up. So people will see utility prices, insurance, and all other home maintenance costs increase. Imagine buying a house at the peak of the market , only to discover that the mortgage rate you were counting on may never return. This is Peter Schiff's warning during a heated debate about the housing market in America.
While real estate investors talk about bargains and the coming recovery , Schiff argues that the entire system was built on 40 years of falling interest rates. And now this powerful tailwind may turn into a headwind. Schiff takes us back to the early 1980s, when 10-year Treasury yields were around 16% and 30-year mortgage rates were around 18%.
Over the next four decades, the cost of borrowing collapsed. Until 2021, some 30-year mortgages were available at rates below 3%. Homeowners enjoyed something of a financial cheat code: rising property values, cheaper refinancing, and sometimes lower monthly payments after borrowing even more. Think about how it worked.
Your house goes up in value, rates go down, and the bank offers you a new mortgage. You refinance, take out some equity, pay off credit cards, maybe update the kitchen, and still get a lower monthly payment. It seemed like a house was an ATM that also gave you a place to sleep. Schiff says that era encouraged Americans to depend on rising housing prices and cheap credit.
But what happens when the direction changes? Schiff expects mortgage rates to continue to rise, and suggests they could reach 9%. This is a prediction, not a certainty. Nevertheless, mathematics explains his concerns. At 3%, a 30-year mortgage of $500,000 costs approximately $2,108 per month in principal and interest.
At 9%, the same loan costs about $4,023. To get closer to the original payment, the loan amount would have to decrease to about $262,000. That's why Schiff makes the stunning claim that the price of a home could fall by almost half to provide the same mortgage payment for a new buyer. He's not saying that every house will suddenly become 50% cheaper.
It shows how higher financing costs change affordability . And buyers should worry about other costs: insurance, repairs, property taxes, and utilities. A lower advertised price can still come with a daunting monthly bill. There is now a huge difference between current owners and new buyers. Millions of homeowners secured low mortgage rates before borrowing costs rose.
They don't want to exchange a loan at 3% for a loan at 7% or 8%. This can reduce the number of homes listed for sale and help prevent oversupply, but it can also freeze the market, forcing first-time buyers to face prices and payments they can't afford. Schiff agrees that such cheap mortgages are valuable to borrowers.
He even argues that a long-term fixed loan can be an advantage during times of inflation because payments are made in dollars, the purchasing power of which can decrease over time. However, there is another side. An institution holding old, low- yielding mortgages may suffer losses in market value when new loans yield much higher interest rates.
A great deal for one person may be a headache for another investor. This also makes the choice more difficult for the Federal Reserve. If yields rise and financial markets come under pressure, policymakers may lower short-term rates or start buying securities to stabilize trade. Schiff fears that large-scale bond purchases could reignite inflation or undermine confidence in the currency.
These outcomes are not inevitable, but neither is a bailout that would return all mortgage rates to their old lows. Treasury bond yields, mortgage spreads, inflation expectations, and lenders' appetite for risk all affect how much a homebuyer pays. And Schiff believes the problem goes far beyond the housing sector.
America has moved from high debt with low interest rates to a world where both debt and the cost of borrowing can be high. This changes the calculations for families, banks, and Washington itself. So when Grant Cardon insists that low-rate mortgages will keep owners from selling and protect real estate prices, Schiff has a more somber response.
What happens when people have to sell anyway? This...I would invest in gold , I would just buy gold. In 2000 you said gold would be worth 2500. It took 12 years before that happened. The stakes will rise even higher. This is not the peak yet, and it will create a lot of problems in the real estate market and in the economy as a whole, especially in the US economy, which was really built on real estate, because we were in a " bull" bond market for 40 years.
I don't think we have higher real rates. In fact, I believe inflation is rising faster than rates. So I think that's pretty optimistic for gold. If mortgage rates reach 9%, and I think we could get there in the first quarter of next year, if the Fed buys Treasury bonds, mortgage rates will still go up.
Yes, they have to buy mortgage- backed securities . They should buy corporate debt. They need to start because anything the Fed doesn't buy will continue to become more expensive as inflation rises. 50% of all loans in this country, 50% of all loans in this country are below 4%. Some people will lose their jobs.
We know what people do when their mortgages exceed the value of their property. They just give away the keys. Look, my point is that Bitcoin and gold have nothing in common at all , and adding Bitcoin to your real estate portfolio is like saying, "I'm going to add Bitcoin to my stock portfolio." I'm going to add it to my bond portfolio.
Would you add gold to your real estate portfolio ? No, because I would just buy the gold separately. Why would I mix gold with anything? Because you don't understand that I am creating a new financial product. You said you were going to buy more bitcoins for the cash flow from your real estate. Why not distribute this cash flow among investors, because they will have to pay taxes on it even if they don't receive it?
If you earn income, then the shareholders pay taxes, right? The first five or six years it will be... Oh, because you're making up for it with depreciation. But that means you get not only do they buy bitcoin and cash flow, they also get depreciation. How many people do you know who get depreciation deductions on their Bitcoin purchases?
Yes, but they will still get it if they just buy real estate. Okay, they can keep them separate, but again you're missing the point that I'm creating a hybrid. I'm creating a new product that will revolutionize real estate, just like real estate... will revolutionize real estate? This assumes that Bitcoin...what?
What does this suggest Bitcoin will do? It will grow greatly, but I don't think that This does not foresee it. Yes, yes, but it's...it's not ... that real estate will continue to show such results. Yes, the only thing... And that assumes that Bitcoin will do that. And you assume he won't do anything, but then again, brother, in 2000 you said gold would be 2,500, and what would it take?
It took 12 years. Well, you know, this, you know, gold has been going sideways for a long time . Now Bitcoin is going sideways. You look older than me. No offense, but I do n't know. I I don't I don't I don't I don't dye I don't dye my hair. Good. But I can, you know, I can be older than you. I'm not sure how old you are, Grant.
Peter, every landlord needs money. A few more years, a few more years of Bitcoin, and you're going to start looking a lot grayer because you know, especially after these midterm elections, the Republicans are going to be crushed. It will be a very hostile environment on Capitol Hill for crypto and Bitcoin.
And the main reason Bitcoin had such a big rally was Trump. Ahem? What? Everyone knows you have Trump Syndrome (DTS). No, no, I don't have Trump syndrome–it's people who blindly support Trump. It's them, they are the ones who are crazy. I am rational. Grant Cardon believes that the millions of low-rate mortgages in America are a shield from a housing market crash.
Peter Schiff believes this shield has a dangerous weakness. Their dispute boils down to one question. If homeowners are locked into cheap loans, who will want to sell at a loss? Cardon says most people won't want to. Schiff says some will have no choice. And this difference could determine what happens to housing prices next.
Cardon notes that many Americans have gotten mortgages below 4%, often with a 30-year fixed rate. Why would they exchange these payments for a new loan at 7, 8, or even 9%? They wouldn't have done it if they weren't forced to. Fewer listings could curb housing supply, reducing downward pressure on prices.
This is the effect of the mortgage " freeze," and it's the real reason why today's market is different from the years before the 2008 crash . But Schiff asks viewers to consider what's going on beyond that convenient mortgage payment. Property insurance is growing in many regions. As well as maintenance costs, taxes and utilities.
A homeowner may like a loan at 3%, but it can barely cover everything else. Job loss, divorce, illness, retirement, or a forced move can also force a sale. Low interest rates make staying attractive. They don't make it possible for everyone. Now imagine that only a handful of those owners would sell at lower prices.
Real estate agents and appraisers look at recent comparable sales when valuing nearby properties. If similar homes start selling for less, the assessed value in the entire area could come under pressure. Schiff argues that this pressure does not force every homeowner to urgently sell their home . Single transactions can affect how much the rest of the market is worth on paper.
Then comes his nightmare scenario— negative equity. Let's say you owe $500,000 on a house that is currently selling for $400,000. You are in the " minus" of $100,000. You still owe the bank the full amount of the loan, and the sale will require finding money to cover the difference unless the lender agrees to a different arrangement.
If you can comfortably afford the payments, you can just stay put. But if your income disappears, that difference will become much harder to cover. Schiff warns that some borrowers may eventually abandon their homes, as defaults and foreclosures have become a defining feature of the recent housing crisis.
Cardone argues that today's market is different, and he's right. Many owners have fixed-rate loans, significant equity, and better lending terms than borrowers had before 2008. Negative equity in itself does not guarantee default. Employment, savings, local supply, and lending standards—all matter. The debate becomes especially heated when Schiff reminds Cardone that he warned about the subprime mortgage market even before the 2008 collapse.
Schiff says he even made money playing against him, while others insisted that home prices couldn't fall nationally. This is his argument for taking uncomfortable predictions seriously. But correctly predicting one crisis does not mean that the next recession must follow the same scenario. The danger is real, but the exact outcome remains uncertain.
There is another nuance that both acknowledge. For someone who has secured a mortgage at 3%, inflation can make the loan increasingly more profitable over time. Monthly payments on the loan principal and interest remain the same, while wages and prices may increase. Meanwhile, investors holding old, low- yielding mortgage-backed securities could see their market value fall as rates rise.
This is a valuation issue for creditors and bondholders, although it does not automatically make the bank insolvent. Cardone remains optimistic about the opportunities created by the crisis. He points to investors who bought homes after the last crash and made huge profits during the recovery. Schiff responds that a crisis can provide a chance for bargain shopping, but at the same time cause devastating losses.
Both statements may be true. A buyer who has cash and patience can take advantage of the discount . An owner forced to sell at an inopportune moment may never see the market recover. So, here is the main conclusion for the audience. A cheap mortgage is a valuable thing , but it is not a protective field for the price of your home.
And an expensive mortgage does not prove that a housing market crash is inevitable. Before buying a property , test the strength of payments, repairs, insurance, and the likelihood that refinancing won't make it cheaper. Before you rejoice at the price drop, ask yourself why the seller is forced to sell it.
Schiff's warning concerns what happens when leverage hits a market that can no longer rely on consistently lower interest rates. Cardon's counterargument is that fixed- rate homeowners provide more resilience to the market than pessimists acknowledge. The next chapter will be written by those who can continue to pay , and those who are forced to sell.
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