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hey everyone Kevin here so many I love sharing real estate with you on this channel well today I want to give you a little bit of an update as to what I think is happening in the market and some trends that are changing and whether or not we're going to see a foreclosure wave after this sort of pandemic comes to an end what we expect for pricing going forward and how I'm investing during this time as well as some options for you so let's get right into it the first thing that is useful to know is as expected we were talking about this back in March construction activity has substantially contracted no I imagine this will come back but we see new building permits down about 21% and housing starts down about 30% this is a substantial sort of decline in construction activity which makes sense for remodeling less people want folks in their homes less people are interested in adding on during a pandemic though we might see that pick up after the pandemic and we know that new construction home builders do not like betting on projects that cost them hundreds of millions of dollars in one location when the market is really uncertain we saw the same kind of pullback back in 2018 when the real estate market just taped like 12% like that thanks the Jerome Powell bumping up interest rates as soon as that happen what do you think happened with home builders starts right after that they plummeted home builders are very reactive to what's going on in the market as soon as there's uncertainty for the horizon over the next two to three years home builders wait the interesting thing about this is less homes that are built actually can tend to constrain supply especially in areas where that supply is needed most like coastal regions where prices seem to continue to go up keep that in mind at the same time as this is happening in the construction industry and the new construction home builder market we see that mortgage applications to buy homes increased about 6% so we're seeing this really interesting move of a buyers coming back to the real estate market in very much like an odd v-shaped recovery for real estate in terms of buying demand but we know this is short-term we know that right now most real estate is looking backwards when we look at data today we're really looking at escrows from April and when we look at the data across the country a lot of our sales data is pretty flat since the beginning of the year we've given up a lot of the gains from January in February so a lot of sellers that are putting up properties on the market today are like hah I get to use comps from January in February and sell my property for more money and buyers are like I'm okay with that cuz rates are up but is this all like Fugazi temporary magic and are we just setting ourselves up for a big foreclosure crisis to come when this pandemic ends well in order to answer that we have to understand what kind of crisis were in and how the government responds to this and how the Federal Reserve responds to this which the government has a mandate over the Federal Reserve right so I'll just say government going forward so it's simpler the most important thing to realize is the great financial crisis was a financial crisis 2008 to 2011 a financial crisis banks froze lending froze credit froze foreclosures came about because of crappy underwriting standards which basically mean people were getting terrible loans people were getting loans where basically every month they would owe more on the property that's crazy and on top of that variable rate interest loans variable rate interest loans like the the rate can go up instead of just having a fixed-rate 30-year mortgage where your payment is consistent for 30 years and of course we had borrowers getting loans who were never qualified for some of these loans in the first place we know that and all of that led and contributed to this great financial crisis that we had in oh wait and oh nine and real estate prices really started falling in 2005 imagine that you started seeing real estate prices slowly tickle down trickle down from 2005 all the way down through 2011 but you didn't really see the big drop until like 2009 when that foreclosure crisis came so then we try to align ourselves okay well if we're seeing a flattening of real estate prices now we've got kind of mixed data okay more buyers are coming in but dad is kind of flattening what do we expect is going to happen are we in a 2005 where prices are at the peak we're starting to get some of that shaky footing and is this the start of a big plummet well remember last crash was a financial crisis this crisis is a health crisis that has turned into an economic crisis and that's a very important distinction because right now we're not as crappy as the market seemed right as crappy as the job market seems the labor conditions companies with layoffs and this whole work-from-home movement changing things and we'll talk about those trends in just a moment but as crappy as those things are our economy is suffering our economy is frozen but our banks are not which is weird right the banking system is fluid the banking system is working the credit markets are working you can get a mortgage you can get credit lines you might not be able to get a credit line everywhere anymore but you can still get home equity lines of credit you can still draw on debt most people didn't have their loans frozen or like they had in 2009 or their credit lines locked up right we're not seeing that we're not seeing that because we're not in a financial crisis and whose making sure that we don't go into a financial crisis the government and by mandate the Fed the Fed is suggesting and this is their wording we do not want this economic crisis to turn into a financial crisis and we will do everything in our power to prevent that if you listen to what they are saying they're literally telling us they will do whatever it takes to make sure that we do not have a 2009 style foreclosure crisis but can we believe that is that going to be true do we want to bet with the Fed or is it better to bet against the Fed well let's think about that we have two real choices here - number one wait we wait and see what happens and the number two will go through these options here together and then we'll talk about trends okay all right so number one is waiting and when we wait we can take our earnings and put them into cash Bitcoin stock or bonds now bonds are kind of out of favor and cash could be okay since inflation is going to be pretty low over the next couple of years or we're seeing near zero inflation heck Canada just went into a deflationary time which we're expecting I think our entire global economy is heading towards deflation and that's why we see more money printing happening right but so cash bonds let's put those aside for a second for consideration you know bitcoin is something I think you'd really buy into if you're super anti the dollar super anti the established system so to speak the government and the Fed so that really leaves sitting in cash or stocks and if you're thinking you know at some point I want to buy real estate I want to own I want to get into maybe owning a duplex or triplex or four-plex or investing in real estate building my wealth you know Kevin I like you saying your courses I want to buy those below market value wedge deals but I'm not quite sure if now is the time well then you're really torn between cash and stocks when we look at the stock market we go WOW not many opportunities left here it's kind of like those have been swallowed up over the last two months last you know March and April a lot of the stock deals are kind of gone and now we're paying what are called safety premiums in stocks we're able to buy Amazon at these ridiculous prices and for Amazon to hit new records almost every week because people are fleeing to safety right people are fleeing away from travel and they still are they're out of travel they're worried about a second wave they're out of hospitality they're worried about commercial real estate you know retail had a good day today but there's still concern in retail and you know even real estate investment trusts so they're plowing money into these safer stocks and we're seeing these premiums well when you see a premium you're basically that's like a nice way of saying you're kind of overpaying for some stocks right now right and that might not be bad it is a style of safety investing and then the long run paying a little bit of a premium now not that big of a deal if it means you're on train America right if you're buying stocks you're probably Bitcoin you're not necessarily on train America but you're on your own train and I'm not bagging on that train you're just not a different train okay and cash okay that might give you some flexibility if you have the discipline to stay in cash and not spend it fine so that's choice number one choice number two and then and then I'll come to a conclusion as to what I think choice number two is you get in the game and if you're going to get in the game here's the opportunity that you have right now you have a saturated condo market a lot of people are dumping condos and properties with small lot sizes because they're worried about the impacts of the stay at home culture on sort of the pandemic they're thinking possibly in in potentially a very overblown manner that people are going to want backyards they're going to want a pool and and so we're seeing more interest in houses with yards and pools not necessarily like large acreage though I imagine that'll do well as well in certain areas of the country but larger yards in favour of condos and community complexes that's not so good if you own apartment buildings but this is good if you are interested in being a buyer of apartment buildings or condos and so then you ask yourself well I mean wouldn't anybody rather buy like a duplex triplex or for plaques or an apartment building yeah maybe both of these can be good opportunities for you to buy in as well as our general opportunity to always buy fixer uppers right wedge deals generally wedge deals are gonna be in the single-family in the condo market not so much in multifamily unless you get rents way below market value that's how you get good deals in multifamily talk about that obviously in detail in the course but the most important thing to think here is if you're going to get in what's your job stability because as terrible as the unemployment numbers are over 70% of us are still working and if you look at your income now and say okay my income is X why don't you take 10 to 20 percent off of your income in case your company introduces some sort of pay cuts well if you have a pay cut what can you then afford with a pay cut and with a pay cut are you going to be able to make your payment's and be comfortable with the expenses for your property remember piti plus HOA right principal interest property taxes insurance plus HOA dues and then of course you want to set money aside you know usually two hundred bucks a month for repairs if you're gonna rent the property out for reserves in case something comes up right create a little bit of an emergency fund for your properties it's different than from than an emergency fund for yourself so these are your two choices right either you wait on the sidelines and you sit in cash or you go into stocks where you are paying a safety premium or you're buying sort of the bottom feeder stocks I get it like I bought some of these do you know the Delta the Carnival the Simon Property Group and you're kind of floating around at the bottom like there hasn't been a big move up right so these are sort of or or you're in like the Amazon the Apple the Tesla which have sold for premiums now even peloton a little bit of a premium but you know good upside potential there in fact I personally think peloton is going to be cutting a lot of people out of the Commission sales gig and peloton revenues are gonna go through the roof so your stock cash plays or you get into real estate where you're looking for exhausted landlords people who don't want to deal with apartment buildings anymore you get into the saturated condo market where people are like droppin condos because maybe people don't want those anymore or you're looking for fixers depending on your stability with your income and your interest in doing work on maybe a single-family it's an option for you and if you're fearful getting into a condo it might be an interesting way to start as long as the condo complexes don't have crazy restrictions like you're not allowed to rent it out or your HOA sucks because HOAs can't suck you know management associations they can suck you get into a good Association the nice thing about a lot of condos is depending on your association a lot of them you don't have to pay to maintain things like the walls the roof the sewer line the structure the building the exterior paint the exterior landscaping so if you're thinking about like stay at home minimalism you might be able to hop into some deals on condos townhouses and again if you want to go for the big gusto and own the whole building an apartment building or a fixer but now we've talked trends and we've got our options so we know our options are either cash stocks or fixers apartment buildings condos now what are we thinking about an actual foreclosure crisis well let's analyze this so in order for us to have a foreclosure crisis after mortgage forbearance ends we're going to basically have to see banks force people to catch up on their payments but right now there is already a substantial movement in Congress that says no no it's okay we'll just let you put your payments at the end of a loan okay well that takes away a massive amount of foreclosure pressure huge amount of foreclosure pressure gone all right well what's the other option okay well in a year after mortgage forbearance is over people don't have a job to go back to or they get a job and they make twenty to thirty percent less money is this going to now force people into foreclosure well let's consider this for and then this is my speculation but I'm trying to put my thinking cap on when America goes back to work if somebody owns a house and they go back to work and now all of a sudden their house poor because they're making less money are they going to sell possibly no absolutely quite possibly sell but if prices start falling say you know ninety-three percent of Americans have more than five percent equity so let's say prices fall 15 percent in the worst-case scenario which means the average person is upside down by about twenty to thirty thousand dollars in equity is it going to be worth somebody dumping their loss of about twenty to thirty thousand dollars in a house and then having a seven-year record of foreclosure on their credit report limiting their opportunity to buy real estate in the future or are people going to suffer through the payments work more but be poor which means less consumer spending but still making their mortgage payment and not going into foreclosure and ruining themselves for the next seven years and so that is where I believe you have to make up your own mind that is if you believe there is going to be a foreclosure crisis you are saying that when prices fall fifteen percent people are going to start listing their homes even at a potential loss to get out just to get out because they can't afford it anymore because their pays gone down twenty percent there to house for they got to get out and then once we start seeing people sell for a loss they start selling with short sales and we start seeing more foreclosure come up short sales are sort of the initial process of foreclosures right we start seeing that then yeah that could self fulfill and we could see more of a decline right do we see a 20-25 percent decline maybe but remember what the Fed is doing they're pushing out guidelines regularly and Congress is regularly saying hey you know what if at the end of forbearance people can't make the payment anymore because their income has declined then we need to give them the option to modify that loan to avoid foreclosure that is you know what maybe let's lower how much principle you're paying off every month maybe let's turn your 30-year loan into a 40 year loan and that goes back to what I said at the beginning of this video the Federal Reserve is trying to prevent a financial crisis people going through foreclosure and short sales freezes up banks and that's what the feds trying to prevent and the Fed is in the ear of Congress and Congress is already saying let's extend forbearance let's put the missed payments at the end and you know what as the bills say if people can't make the payments at the end then they may as well do a loan modification before they go into foreclosure and really push the market to crap so remember in my opinion for us to actually see a foreclosure crisis we'll have to see prices fall 15% people's income go down 10 you know 15 to 20 percent people not be able to get loan modifications be forced to sell these people are gonna stay unemployed forever right they will go back to work albeit at less money and then all of a sudden what happens well here foreclosure crisis in that scenario doesn't happen because the Fed and Congress prevent it from happening by giving people options let's just accordion out your loan logger and lower your payments that's a more likely bet in my opinion I'll give you a percentage in my take and so that's why personally I aligned with hey you know what I'm pre-approved I've got cash ready to go I'm geared up and ready to take advantage of these low rates because I know they're going to be distressed condos distressed apartment buildings and to stress single families and I'm gonna scoop them up and you know what maybe people like me and people in my investing course link down below and those of town polo and of course those of you who get your life insurance because you know we're out there trying to buy real estate deals may as well be protected with life insurance or at least protect our family well us we're ready to go we're ready to snatch up these deals now does that mean I'm some shill trying to get you to buy real estate than that guaranteed there won't be a foreclosure crisis no no guarantee for that at all I guess I just look at it this way I think right now there's a lot of sentiment that says unemployment is so high how can there not be a foreclosure crisis and I think in that aspect we look at sort of this roulette wheel at a casino and we're like okay foreclosure crisis is red no foreclosure crisis is black go place your bet you got forty nine percent chance of that forty nine percent chance of that and two percent chance that Bitcoin wins sir so that's kind of what the rule Bitcoin joke oh yeah I'm not trying to fend Bitcoin view you know that's kind of the roulette wheel right now is what it feels like but the reality to me is I got 90 percent of the table covered I got 90 percent of the numbers on the table covered and there's maybe a 10% chance of a severe foreclosure crisis because not because of unemployment look unemployment is bad solely because of what the Fed is saying about what I just described and what Congress is doing if those things change and if they say you know what screw forbearance y'all just go through a foreclosure you know what file B K yes that will be bad then the stacks will change that's gonna be kind of like Jerome Powell coming up to my roulette table and going you those chips mine and take some off the table and goes in place craps that would be bad then we got problems so there you go folks this is my opinion on the coming foreclosure pandemic crisis coronavirus whatever and folks make sure join me ]
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