Epic Real Estate Investing - The Fate of 2024's Housing Market | 1292

Episode Date: February 8, 2024

Are you ready to dive deep into the tumultuous waters of the 2024 housing market? In this episode, we dissect the looming crash, exploring both the challenges it presents and the opportunities it unveils. Our expert speaker takes a methodical approach, analyzing key factors such as affordability, unemployment rates, and the looming specter of recession. But fear not, for amidst the uncertainty lies potential. With whispers of interest rate cuts and a delicate balance in inventory, there's hope for savvy investors and homebuyers alike. Discover actionable strategies to weather the storm, whether you're a seasoned real estate pro or a first-time buyer. From securing a 30-year fixed interest mortgage to building your emergency fund, we've got you covered. It's time to navigate the choppy seas of the housing market with confidence and clarity.  Tune in now and seize the opportunity to turn crisis into triumph. Your path to prosperity starts here.  P.S. Whenever you're ready to go deeper and further with your real estate investing, looking into my partner program to help you get your first deal might be the move... take the first step here for free 👉 https://epicearnwhileyoulearn.com/ Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. By the end of this, you're going to know exactly how the 2024 housing market crash is going to unravel and how you can best position yourself to profit from it. Because depending on who you ask, 50% of the people think it's only going to keep going up, and 50% of the people think it is going to crash. But I think it's actually going to play out a little bit differently, and I've got evidence to support it. Hey, strap in.

It's time for the epic real estate investing show. We'll be your guides as we navigate the housing market, the landscape of creative financing strategies, and everything you need to swap that office chair for a beach chair. If you're looking for some one-on-one help, meet us at rei-aise.com. Let's go, let's go, let's go, let's go, let's go, let's go, let's go. Let's go. Now, before we can know where the market is headed, you need to understand where we're at currently, because according to Realtor.com and their year-end review, the state of the housing market can be summed up in one word. frozen. Last year's market didn't just slow down, it skidded to a haul because of interest rates. They almost tripled from their 2021 low. Mortgages became more difficult to get and sellers stayed put.

And that's how you get a year with the fewest existing home sales since 1995. And pending home sales, they hit rock bottom, the lowest since we started keeping score in 2001. Mind-boggling, considering the U.S. population has grown by 18% since then. Now, logic says home prices should drop in this scenario, right? Instead, the opposite, pull in a 2.1% year-over-year increase to a median record price of $428,000. But what about this year? Will prices tank or will they keep climbing? There's two sides to this story.

And once you get this, everything's going to click. But before I break down the case for why markets might skyrocket, we need to break down why prices might crash. All right, first, let's take a look at why some analysts are betting the housing market might take a nosedive in 2024. And the third one, it seems everyone has to be. forgot about, but it's still very, very real. But first, it's affordability. And it works like this. You take an area's average house price divided by the average income, and traditionally,

that number will tell you if the market is hot or not. When a market becomes less affordable, it usually leads to a decrease in demand, which leads to a reduction in price. And right now, nationally, we're looking at the worst affordability since 1984. CNN just posted a stat from then, and a whopping 38.6% of the median household income is now needed just to keep up with the average home payment. And if it's over 30%, usually that would spell crash. The kicker for today, a stattering 99% of the U.S. is now out of reach for the average Joe making $71,000 a year. If you're in L.A. or San Francisco or Seattle, you need to make at least $155,000 a year. Second, unemployment.

And before you start screaming about how unemployment is super low or how unemployment, how the unemployment numbers are all a farce, wait. It's still worth it to look at the history books for this. Aside from the 1950s, post-World War II era, unemployment hasn't stayed under 3.5% for more than a year. In 1953, high inflation kicked off a recession, doubling unemployment, almost tripling it. Fast forward to the 70s and 80s,

and you've got the same high inflation, same high unemployment horror show. The 90s saw tight-fed policies, the 2000s, the tech bubble burst, 2008, well, that was a lot. a financial nightmare, and now it's deja vu all over again. But get this. When inflation slows, unemployment tends to boomerang back up. Since 1949, this pattern's been as predictable as a sitcom rerun. Worse still, the average worker's paycheck shrinks six to seven percent for every

1 percent uptick in unemployment. So if this trend repeats, brace yourself. Home affordability could nosedive further than it has. But we're experiencing two things right now, that economists didn't think they could actually happen at the same time. Low inflation and low unemployment. Technically, a good thing, but an anomaly causing greater uncertainty. Now, the third thing, recession in 2024. According to Realtor.com, a recession could take the housing market from lukewarm to cold. If it hits hard, even the most steadfast homeowners might have to wave the white flag and sell.

This could flip the script on the Supplied Demand Saga that we've been watching. Fannie Mae, they're chiming in too, warning that our spending habits are like a high speed train heading for a clip. And as for the people's voice, only 16% think it's a good time to buy a house. That's not just low, it's basement level low. And guess what's freaking people out more than sky high prices? Mortgage rates. They are the new boogeyman, scaring off consumer confidence. Now, this isn't my first rodeo. I was around for the 2008 crash. I was right in the middle of it. And I think I know how to play this one perfectly. But before I tell you that, I need to make the case for why prices might skyrocket. There are five.

compelling reasons why home prices could start climbing again. And the fifth one is the most obvious, but nobody is talking about it. The first reason prices might take off again is that Federal Reserve, Jerome Powell, hinted at dropping interest rates, predicting three rate cuts of 25 basis points each this year. This could drop the federal funds rate to 4.5% with mortgage rates potentially settling between 5.5 to 6.5%. What does that mean? Well, since we momentarily hit 8% last year, Inadvertently, we've established a new bottom for rates, or entry point, in other words. This could be a green light for buyers to jump back in and drive prices up. I mean, we're already seeing some signs of this as it is.

And the big players, they're betting on this. Realtor.com's Lawrence Yun is calling for a 3 to 4% rise in home prices this year. Zillow's crystal ball shows a ginormous 6.5% increased by July this year. Even Goldman Sachs is jumping on the bandwagon, saying home prices are only going up from here. If they're right, strap in. We'll be back with more, right after this. Boarding for flight 246 to Toronto is delayed 50 minutes. Ugh, what?

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A whopping 60% of homeowners are sitting with a mortgage rate under 4%. They're more likely to stay put than jump into a pool of higher rates. I mean, why would you swap a comfy 3% rate for a chilly 7% one that increases your payment by 30%. But here's potentially the big game changer. If the whispers of these dip in interest rates, if that comes to fruition, a 5.5% 30-year fixed rate mortgage could be the golden ticket that lures this pool of homeowners out of their nests. The small sacrifice to a better or bigger home may be worth it. These homeowners could turn into eager sellers, eyeing the chance to leap before the market gets too high. We could see a surge of homes up for grabs within just a few months shaking up the inventory balance.

Third, let's talk Jerome Powell again, but about the economy overall. He's tuning the economy for a smooth landing this year. We're talking controlled inflation, a sturdy GDP, and robust consumer spending. Plus, there's a whopping $6 trillion in cash just lounging around, ready to deploy. Fourth thing, let's talk housing cycles. Housing prices, while generally on an upward escalator in the long run, they dance to this seasonal beat. Like clockwork, you'll find predictable swing. And right now, we've slid into a slower market tempo. And here's a pro tip for the moment.

Many markets in Texas and Florida have seen price cuts in excess of 30% in the last 12 months. Virginia, Kentucky, Wisconsin, New Mexico, Montana, and Idaho have all seen similar drops. That means that right now might be the lowest we see prices for a very long time, or forever. Finally, let's zoom out for the big picture. Historically, housing has been like a fine wine. It gets better with age. Adjusting for inflation, housing values have seen just one dip in the past 50 years back in 2010. Over a century, they've been on a steady climb, consistently outpacing the growing population. This trend, it's likely to keep this pace, if not accelerate, for another 50 years. And here's why. No one is

talking about this one. This here, this is a graph showing our population broken down into their respective generations and by age. And this peak of our population is right here inside the millennials. And they are at the age of 33 to 34 years old. Now, look at this. The anatomy of the first-time homebuyer is the age of 33. That just rose to 36 last year. But these two numbers, they have collided, which means that there is more demand for housing right now than ever before in the history of the country. Now, look at this. This is the supply of available homes. Over the last eight years, the number of single-family homes has grown by just two million units. While the population of people aging into first-time homebuyer age, 33 to 47, that's grown by 13 million.

That's 11 million single-family houses that were behind. That type of supply, demand, imbalance is not a precondition for housing prices to fall long term. And for someone who's been in this game since 2002, I'm going to give you a few pro tips that'll help you get through this, regardless of the market surging upward or crashing. And I've got six of them, six things that you can do to safely play the game, survive, and even win. First, our survival guide begins with getting yourself a 30-year mortgage.

And here's why. Flexibility. If the interest rates are your concern, you can always double up your payments to knock it out as if you would in a 15-year mortgage, still saving a mountain of interest. But if life throws you a curveball and your wallet feels the pinch,

you've got the breathing room to make smaller payments. That kind of adaptability moving into uncertain times is priceless. Secondly, opt for a fixed interest rate. Locking in a fixed payment offers a sanctuary of predictability amidst the chaos. It's like an anchor in stormy seas, giving you peace of mind that your payments won't fluctuate. And if the interest rate predictions come true, you can always refinance. And that brings me to number three. Refinancing.

If there's a chance to refinance your home, maybe grab some cash, but definitely lower your payment, grab it. When future interest rates dip below your current rate, refinancing swaps them out, cutting your costs. It's a financial mover that can keep more money in your pocket. Fourth, hold on to your home unless it's a must-sell situation. Real estate values really only count when you're looking to sell. The goal here is to whittle down your monthly payments to the bare minimum. This strategy gives you the power to not sell unless you have to.

Plus, by staying put, you can ride out any short-term market dips and wait for recovery. and if your timing is wrong, it could be really tough to get back into home ownership. Fifth, always have an emergency fund for your real estate endeavors. Things break when you least expect it and often with a hefty price tag. For instance, you might coast along for a few years, then bam, $2,500 heating bill out of nowhere. Plus, there are unavoidable recurring costs like property taxes, insurance, and routine repairs. My advice, keep a few months' worth, at least of property expenses in cash on standby. It's not just smart, but it's essential for your financial peace of mind.

Lastly, the sixth golden rule, only by what you can comfortably afford. Avoid the temptation of overreaching for your Taj Mahal. Stick to a property within your financial comfort zone. A good benchmark is to ensure your housing payment doesn't gobble up more than 25% of your income. 30% tops. Staying within this boundary, it's crucial for financial health, no matter how the market swings. Historically, real estate has been a stable investment. the best, in my opinion, with a consistent upward trend, barring the 1929 and 2008 crashes,

but still, had you purchased just prior to each of those crashes and you didn't sell, you're still looking like a winner today. A repeat of the 2008 crash, it's unlikely. We're probably looking at a gradual slowdown. So buy what you can afford, preferably with a 30-year fixed-rate mortgage. Hold on to it for the long haul, buy within your means, planning to hold for eight to 10 years, if not forever, and short-term price changes probably won't impact you at all. Now that you have a clearer view of both scenarios and what to watch, I want to help you make your first $100,000 in real estate

regardless of what the market does. Thanks for watching. I'll see you over there. And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button.

when they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings, and success to you. I'm Matt Terrio. Living the dream. Yeah, yeah, we got the cash flow. You didn't know home for us. We got the cash flow. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.