New Mortgage Rates CRASH the Housing Market



2021 Housing Crash around the corner? Low Interest Rates could cause the crash to come sooner than later.

Home prices in America in 2021 have surged to record levels, pricing out many home buyers and real estate investors from the market. A Housing Crash could be inevitable. But many believe that low interest/mortgage rates will keep the Housing Market Bubble going.

Mortgage rates have declined significantly over the last 40 years – from a high of 18% in 1981 all the way down to 3% in September 2021. These low rates have made the monthly cost of owning a home stay reasonable, with the typical annual mortgage payment in 2021 similar to four decades ago.

Over the same time frame, home prices in America have surged. The typical price of a home has increased from $30k to $300k – a 10x increase – since the 1980s. As a result, the down payment (10%) has surged from $6k to $30k in the same span.

Skyrocketing down payments is creating big problems for the US Housing Market. Renters (aka future First Time Home Buyers) are struggling financially, with lower average savings today than they had 30 years ago (you read that right). Whereas in the 1980s and 1990s renters had more savings than required for a down payment, now they have significantly less.

The result is a significant portion of America is locked out of the US Housing Market. And no matter how low monthly mortgage payments go they will not be able to participate given how high prices and down payments are.

But not only a significant share of renters/first time buyers priced out. Many simply don’t want to buy, even if they do have the cash. Recent data from the Fannie Mae Housing Survey shows that a record percentage of Americans think it is a BAD time to buy a home.

With renters priced out, investors are stepping in and continuing the speculative bubble. Data from Redfin shows that investors purchased more homes in the second quarter of 2021 than any other period in US history.

These investors are speculating in the Housing Market and inflating the Housing Bubble to crazy levels. But what happens when home prices start declining? What do these real estate investors do then?

Case Shiller 2004 Paper:
http://www.econ.yale.edu/~shiller/pubs/p1089.pdf

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0:00 Record Low Rates! BUY NOW?
1:19 50 Years of Housing History
3:18 Monthly Payment or Down Payment?
4:37 Stagnating Renter Savings
6:53 $30k Typical Down Payment
9:03 Americans Say: BAD Time to Buy
10:58 Who IS Buying Right Now?
12:18 SPIKE in Investor Home Purchases
13:48 Small-Time Investors / Mom & Pop
15:12 Quote from Robert Shiller
16:52 Join for the Reventure Newsletter!

#MortgageRates #HousingCrash #InterestRates

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35 comments

  1. Myname MyLastname

    Mortgage rates are record low, home prices are record high, buyer gets the shaft.

  2. Michael Norks

    On top of that what about their college loans?

  3. Robert Norvell

    If you're buying a house to live in, then the payment is more important than the value (assuming you can afford it and can stay). If you're an investor worth a dollar, you're not buying retail OR you're asking sure the numbers fit your plan.

  4. Shannon Phelp

    Some investors look to their investments as a source of income while others use it is a means to grow or preserve their wealth.

  5. text message

    so it is in a way related to the low interest rate. you said that investors were taking advantage of the interest rate to buy up homes, mom and pop investors, isn't the result the same higher prices as demand increased? am i missing something.? how long after the top will the investors decide to liquidate 2 years? like 2006 to 2008 bust?

  6. Just got a phone call from a realtor saying “it’s a fantastic opportunity to buy a home now”. Clown!!!

  7. george singh

    That is not true,renters go on welfare they pay nothing!

  8. Ok at first I was like what kind of bs does this guy got…then I saw some graphs and interesting information. Thanks.

  9. Michael Russo

    It’s also the fact that buyers are having a really bad experience in the buying process. As a buyer you are told that if you don’t come in with a full cash offer than you need to make an offer really higher over the asking price. I find nothing more revolting than actually making a higher offer on an already ridiculous priced property. It goes against everything I have been taught in school and in my professional practice as it comes to contract negotiations. So even when you can afford a 20% down payment on a property you can’t really get a decent property unless you offer an obscene amount over asking. Other than that, you are left buying overpriced undesirable homes. I rather become a cash hoarder and wait till the market comes down crashing and burning than feeling like I’m getting scammed by these crooks.

  10. Straight Whitemale

    What percent of America earn over $300,000 annually ? 5-10 % of Americans? Average homes pricing requires a $ 60,000.00 down payment. Give me a break , most renters aren’t worth net $10,000.00 . I would be bullish on Real Estate if our government wasn’t socialist . I bought properties buy and hold allowing renters to cover the costs. Now I can’t bet on rental income some government bully can say no rent due anymore. So why buy homes?

  11. I could see a correction, but I don't think there will be a crash. Not like 2008.

    My area is upheld with high income tech. Even during the 2008 crash, the area held higher prices than other spots.

    The thing about the low interest rates, a new loan you are paying almost, or maybe more principal than interest. I refinanced in February. Previous, even a 6% interest loan you are paying mostly interest at the beginning of the 30 year loan.

    Also, what is the alternative? Renting? I'm seeing $500 rent price jumps just in the last month. I would say the play is buy small, low interest. And in a few years use that capital/value to upgrade to a bigger home rather than continue to sit on the sidelines and rent.

  12. Charles Michael

    10% down? In Denver, no lender accepts less than 20% which is the long time historic standard which was briefly departed from in the 08 bubble.Why would you use that odd down payment in your historical argument & model? 
    Today, by all accounts and my local experience, lenders are demanding good credit and that standard 20% down. Practices which indicate that this surge is, for now, a legit sustainable demand pull deriving from the low level of construction following the 08 blow up. Now it is supply playing catch up to decade-long backed-up demand enhanced by the lockdowns of 2020. Hence, as your earlier videos indicate, prices outpaced income since 2015ish as new supply failed to keep up. As I see it, these prices and increases will continue until the industry ramps up output to exceed demand in a few years from now.Then, prices will soften and your investors will exit en masse and start your snowball rolling down the hill. IMHO! Sooner or later, yes, prices will mean revert back to normal ratios compared to income but that will be awhile. Not in time for xmas as you seem to be saying.

  13. RCPhotosVideos

    I must be doing something wrong with only 9k in cash accounts (home owner)…I always thought it was better to have your money making more money for you in investments.

  14. shouldn't these graphs for downpayment and savings be adjusted for inflation?

  15. Josue Anguiano

    That makes a lot of sense!!

  16. Chase Gaetze

    I've been holding onto my cash waiting for the crash. Just look at how the price of homes has gone up in the last 3-5 years

  17. Rental prices are just going up though. How's that going to get any better? Investors are buying up homes like hotcakes right now there's a huge demand for them. Did I miss you talk about this? If so if somebody please point me to a timestamp.

  18. Brilliant analysis and presentation, well done!

  19. Not sure if you mentioned this in your video… 28K in 1970 would be worth about 200k today's money. Home price increased but maybe not as dramatic as 10 times if you consider money value over time.

  20. Panda Digital Love

    Be a slave to your mortgage. Property tax will f you over in today's high price real-estate of big cities.

  21. Shoaib Sheikh

    WOW! that yearly payment graph is amazing!

  22. Crash or correction?

  23. I'd rather 18% on a 60k house.

  24. Enrique Felix

    In the mid 2000 I remember a lot of people walking away from "investment" homes because of the type of mortgage loans they had such as ARM s when they would reset the payments would go from $1500 to $4000 the next month ,,, if people or putting down more down payment this time around doesn't that give them a nice equity with a fix low interest rate? Even if the home prices go down who care if you put down 50k 100k and have a fix 3% rate for 30yrs the people that are in a bad spot are the renters waiting for the home prices to go down.

  25. Are the rents purposely being raised so it forces people to buy a house? Are these 2 working hand in hand with each other?

  26. This is where having a wife who worked in the mortgage industry and real estate helps significantly. She understands the games being played. I can also say she did a ton that blows all this out the door to eventually get us a home in the town we wanted. Each time, we've lowered our payments, interest rate and increased our savings. Again, it helps when you know the game to game it yourself. She also predicted the crash in 2008 20 years prior. I'll listen to her because financial people are clowns that cause the average taxpayer to clean up the messes they make. Just look at who footed the bailouts of these financial clowns.

  27. KayAnne Riley

    Hi Nick LOVE your channel! I am a realtor (BOO, HISS) and I agree with almost everything you say. One thing I would urge you to consider however is rural markets, because what is happening in rural markets doesn't track with the mostly metropolitan areas you follow. I live, work, sell and buy in Prescott, AZ. Do take a look at the market in Yavapai County, AZ. It has been all gas, no break for months and months. I am a veteran and have a sort of niche market in the veteran community and what I am seeing here is sad. My vets (and FHA clients) get beat out by cash buyers over and over (I have written seven contracts for one couple). Not sure but the feeling here is these are mostly LARGE investors (like Blackrock), and not the mom and pops you say are driving the investment market. Not sure how to verify that but that's just the word on the street. They are buying up every stick-built house they can find under $400K and plan to use them for rentals. Once again, average Joe is pushed out of the market despite low interest rates and the wealthy investors clean up. As a realtor, I am approached DAILY by investment houses asking if I have any "pocket" listings for them to purchase (these are listings about to go live that have not yet hit the MLS). While I agree in the cyclical nature of these cycles, what we are seeing in Yavapai County is a little bit different. Would appreciate your perspective.

  28. EPTRotorsport

    You can't refinance principle.

  29. Agreed with all the points made in the video. One thing it doesn’t mention is the much more robust capital adequacy of US financial institutions. Allowances for loan loss are at all time highs, and as such, yes, there may be a correction in home prices but not one exacerbated by a broader institutional failure as we saw in the last cycle.

  30. Thanks Nick for all valued information! What do you think about New York City market? Is it good or bad time to buy now?

  31. Very interesting video. It's time to save dough for the next buying opportunity.

  32. We just put a bid on a house in Dana Point,ca. 18 bids on a 940k list.

  33. I agree. Awful time to buy.

  34. Don't worry about all time highs in housing prices?? Seriously? Buy a severely overvalued asset just because of low borrowing rates?

  35. I live in Holland and housing prices are up to and over the roof. Rent is really low also. Demand is much higher than supply so I dont think this market will crash. Buyers sometimes bid 10k to 50k higher than the prices, it's insane! So how could it possibly crash when the demand is so high? The population has to decrease or they have to build new houses really fast.
    Id like to hear your opinion about that. What if this is the situation in the US? Would it then be a good time to sell, wait a few months and then buy back in?

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