YesTalk-199 - Real Estate Market Prediction 2020 Post-Coronavirus

Welcome to Kevin Ward's Yes Talk for Realtors. This is Kevin Ward. This is about to be huge. The reason I say this is going to be huge is because whatever is about to happen in the real estate market is going to be huge. The question is what's about to happen in the real estate market. And a couple of months ago when the coronavirus and all of that stuff started happening, I did a video of how coronavirus is going to affect the real estate market. I'll put the link down below so that you can go back and watch that video where I was talking then about what's going to happen to the real estate market. Well, now we're three months into this whole thing. We've been through March, April and May, really the last half of March. So we're about 10 weeks in. As I'm recording this video. The question is what's going to happen post crisis? Now we've got the new crisis with all of the social unrest as a result of the unfortunate death of George Floyd and the murder of George Floyd and how that has caused a lot of disruption and the social unrest is now also contributing to the economic impact, which is going to have a, you know, is going to have a domino effect in the housing market, real estate market and all that, because everything that affects the economy, affects people's incomes, which affects their the housing market. Now, I want to just start first by what's going to happen in real estate. And the first thing we're going to deal with is what's going to happen real estate. And two is, when is it going to happen? Is there going to be a housing crash, a real estate market crash, and if so, when is it going to happen? Now, I firmly believe that we are in for some rocky times ahead. How quickly things can get really ugly depends on a whole lot of factors beyond the fact that right now things are really ugly, not just in the social unrest, but there is a lot of things that are ugly in the economy because of the pandemic and all of the crisis that has caused. But I want to look at it in this video strictly from a real estate perspective or a real estate market perspective. So first I want to just review real quickly that there are five factors in my estimation that really drive the real estate market and especially the housing market. Now, commercial real estate is related, connected, but it is a completely different animal when it comes to how we're going to talk about it in this video. So the five factors that drive the housing market are these things. Number one is demographics. Okay, Demographics is a long term factor. It is not something that has been affected or changed by the coronavirus or anything else that's short term. It has to do with demographics, that is age groups. So we talk about the two biggest age groups currently in the United States, and these are also reflected globally as well. But we call the first big group is the baby boomers. The baby boomers are those born from 1946 to 1964. They are now in their mid to late 50s, 60s, and 70s, and they are the largest demographic in America. There is over 70 million, well over 70 million baby boomers right now. And they own 53% of all the homes in America. They own 53% of the all. The 53% of all the homeowners in America are baby boomers. That means they're in their mid to late 50s, 60s and 70s, and they tend to own the biggest houses of their lives. What that means is that over the next few years, they're going to be selling, they're going to be downsizing, okay? That dramatically will have a major impact in the housing market going forward. And especially because the age group behind them, the Gen Xers, is a much smaller demographic. There's not as many of them, so there's not as many of them that are going to be buying the big houses during the peak spending years, which is in our 40s and 50s are the peak spending years when your kids are growing up and all of that. And that's when peak income earning years. Also when people tend to buy their biggest houses, there's just going to be fewer people on the back end to buy the houses. And then behind that is the millennials. And the millennials are less enthusiastic about home ownership. Just as a general demographic. It's a large group of people, but they are not near as excited about owning houses and certainly not as excited about getting into massive debt with big houses. They've already got enough of debt with credit cards, car payments, and of course the big student debt, which is over $1.6 trillion in student debt in America right now. So there's a lot of that going on. So demographics is going to be a major driver in the trends of the housing market over the next 10 years. So this is not a short term thing, this is a long term thing. Okay? So that's one of the big factors. The second big factor that drives the housing market are interest rates. Okay. Your interest rates is again, this is not new. This is just something that drives real estate. Right? When interest rates are low, people's buying power goes up, they tend to buy. Interest rates have been historically low, literally for 20 years. Okay? When I first started real estate back in 1998, interest rates were just now beginning to go below double digits. And people were like, wow, interest rates are awesome. It's 8%. Then it got down to 6%. They're like, this is like, never going to happen. Never happened before, never going to happen again. And people were crazy about it. And now we are talking about record low interest rates right now, who are looking at interest rates in some cases under 3%. Again, historically unheard of. That is going to incentivize buyers to buy houses. In spite of all this stuff going around there. Massively low interest rates is always good. Now, the other problem with low interest rates is that because it's been low, America is in a massive debt bubble. I mean, the amount of personal private debt and the amount of government debt, our federal deficit, all of that has exploded over the last 10 years. And there is going to be that bill to pay. And so that's causing a lot of problems in the third of the factors that affect the housing market, and that is the overall health of the economy. Okay? And right now, our economy is in shambles. Now, let's talk about the factors of the economy and what makes that tick. First, the stock market. Now, here's what you have to understand. Right now, the stock market is completely disconnected from the reality of the economy. The stock market is being driven by the Feds, by the Federal Reserve, not by the market or the economy. Okay? The stock market is totally. It is not being driven by reality, okay? It is driven by the Fed's printing. They don't call it quantitative easing anymore, but they are basically injecting over 100, on average, over $100 billion a day in printed money in debt. We're adding to the debt, I mean, just at massive, massive rates. And that is propping up the stock market. So the stock market is not a true reflection of what's happening in the economy. Now what's a reflection of what's happening in the economy? Well, for one thing is, do people have jobs? And right now, as I'm recording this, the first week of June, the official. According to the Bureau of Labor Statistics, the official unemployment count in the United States right now is over nearly 41.7 million people. That is nearly a 10x increase in the last three months, nearly tenfold since March, when it was at one of the lowest of all times. Okay? So we get over 42 million Americans unemployed, officially not to mention all the ones that are not employed or underemployed, that are small business owners, that are independent contractors in the gig economy and all of that, it is an insane amount of people that do not have strong incomes going on. Right now, nearly 10% of all mortgages, all mortgages in America are in forbearance, which means people aren't making their house payments. Now. That's 10% that are in forbearance. There's nearly twice that many, another 10% that are not making all or even that are either making partial or not making house payments at all. Not to mention the massive amounts of Americans that aren't paying rent. Okay, we are in a, have been in a massive business shutdown, stay at home orders. And because of that, businesses are being shut down. Businesses have been closed, some of them are going to be closed, many of them are going to be closed permanently. You got massive bankruptcies. And once as we're starting to open back up the economy, which is, we're working on doing that right now across the country, stores and businesses and restaurants and all that are beginning to open up. But even with that, there's going to be a massive slowdown at that because the stay at home orders are only going to be slowly undone. And people are still conservative. And when I say that they're still staying at home, they're not spending money. Consumer spending is 70% of the GDP. 70% of our gross domestic product is consumer spending. And consumer spending is really, really contracted. Most of the consumer spending that has driven it over the last two and a half months has been people either stocking up on staples, buying things that to, you know, just in case, stocking up on toilet paper, stocking up on dry goods, stocking up on non perishables, people buying stuff to prepare for in case things get worse. So people have gotten very, very conservative with consumer spending and that because that the economy has contracted massively. And even as all this comes back where we're kind of trying to return to normalcy, we're still going to see a lot of people with no income and a lot of people with lower incomes. Revenues are going to be down in companies, businesses making less money. They're paying, they're hiring fewer employees back, they're paying fewer employees. There's red in the Wall Street Journal this week that they are anticipating that approximately 42% of the jobs that have been lost during the last 12 weeks will never come back. So we're talking that alone, we're talking nearly 20 million Americans that their jobs are gone and they're gone permanently. So that is a massive, a massive factor in what's going to happen to the housing market. Now the fourth, the fourth factor is consumer confidence. Consumer confidence. And that is how do people feel about spending money? How do people feel about taking on debt? And when people are scared, when people are worried, they don't spend money. So this again goes back and it affects the economy, but it also affects people's willingness to buy a house, to take on a massive chunk of debt and a massive increase of a monthly payment in the purchase of a house. So people tend to be very, a lot more conservative when consumer confidence is down. Now again, consumer confidence right now is one, it's largely driven, it is largely, almost totally driven by emotion. So it depends on what you're looking at. If you're looking at the unemployment, you're like, oh no, we're in trouble. So consumer confidence is going to be in the toilet. If you don't have a job, your consumer confidence is down. If you're looking at the stock market, you're going like, ah, we're in the rebound, we're, we're in the, on the upside of the V shaped recovery, it's all going to be good. So it depends on what people are looking at and what's happening right now that is going to have a lot to say about consumer confidence. So you're going to have some people that are saying, oh, everything's going to be good. Home prices are going to continue to go up, the housing market is going to bounce right back, the economy is going to bounce right back, everything's going to be good. And you have other people who are going like, I don't know, I think the sky is still falling and we are still in for a long ride. So consumer confidence is a major factor in it. And then the fifth factor is government. Well, I'm going to just call it government perks or government incentives. So just as an example, the interest deduction on when you buy a house and you're able to write off a big chunk of your interest or all of your interest as a tax deduction, those kind of things have a dramatic impact on the housing market. Probably nothing really going to change on that in the near future that's going to affect anything. The other thing that is kind of like a new government incentive or a government factor is the stimulus. Okay? And that's just Americans being paid money or Americans, whether it's unemployment or the forbearance where right now banks can't even file a notice of default. Okay. So all of those things have an impact on what's going to happen to the housing market. So that's the factors that we're having to take into consideration as we talk about what now is going to happen the rest of 2020 and beyond. And I put here 2020 and I put the big red arrow of like 2020 and beyond because we're talking about what's going to go into 2021 and so forth. So now let's talk about the future of real estate. What is going to happen to the real estate market? And how is all the crisis, both the pandemic and the social unrest, how is all of that going to play into the future of the real estate market? And there's still a ton of things that are in play, like what goes up must come down. And we've still been, and before this we were in the longest period of economic expansion. So when the stock market goes up dramatically, at some point it's going to come back down. We are in a massive debt bubble. All of those are factors that we still haven't dealt with yet. And when the, when you have the Federal Reserve printing trillions of dollars in federal currency, our federal deficit has gone from the low 20. Just last year it broke 20 trillion. Now it's nearly at 27 trillion already. So I mean there's the massive growth of debt is something that over time is going to become another major factor. I think that's more, that's beyond 2020, but it's definitely something that's going to come into play. And how long the housing market, once housing prices start going down, how long they're going to go down is going to be a major factor. So I'm just going to right now talk about the next 12 months because beyond that it is, to me it looks uglier, but there's timing wise, there's a lot of stuff that's going to play that will determine how soon things turn down. The biggest factor is going to be government stimulus. How long can the US Dollar stay strong? And as long as the US Dollar is strong, the Feds have already said we're going to print all the money we need to print. We're going to inject all the money into the economy that we need to inject to keep the economy growing. So let's talk about what's going to happen to the housing market right now. Because the fact is real estate right now is still moving. So right now, today there is still a massive Amount of pent up demand that's been from months and months and actually a couple of years of very, very low inventory. You still have low interest rates. And so the market in a sense is still hot. Now buyers are starting to get back out. Sellers have kind of adjusted to the, the fear of the pandemic. We're doing a lot of virtual showings, virtual tours, virtual open houses. You know, the real estate industry has kind of adjusted and adapted to this new reality. So people are going to start, buyers are going to be out looking again. Sellers are going to be putting their house on the market again. And so for right now, things are probably going to stay pretty good. And as long as the stock market stays up and the Fed keeps printing money, then it's going to feel like everything's gonna be okay. So for sellers right now, it's still a hot market in a lot of areas. Now the question is, will it last? So today market's still good, prices are still, you know, kind of ticking up and down. Although the actual number of sales in April and we're looking, waiting for the finals in May. But in April, housing total sales were down dramatically. New pendings and closings have dropped Dramat 25% more or less in different areas across the country. That is major. This is some of the greatest drop in history in terms of the number of houses to sell, just in terms of things just freezing up, okay? But if somebody wants to sell, they can still sell. And somebody wants to buy, they can still buy. And prices are still strong. Right now the question is, how long is it going to last? So what's happening today beyond that is you still have massive business failures, you still have reduced consumer spending, GDP is contracting, you've got less revenue, fewer jobs, reduced pay. All of those are realities that are in the market right now. Now what's going to happen in the next six months? So here's what I see happening in the housing market. I feel like probably what's going to happen is for the next six months, the housing market is going to move along fairly slow, but things are going to hold steady. Okay? There's not going to be massive amounts of sales, there are going to be massive amounts of activity, but prices are going to probably hold pretty steady for a couple of reasons. Number one, government stimulus is going to keep the stock market propped up. Number two, you have an election coming up and President Trump is going to do everything he can to keep the economy moving along. So keep, keep stimulating, keep things going, keep helping people out. Let's just Keep things moving. So that is going to be, that's going to keep that going on. The other thing is forbearance. So with CARES act, you have the six months of forbearance where Americans can get forbearance and they don't have to make a house payment. So all the people that are unemployed right now, people that have lost their jobs or not, or had a massive reduction of income, they don't have to make house payments for six months if they've applied for forbearance. Now if you're have, if you're a real estate agent and you have people asking you about should they get, you know, is it okay for them to request forbearance on their home? Well, they can. And if they're government backed loans, Fannie Mae, Freddie Mac, Virginia, FHA and all that, they can get it. Okay. It affects you. They can't refinance. It's going to show up on their credit. It's going to be an issue for them down the road. So I don't recommend it. But nearly 10% of all mortgages are in forbearance right now. Now, in six months, which actually becomes October from the time all this started in October, that six months of forbearance comes to an end. Now, depending on where we are at that time, the CARES act also said after six months you can apply for an additional six months of forbearance. So we have two time frames. We have six months from that time that started, which is October, and then we have the 12 months. So six months of forbearance followed by an additional six months of forbearance. Now you're looking at 12 months. So what happens in six months or in October when the first wave of forbearance comes to an end and people go like, okay, now I've got to make a decision. Do I ask for another six months of forbearance which just keeps me buried, or do I start paying my mortgage back or do I realize, you know what, I haven't had a job in six months. I've been looking, I'm trying to get a job. I can't get a job. We're just going to sell the house. And so my prediction is that when forbearance ends and eventually these unemployed, all the people that are unemployed will not be able to make their mortgage and rent payments. And once that happens, more homes are going to start coming on the market. And I see in October and November and again during an election cycle, people tend to be, they don't they tend to not do much real estate wise? So some people will hold out for a few more months, but in that period of time between now and the election, things are going to be fairly stable. But October, November, and all of a sudden a lot of those people are going to go like, you know what? We still don't have a job, our income is still down, we still are feeling uncertain and it's time to sell. And I think in six months, more or less, you're going to see a wave of real estate, a wave of homes come on the market and a lot of them are going to be in distress situations. A lot of them are going to have notice of defaults. There's not going to be as many short sales because you've had more people paying 20% down over the last 10 years. So there'll be people that have some equity still as long as prices still hold, but they're going to be a lot of people in distress. Now the problem with that is once more homes on the market, now buyers have more options all of a sudden. And so this number of sales slow down. Days on, the market goes up and prices start falling. Now lenders right now cannot even file notice of defaults during the stay at home and all that kind of stuff. But when all that change is when all that's lifted and people start going back to the previous ways of doing business and all of a sudden they realize, wait a second, there are that sense of normalcy, I think a lot of people are going to be shocked to realize that the previous way of doing business has been forever altered. And because of that, you're going to have a lot of economic impact. And a lot of people are going to be realizing, my job's never going to be the same, I'm not going to have the same amount of income. Business revenue is down, company is down, there's going to be a lot more. There's going to be a drop in consumer confidence and you're going to have those that went for the 12 months of forbearance that's going to come to an end next spring. Now we're into 2021. So now we're into 2021. And in 2021 we have the, the elections are passed. Whoever wins, the reality is going to set in. Stimulus has been stimulating, stimulating, stimulating. At some point people get scared. Another wave of houses going to come on the market next spring. When that happens, depending on how big that wave is, home prices could begin to fall and could fall dramatically. Now You've got the debt bubble, you've got the Fed stimulus that at some point is going to come to an end. You're going to have either this Trump in his second term or a new administration where there's president turns out to be President Biden or whatever, that at that point it is a new reality. And at some point all this is going to come full circle. And all of a sudden, when stock market cannot forever continue to be propped up by printing money, when companies are going out of business, they are not making a profit, they are, their price to earnings ratios are in the toilet, things are going to happen. So I think that what is probably going to happen, the high probability is prices are going to hold steady for the next several months, around the end of the year, election time, shortly before or after. It could happen before. And if you get into a panic before the election, it's game over. Okay, that's, that could happen. If we make it through the election, prices are going to start dropping. There'll be a wave of homes come then 12 months, you're going to see another wave of homes come on the market. The new reality is here to stay and home prices are very likely going to start dropping. And if home prices start dropping, consumer confidence goes down, consumer spending stays small. The economy is still contracted, unemployment is still high. Federal stimulus comes to a point where it becomes less and less effective. The value of the dollar now becomes less and less because there's more money being printed. So inflation can become an issue. And that's a whole different conversation. We could be in for a long, slow ride. And then demographics comes into play because now you've got all the, the, the, the baby boomers going like it's time for us to downsize. And so you got big houses coming on the market, the high end starts coming on the market, luxury homes start flooding the market and there's nobody going to buy them. So what happens to those? Home prices start collapsing there. So you're going to see a potential in 2021 and beyond of massive changes in the economy. Now, you may be going ballistic right now and wanting to yell at me or tell me that's right or ask questions, but those are the things that I see happening. And I want to conclude this video with this. And that is, that is right now. And the sooner the better before the big shift happens. Because home prices have held right now that I think they're going to hold for a few more months. But when they start going down, it can become a massive, massive spiral. And the Worst thing that a seller, homeowner wants to do when they're wanting to sell is be chasing the market down. So that's what you can be talking to your homeowners about. Now, if you're a Realtor, what's a realtor to do in this market when there's going to be fewer home sales and people are scared and uncertain and they're, you know, should I sell now? Maybe we're going to wait. We're going to wait and see what happens. Well, waiting to see is a dangerous plan if you own a house right now because we passed the peak. So here's what a realtor is to do. So what's a Realtor to do? Number one is focus on finding motivated sellers. 100%. All your lead generation, all your prospecting. Motivated sellers. Motivated sellers. Motivated sellers. Investors are going to be great. Why investors? I'm not talking about investors buying. I'm talking about investors selling. Selling. Why investors selling? Because the traditional strategy of all real estate investors is you buy low and you sell high. Well, they bought low, they bought in 2010, 11, 12, 13, and now it is high. And they're like, this is time to sell, get out, hold my money and wait for the crash. Okay? Whether the crash comes or doesn't come or doesn't come soon or whatever it is, they're going to be getting out, playing it safe. Airbnb's, vacation rentals, downsizers, all of those are people when they, you see them, people that are unemployed, distressed. Sellers find sellers and no matter what, it is easier and better, more leverage for you when you have sellers than when you have buyers. Okay? When you have sellers and you price a house right, you put it on the market, you're going to, a buyer is going to show up. Okay? So number one is you want to spend all your focus on finding motivated sellers. Number two is you have to price the, the homes, your listings, you got to price them ahead of the market. You got to be aggressive in pricing because the faster it sells, the better price that your sellers are going to get. Even if the market holds steady right now, the first week of houses on the market, the better price it is going to get. That's just the way it has always been. And when you're in a potential of a declining market, it's even more critical that you be very, very strong on pricing. And you've got to help your sellers understand that if the things go bad and the stuff that we've shared in this video will help prepare you to, to be able to explain to seller here's what could happen and if that happens, you don't want to be chasing the market down. Okay, now it's your turn. So if whatever your thoughts are about all the stuff we've shared here, I want you to post your comments, your questions, your rebuttals, your amens, whatever it is. Post those in the comments below because it's going to help me in preparing for our next Some of the next videos are going to be coming up. I'm going to be doing a video on Is it time to sell? Is it time to Buy? I'm going to be doing a video on that. That would be great. I think if you're a real estate agent helping you educate homeowners and educate potential buyers. And if you're a homeowner or a potential buyer, it will be great for you. That is coming up. So post your comments down below. If you like the video, give it a thumbs up. If you don't like it, give it a thumbs down. I'd like to know what you're thinking. If this video has been helpful and you're new here, make sure you subscribe to this channel. Real estate is a great game. Interesting times ahead. But if you stay educated and you watch and be aware of what's happening, you're going to be okay. So thanks for watching and I'll see you on the next video. Hey there, it's Kevin. I hope you enjoyed today's podcast. Are you tired of getting no after no? When you're out there trying to get listings and trying to inspire sellers to say yes to you, then I'd like to invite you to download a free copy of my no BS listing presentation. This presentation will guide you through exactly what to say that will have motivated sellers saying yes to you over and over again. Stop getting stumped with skeptical seller objections or the famous we need to sleep on it, eliminate the resistance and have sellers ready to hire you and give you the listing before you even finish your presentation. To get a complimentary copy of my proven listing presentation, go to yes masters.com download again. That's yes masters.com forward/download to download your free copy today.