ECONOMIC COLLAPSE 2022 (WORSE Than 2008 Housing Market Crash?) Ep 108

Are we in an economic meltdown? Perhaps we're not in a full on Chernobyl, but many people are starting to see warning signs. So if this is the case, then when it comes to buying your first home, then you should totally pump the brakes, right? Actually, in times of uncertainty, renters should be way more scared than people buying a home. Let's talk about it. What is happening? My how to Buy Homies. I'm Dave. David Sidonian. If you are new to the show, welcome. We're very glad to have you here today. And if you're looking for weekly advice and guidance on how to buy your first home, you want to know all the ins and outs and all the insider secrets. Well, then subscribe. Become a homie, and you get weekly information to digest into your ear holes. And yeah, you're probably going to have to hear me say homies and ear holes. Homies. I was going to get back to the Alphabet definitions, but yet another crack in the economy stirred the headlines this week. And that means I know some of you need the calming reassurance of Uncle Dave to explain how this affects you. So relax, as always. I got you guys. So how's your summer going so far? Sounds like we should all be headed to a bunker and hoarding canned goods. I actually saw a guy on TikTok. He was at a gas station with his pickup truck bed lined with a tarp, and he was straight up filling the bed of his pickup with gas. Guess he didn't want to wait for it to go up another 20 cents next week. Dude, the economy is crazy right now. With inflation at 8 and a half percent here in June of 2022, it doesn't look like it's slowing down like everyone had hoped for. So the Fed went nuts and they just agreed to a 0.75 percentage point raise in the Fed rate. Who knew that three quarters of a point of anything, three quarters of a percent could be such a big deal? This is a big deal because it's the highest raise in the fed rate since 1994. So what happened? Everybody freaked out. Stocks went up and then they went down and bonds rallied and now everyone's talking about a recession. Meanwhile, maybe you're thinking, okay, you know, I'm kind of new to this adulting thing. What the hell does the Fed raising the rate mean to me? And if gas is more and food's more, does that mean the houses are going to be more, too? Let me give you the technical definition of what the Fed raising the rate means to everybody. And our bottom line, our pocketbook. Well, what it means is that nobody knows what's going to happen. The government's going to try to help, but we don't know how they're going to help or who they're going to help. And if the Fed rate doesn't fix it, we don't know what to do next. And the big corporations, they're going to keep screwing everyone because that's what they do. There. You feel better now. Feel all informed. The truth of this situation is in times like this, stability is your best friend stuff. Reality, you need to be stable to stay safe. Buying a home should be looked at as a safe, long term stabilizing factor in your economic life. Homeownership is a rock that will stay the course and be your foundation. This is the way the homeownership has been viewed in the past. I mean, since the Great Depression, people have been looking at it that way and it's been a stabilizing force for over 100 years. However, in the past 20 years, because we've had these crazy wild swings in housing, suddenly everyone is tossing their first home buying into this swirling mess of changing economy and thinking that somehow they're all tied up together. This is something that we call recency bias. Recency bias is a psychological phenomenon where you give more importance to recent events compared to what has happened further in the past or historically. Now, in the case of real estate, this is massively present. Right now I'm seeing serious recency bias when people talk about buying their first home as opposed to just renting. Now some of you are just starting to adult and in general, most 20 to 50 year olds, they only think that real estate behaves in these huge swings because that's the recent behavior that's been happening in the last 25 years. It's either shooting up or it's crashing down now. So either you think this because you're on the older edge of that 20 to 50, or you're, you're on the younger edge. You think this because your parents got crushed in 2008 and they give you all these horror stories. Now as things get hairy, this generation could make sounder decisions by taking a step back. Back to realize that when things get bananas, owning a home, owning a home the right way is your best shelter. Literally and economically. Figuratively, it's your best shelter. When the storm of recession comes, a blowing homeownership may not be as sexy as it was when there was the 19.5% increase in prices and appreciation in 2021. But it has two huge comfort factors in an uncomfortable economic environment. Number one, buying a home is fixed and stable. And number two, you are in control. Prices are going up everywhere on everything, including rents. The rent numbers are going straight up and they're not stopping. Look at this chart. Straight up since 1988. But a home is a fixed payment, fixed, stable. If you own a home, you get the warm, cozy blanket, a full fixed stability. It's a non changing bill that you can always be assured of and it gives you some peace of mind and you are in control. You cannot get kicked out of your home unless it's your doing. That is not the case when you rent. Your landlord can raise the rent for no reason other than people can't afford to buy a house because they got scared. They didn't make any sort of plan. So now he has more applicants. Or your landlord can decide they need to change the building completely. So they decide to rehab the whole thing and turn it into someplace that you, you can't afford or that isn't designed for you. Or worse. If the recession hits really hard, the landlord could sell the building that you rented and change it altogether. Yeah, getting your home that you rent sold out from underneath you is a real thing. Especially if you're renting in a smaller complex or a duplex or those of you out there renting homes. If they need to sell it unexpectedly because they need money because of this recession, then you might need to go a lot quicker than you were expecting to. And heck, I even know stories where the landlords have lost the house in the recession to foreclosure and the sheriff comes and kicks you out. Again, no control. So the fear that's out there for home buying, I'm actually way more scared for the new renters out there right now that maybe they need a few years to get together and become a homeowner. These people are the most vulnerable people in an economic uncertainty. That's way more scary than trying to buy a stable living place to live in and ride all this out. Homeownership is the opposite of uncertainty. So why don't most people see it that way? Because of recency bias. Owners are fixed and owners are in control. I'm going to say something controversial right now. Are you ready? I want first time home buyers to succeed and this is all done out of love. So here it comes. Some of you are saying, I don't want to be house poor. And I'm telling you to some of you, you need to get over yourself. People are using the term house poor to stay renter boy broke. Avoiding being house poor is not a catch. All financially intelligent, financially safe, smart plan. And just to be sure, if you're thinking right now, oh, wait a minute, I'm a person that says I don't want to be house poor. And that is indeed a factor in my decision making process when I'm buying my first home. Cool. I'm telling you, you could be right. But you also might need to check yourself. Where did you get the term house poor? Where you heard the term house poor. And when you're using the term house poor, do you have all the understanding of data behind that to realize exactly what you're saying? The biggest mistake I see is that people forget and do not include that rent replacement formula while they're spewing out house poor so that they sound really smart, intelligent and safe. But a lot of times just because they don't want to feel like a sucker. Like I said, check my credentials. I come from expertise and I come for love. I'm not trying to push you into anything or sell you anything, but I have seen a whole bunch of people hold themselves back back because they're so afraid of being a sucker, they just throw around the word house poor to not realize that they're becoming rent poor. And that's because they're not using the rent replacement formula. Now, you could be on the right side of things. I do believe the term house poor can be a smart financial philosophy in theory. But I've seen the pendulum swing way too far in the other direction. At its core, I agree with the philosophy and I've seen it work in the right way when one partner is helping the other partner stay in their budget. Because perhaps, you know, just perhaps, maybe one of the partners watching way too much HGTV and has some unrealistic dreams. See, the problem is, I see so many people using the term house poor to quell their fears and to satisfy their insecurities. See, by not buying a home, then they don't have to feel like they're getting ripped off or they're making a bad decision. But the key is they're not realizing the simple math of the rent replacement formula. If you currently pay $2,000 a month and buying a home costs you three grand, $1,000 more, don't say, well, we can't afford that, we'll be house poor paying an extra thousand dollars a month instead. Perhaps. Look at it this way, the economic mess is coming and you can't afford to continue to put $2,000 a month, a huge chunk of your monthly payments to an asset that gains you nothing in the long run. You can't afford to not find a way to put an extra thousand dollars a month into your shelter payment to help it stay fixed when these changes are coming. You can't afford not to figure out how to possibly rearrange your current budget, your savings, and maybe even your retirement plans to stretch for that extra thousand dollars a month so you can transform that wasted $2,000 a month that you spend into something else. Because by the way, it's also going to be 2200 next year and 2,500 the year after that. Avoiding more home than you can afford is a smart move. Totally with you brah. But I say to you, do your research. I want to get the phrase rent broke into the zeitgeist. Rent broke. That's what really matters, you know. Rent broke, gaining no equity and paying into something instead of paying into an historically safe asset. Rent broke, paying into that, because that's going to cost you way more in the long run than changing your budget a little bit and buying a home within your financial means. Rent broke. Being totally unstable and not fixed has more chances to make you so poor as opposed to being in a situation that doesn't change and being in a situation that you control. Being rent broke, being rent poor means that you don't control the situation. It could change at any time. You want to be poor, live paycheck to paycheck while you put your largest monthly out payment to nothing while you're ignoring a potential to replace that and use that payment every single month in a simple, safe, proven long term wealth builder. That's poor man, and I don't want you to be poor. Let's stop being afraid and insecure and let's start being educated and empowered and comfortable taking advantage of the cards that we're being dealt. It's easy to freak out about this and it's easy to listen to other people warning you about this when the people out there like myself, I'm not promising super sexy returns anymore. It's easy to contradict my long term unsexy non get rich quick game plan. Go back and ask the homeowners who are 40 times more wealthy than renters how many of them who bought in the last recession are house poor today. True house poor people would have overextended themselves and gone into foreclosure and foreclosures are currently at about 1%. And don't even try to tell me there's a crash coming and that more people are going to be going into foreclosure because I have dozens of episodes on that. Not to mention the buying a home in the last decade and a half has been far more stringent and difficult than it was in the past, meaning that banks won't even give you a loan to a level that would truly make you house poor. So that wave of the foreclosure crisis, well, it's not coming before and it's not coming in the future. In basic principle, I do agree with parts of house poor. Mostly I just agree the fact that you should be house smart. But stop misusing this phrase as a simple catch all to satisfy your need to do the easy thing and stay put and stay renting instead of doing the work and realizing that the hard thing to do, the unsexy, the not get rich quick decision, is going to make you wealthy in the long run. Start the how to buy a home process, work the plan and you will be in a better position years and years from now. Back to you and what all this economic upheaval means for you. As far as housing goes, you missed the roller coaster and now it's time to get on the kiddie ride. The one that just goes kind of round in circles. That is the real estate market. That's the usual real estate market. It's not thrilling. You don't get the gaudy fast equity numbers and the huge profits. But you also don't get the super scary 10 story drops. Just some simple twists and turns with the occasional jump scare that goes away once you turn the corner and get past the scary wicked witch. It's simple, it's fixed, it's stable. In a time of uncertainty, if you want to flip houses or buy a home like an investor, hey, nice to meet you. Wrong podcast. That's more guidance than I care to attempt to offer because I have seen far, far too many people jump into that without understanding the risks. All they see is the rewards. And for those type of people, they're definitely not going to dig my whole let's be stable speech today. This show is Here is for people who want to stop paying rent and find a more economically viable way to spend your largest monthly payout. I want you to realize there are solutions here because you know who is the most vulnerable people in the most vulnerable position in an economic crisis. It's not the homeowners. It's hard to buy a home. Don't get me wrong, it's not going to be easy. But Once you've got it, you're actually in a better position than the renters. Those are the people that are going to be in trouble as we move forward. In the last crash, people bought homes like investors and they could not afford the homes that they bought. So people are freaking out when they hear about a recession. Little reminder, gang, it's not the same way as it was the last time. People aren't buying homes like investors now. People are buying homes in a more stable way. How about that? A home being stable. Who would have thought? I told you about the potential recession back in 2019. There's an episode on that way back when. And now all this current news. It's going to affect mortgage rates. You're right. And that's going to affect you. Yes, but as I've discussed in previous episodes, the rest of this news really doesn't do much for you. For anyone making a plan to buy your first home as the foundation of your financial prosperity, there's data, math, history and plenty of me ranting on other episodes to explain that to you. So with this in mind, let's get you started on a stability plan to prepare for the economic cluster mess that it looks like is only going to get worse for us right now. Before it gets any better, let's do some simple planning. We're not day trading stocks, we're not finding the best crypto strategy. We're not attempting to time the NFT market. You do that after you've turned your rent into your stability. None of the immediate news should affect your long term, like seven to ten year plans. If you're way out from buying, but you want to project yourself. Radio, start your plan today. What's the worst thing that can happen if you start your plan today? If you started like you were getting ready to buy a home next month, what's the worst? Right? You've looked at your credit, you started budgeting, you started savings, you worked on your debt, and you're actually now going through life with some sense of purpose and a plan instead of mentally flailing and just hoping to survive. And what if you are one of those people who's actually close to buying? What do you do to stabilize yourself in the poop show that's happening out there? Well, here's one way. I got this email from a listener just the other day. They went to howtobuyahome.com and this is the email they sent me. For those of you who are getting ready to go right now, you might be there and you just don't even know it. Here's the simple step by step plan and it was great. He sent this email to me just like this. It says timeline. June 8th. I emailed you June 9th. You responded with a form which I completed. June 11th you connected me with Stacy. Stacy's the unicorn. June 14th I met Stacy in person to discuss my goals. She recommends a mortgage broker to me. I submitted my loan application and all the documentation for underwriting and pre approval. Then the next headline of the email next steps. June 15 meeting with a broker on zoom to discuss financial position in more detail. And next start looking at houses. Exclamation point, exclamation point, exclamation point and then he put at the end additional notes. Stacy was great and really helped me feel better about the whole process. If there is a single most important thing I've learned from your podcast so far, it's finding the right real estate agent matters. That was all caps and bold. I won't celebrate yet, but I am feeling optimistic and less stressed out about this process. This might not be for everyone. I understand you might need a few months to get pre approved so this timeline is not for you. Rad. What are you doing today to get your plan started? Not just the listening and the researching. You can't count having me and your ear holes right now as doing something. What are you actually doing? You know, do you have a professional guiding you go to how to buy the home.com and find the resources you need. Either get the info on how to interview and who to interview, the guides to help you get started or ask for a unicorn recommendation. I don't care how you find a pro. I just want you to get the right pro for a first time homebuyer and get one asap. Who's going to work with you on the planning, not just the purchasing. How to Buy a home dot com. Go there. Hit the Ask David button if you want to look on Instagram and get some more stuff. That's at David Sidoni TikTok. You guys know I'm there. That's at how to Buy a Home. And if you are digging the YouTube the How to Buy a Home podcast page on YouTube. Go check it out. Subscribe. Ding that bell so I never want to hear you say this ever again. Damn, the economy sucks. Yeah. Yeah it does. And we all knew that the summer's hot and we knew that too. So what are you gonna do? Are you gonna whine about how hot it is or are you gonna go buy a fan or fix your air conditioner? And next I don't want to hear this one. I don't want to be house poor. Stop using that excuse. Say I want to be house wise and not rent poor. That way you're thinking about the whole picture now. Share this podcast with anyone who needs to hear this message. We can change the world one friend at a time. I'm tired of living in a world of whiners. Aren't you? Wouldn't it be great if we could spread this practical positivity and make the world a better place? Give people a message of hope instead of a message of despair? Because I've seen people do this out of the worst recession since the Great Depression. I sold tons of first time buyer homes during that huge recession of 2008-2011 and none of them are house poor today. And all of them were happy to be stable through unstable times because they heard me tell them this. You can do this.