1831: Dr. Lawrence Yun, National Association of Realtors, NAR, Rising Mortgage Rates & FOMO Part 1

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You know, Jason, I've been following you for a long time. Ten years ago is when I first saw your course and I've been investing, gone to several Meet the Masters. And man, I'm telling you, the way that things have played out are way better than you projected. For me personally, obviously it's been, you know, a good six years, but now I'm ready to kick it into high gear. As you know, I want to really build a portfolio that's, you know, four or five times what I have already. My wife and I have 12 properties and I really appreciate the opportunity to talk here.

Welcome to the Creating wealth show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine, self made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your Financial Independence Day. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

A big welcome to all our listeners from 189 countries worldwide. This is episode number 1831-1831 and our guest today will be Dr. Lawrence Yoon, the chief economist of the national association of Realtors. And you might be thinking, I'm not a realtor. Why do I care? Well, nar, as it's known, has a giant research arm in and they have been putting out some really good data for decades now on the real estate market and on the real estate industry. And this is the second time Lawrence Yoon has been on the show and he has some interesting insights into the market. So I think you're going to like this one a lot. But before we get to Lawrence Yun, who by the way, will also be here on Wednesday. He will also be here with us on Wednesday's episode. And by the way, I just realized Ashley sent me the information but I did not include it. So I will announce the winners of our $50Amazon gift card contest on Wednesday, I promise you. By the way, we're also putting these in the show notes for the podcast and I think we're going to get them in the YouTube descriptions as well. Remember, you can win $50 gift card. Two people win every single week. One for writing a review on Apple Podcast, formerly itunes when it was better back then, or just commenting on our YouTube videos on the YouTube channel. So we have two winners to announce again this week and be sure to claim your prize because you got to claim it within a month or you're out, zip, nada, nothing. One month. You got one month to claim your prize. Okay. So keep listening for the winner announcements. Okay, so everybody and their brother is talking about a housing bubble. And I have several speaking engagements coming up at live conferences over the next few weeks and I will be talking about this issue quite extensively as we dive into it. But the housing bubble, Are we in a housing bubble? Gosh, there's a lot of evidence that would point to the idea that we might be in a housing bubble. Let's kind of pick up this story and a couple of things here. Okay, so first of all, this post from Fortune.com I thought was quite interesting. One of my Facebook friends posted it and just says rising mortgage rates are having a counterintuitive effect on the housing market. Home shoppers are actually sprung into action in an attempt to buy a home before mortgage rates rise any higher. What do we call this? We call it fomo. Fear of Missing Out. Well, the rates have gone up quite substantially as we all know. It has been a real shock to the system. It really has. But so far it is having the effect of more buyers, people just going, I mean the market, we thought it was overheated before, it's even more overheated. Since they increase the rates now, we'll see how long that holds. It's definitely not going to hold forever. We definitely will get to the point at which buyers do capitulate and we start to see this strength of the buying market, of the for sale market, switch more to the rental market, which is already super strong. But remember in my teachings about the three dimensions of real estate, you know, I almost held up four fingers.

It's early folks. Anyway, the three dimensions of real estate where I talk about how real estate prices and rental rates are non correlating indicators many times in the marketplace. So we will see even more strength in the rental market as the sales market eventually as it must inevitably cool down as the sale market strengthens. The typically people move from renting to owning. So that's where they go. They decrease demand for rentals and increase demand for purchases and then it switches the other way but in the last few years, we see just crazy demand for everything because we have this housing shortage. And I know you're listening to a few other people out there that have been predicting a collapse for the last 30 years. Yep, they have. And like a broken clock, it will be right twice a day. So if you predict that the sky is falling long enough, there will be points in time where the sky does fall. Chicken Little. But overall, everybody listening to those fools will miss the opportunities for seven of the 10 years. Usually in every decade there's seven boom years and, or, sorry, I said that backwards, there's seven mediocre years or even down years and three boom years where the market just takes off and goes absolutely nuts. And over the last really 12 to 14 years, we've seen that cycle has been extended and we have more and more of this because we have central planning and that massively distorts the market. So anyway, we are seeing an extremely hot market, even with these higher rates. And again, people simply learn to accept less. That's what happens when housing affordability declines. It's not that people don't buy anything, they just buy less. When rental market affordability declines, they just accept less. That's called a debasement in the standard of living. It's called the standard of living declining. Folks deal with it. That's the way the economy works. It's not like people don't do anything. All these actors within the economy still do something. They still need a place to live. A place to live is not an option. You got to have a place to live. So they simply accept less. And that's the way it works. Okay, so here's an interesting thing out of one of my newsletters. It says home builders don't like to see interest rates rise so quickly. Well, of course, of course they don't. Especially while they're building so many new homes. Now keep that in perspective and ask yourself the Jason Hartman question. Compared to what? Well, yes, they are building a lot of new homes compared to recent years, but compared to what is needed, they're hardly building anything. This is hardly going to even make a dent in, in the, in the supply demand equation. However, we will see a huge thing happened. Okay, folks, get ready. So let's just take the example of John and Jane Doe homebuyer. Okay? They bought their first new home. They bought it from a new home builder. And with all of the supply chain problems and the labor shortages and all of this stuff and the commodities price increases, they bought this home from a builder and that home, normally it might be finished in say, six to eight months, but now it's going to take eight months to one year, for example, to build the home. Right. This is a very normal circumstance that's going on all around the country and similarly all around the world. And so they bought that home with the expectation that their mortgage payment would be a certain amount of money. And because the construction process is so long, they couldn't lock their interest rate and the interest rate went up during that time. And now John and Jane Doe will be forced to not qualify for that mortgage any longer. They'll be forced out and they will have to cancel the contract. Now all of these chicken little sky is falling. People predicting the end of the world doom and gloom will say to you, well, that means the housing market's going to crash. Oh my God, it's over. It's. The housing market is just. It's going to be devastated. No, it's not.

You're wrong.

The stupid people think that. And there will be cancellations. Absolutely. People will be priced out in the midst of being under contract and under construction. But guess what? There is someone to replace them. Someone else who is falling down the socioeconomic ladder because affordability is not as good as it used to be. That person might also be under contract for a more expensive home that they too thought they could afford when they signed the contract.

But guess what? Rates went up substantially while they were under contract and they have been priced out. So guess what? They also have to cancel their contract. But they're going to go and buy the house that John and Jane Doe home buyer had to cancel. They're going to move down the ladder. It's like, folks, how is it that all of these supposedly smart people with these frickin PhDs don't understand the most basic concepts of any marketplace yet I, your humble host, understands how things work. Maybe it's just because I've been around so long and I've seen it happen a million times. No, that's not an exact number. It's an estimate. Maybe less than a million. Maybe a lot less than a million. Maybe 282,361 times. That's how many times I've seen it. Just kidding, obviously. Sarcasm. Okay, so let's go on with this snippet from the newsletter. Okay, so home builders don't like to see interest rates rise so quickly, especially while they're building so many new homes. Lucky for home builders, investors have plenty of cash on hand and are increasingly eager to buy new Homes, Homes, reports Will Parker, more than one in every four houses purchased by a professional rental investor in the fourth quarter of last year was a new construction house. Brand new homes were just 3% of what these investors bought during the third quarter of 2019. Okay, so you see how the investors, they don't care. They're just gobbling up these properties. Still gobbling. Now, granted, they also will have to pay more for the cost of their money that is slower to trickle through because they're not getting traditional mortgages. They're going to Wall street and having people buy bonds and they're raising equity financing. And, you know, that's all complicated. So we're not going to get into it right now. But folks.

It just shocks me how the experts can be so clueless about basic economics and how we live in this world of extreme clickbait where everybody is vying for clicks and they are totally misleading people. It is just criminal what is going on. It would be like Facebook fact checkers who just have opinions, no facts. Okay, that's another story, right? The. The fact checkers are full of crap, right? Okay, anyway, but here's the thing. This is also an excuse for people to sit on the sidelines and justify their own failure. And I saw this and I thought it was an interesting meme. You know, memes and quotes and song lyrics are so great because they sum up so much truth in such a compact space. You know, they do. So here, written on this whiteboard, it's like the quote for the day. This is good advice for life, right? Most people don't want to be part of the process. They just want to be part of the outcome. But the process is where you figure out who is worth being part of the income. See, this is the thing in life, and I know that most of us know this, but we all have a bit of an childish, immature side. Of course we do. I do. Everybody does. We all want something for nothing. You know, we all have a little Democrat in us, right, who wants something for nothing. You know, a leftist idiot, right, who thinks that you can just give out more. The government can just keep spending money with no consequences, no inflation, no higher taxes, blah, blah, blah. You know, it's just childish. These are childish beliefs, but we all have a little bit of them. We carry them with us to some extent, right? And that's okay. But look, this is the weeding out process. This is the vetting process of life, right? Is life is deciding who deserves success and who doesn't deserve success by the people who are simply willing to do the boring, redundant, non stimulating task every day of doing really humble things like buying properties. It's not sexy. I get it. You know, it's not like launching some new startup, okay? It's not like discovering some great invention where the world is beating a path to your door and you have fame and fortune, right? It's not like that. It's simply the redundant, boring task of buying a property that you undoubtedly think no matter where you were in the market cycle at the time you bought it, you overpaid. Everybody always thinks they overpaid. They thought they were overpaying in 2006, they thought they were overpaying in 2008, they thought they were overpaying In 2010, they thought they were overpaying IN 2012 because, gosh, the market's really coming back. It can't go on for much longer. Well, that was 10 years ago. And it kept going on. And then 2014 rolled around and they definitely knew they were overpaying then. And then 2016 came along. You know, I'm just going with even years here. I'm just doing every two years because it would take too long to say every year. And everybody always thinks they're overpaying. That's always the way it is, right? People always think that. But those willing to bear the risk and go through the process are the ones who get the big outcomes and get the success in life that do the mundane things like responding to an email from the property manager or the tenant or taking a phone call when you've really got something else to do, something better to do, right? These are the ways people pay the price for success. And it's the way it should be. Okay, now here's more stupidity for you. This chart that I will explain to you if you're listening only on audio. This chart shows that housing affordability is getting worse. And this is OECD data, Office of Economic Cooperation. I can't remember what it stands for. Anyway, the OECD shows a bunch of different countries, right? And the price to income ratio has risen dramatically since 1995. But guess what? This is not adjusted for inflation and it's not adjusted for interest rates. Now, the US has a really special mortgage market that is subsidized by the government. So rates and mortgages are far better in the United States than anywhere else in the world. But it shows you that in South Korea, Japan, Portugal and Germany, house prices have actually come down as a percentage of income. In the US they're up slightly, but in Italy, Finland, Switzerland, Ireland, Spain, France, Australia, Canada or Canadia. I like to say Canadia. I like to make up words Netherlands, Belgium, Denmark, Norway, New Zealand, UK and Sweden. Prices are way, way up, way out of sync with incomes. Right. But again, what doesn't it say? It doesn't answer the Jason Hartman question. Compared to what? Because it doesn't account for the financing and it doesn't account for inflation. So you got to make these adjustments. You got to read between the lines with this data that's published. This stuff, it's like my pet peeve because it's just so misleading. All of this stuff is just so, so misleading. Anyway, be sure to go write your review, comment on our YouTube videos and you get entered in the contest, our weekly contest for the Amazon gift cards. We give away two $50 gift cards every single week. So make sure you do that. And thank you to all of those of you who've already done it. And what else? Gosh, we've got a good collection event coming up. Thecollectivemastermind.com if you want to be in a high level mastermind group and that is coming up in Dallas, what about three weeks or so? That's going to be absolutely off the charts like all of those collective mastermind events are. So check that out. And we've of course got our Jacksonville Wholesale mentoring small group meeting in Jacksonville, Florida and that's coming up next, next month. Go to Jason hartman.com wholesale for information on that. That's Jason hartman.com wholesale if you want to be a more active investor and learn how to wholesale properties and make quick money. Quick, quick money. That's the great thing about something like wholesaling. And I will be there. That's a three day workshop in Jacksonville, Florida for those of you who already signed up or looking forward to seeing you there. And for those who haven't, go check it out. Jason hartman.com wholesale and without further ado, let's get to our guest today. And that is Lawrence Yoon, chief economist of the national association of Realtors. Here we go.

It is my pleasure to welcome a returning guest back to the show. And that is Lawrence Yun. You probably know his name, you've probably read a lot of his research. He is the chief economist for the national association of Realtors and also the senior vice president of research at nar. Lawrence, welcome. How are you?

Thank you for having me, Jason. I think it's been many years since I was on your show, but the market has been exceptionally hot and constantly changing.

So thanks for inviting me yeah, it's our pleasure. And the question everybody is asking themselves nowadays is how long can this continue? I think it has surprised everybody that this red hot market has gone on for so long. Of course recently interest rates have risen quite substantially still. They're historically low, but they have risen a lot compared to their ridiculously low numbers. Where does that leave us, Lawrence? Are we in for a change or a correction or just more of the same? I mean inventory has actually declined since the rates go up. One might think on the surface it would go the other way. No?

Well, the recent sharp rise in interest rates, which actually is surprising me, I knew that the interest rates mortgage rate will be higher in 2022 versus what we experienced past couple of years. We know that inflation was picking up and therefore the Fed would have to raise interest rate. It's surprising that Fed has only raised interest rate only one round so far. Quarter point change. Yet the mortgage rate has jumped from 3% of last year approaching close to 5%. So that's almost 200 basis point increase. And just to put it what it means for first time buyers, and let me put it in first time buyers perspective rather than a repeat buyer, because repeat buyer they sell their home, they have the proceeds and they can use that for the down payment makes the transaction a little easier. But the first time buyers, what they were considering last year say same property that they are reconsidering this year because of the multiple offer situation and they were unable to win the bid. First the prices are higher by 20% over a 12 month time span. So you say oh, 20% more prices then the increase in mortgage rate from 3% to say 4.7% which is the Freddie Mac average that is bumping up another 25% on top of the 20% increase in home prices. So one is looking at about 45% increase in cost burden to buy now versus one year ago. So inevitably this means that some first time buyers have already reached their financial limits and they simply cannot buy anymore unless they decide to change their perspective on the size of a home or different location. So it has become a huge burden.

I'm so glad you mentioned unless they change their perspective on the size of the home. And that's what always gives in these situations. It's standard of living, it's lifestyle. People just literally accept less. And Lawrence, I made the comparison recently in one of my presentations about someone moving from Jacksonville, Florida and you know what a million dollar home is like in Jacksonville Florida which is basically a mansion versus moving to New York City. And a million dollar home, even if you could call it that, is 653 square feet, which is, you know, they call it one bedroom. It's not even one bedroom. It's just a, you know, one little tiny space. So the perspective has to change. But one other thing I want really for you to maybe unpack for the audience is this. You just talked about the comparison of a first time buyer, or really any buyer. Now granted other buyers, if they're not first time, they're trading equities. So they have the theory of what I call the theory of real estate relativity working for them because they're not as impacted as the first time buyer is. And that's a fair statement. However you compared it to a year ago, but a year ago everything was essentially on sale. Given that the prices hadn't risen much yet and the rates were so absurdly low, maybe that's a false comparison. Is that fair to say? Maybe we should compare it to three years ago when rates were higher or not. Just tell us about your thoughts on that.

Oh, well, Jason, you make a very good point. So I was thinking in terms of, say people were involved in the buying process one year ago, they were frustrated because we have heard so much intense multiple offers. And the definition of multiple offer means one winner and multiple losers. And they have to come back to the market always looking for that fresh listings. So compared to one year ago, it has become cost burden. Now compared to three years ago or four years ago when mortgage rates were 5% or I remember back in the year 2000, mortgage rates were 8%. And people thought that was pretty good rate back then at 8%. And my parents, when they purchased their first home in the early 80s, it was about 16% mortgage rates. So people need to put it into perspective as the mortgage rate is rising close to 5%. This is still historically very low rates. And compared to three years ago, the cost burden has increased because of the home prices, but not in terms of the mortgage rate changes. And especially I think I like the example of Jacksonville because as people have some degree of greater flexibility to work from home, especially those lucky office workers where they have been working from home the past two years during COVID now they're slowly returning to office. But I'm not sure what the right model is regarding the work from home. But the inventory, I mean, we need to get the inventory up because when you see these sales decline, which we have been recording in our metric of existing home sales coming down about three consecutive months, and people say, well, maybe the Buyers are retreating. And that's not the case. We have multiple offers. The days on the market is still very swift. And let me give you this one chart on the inventory, I think, which will be quite striking. So let me put that onto the screen.

Sure. And so for people not watching on video, we'll try to explain the visuals that Lawrence is showing. But he is just a wealth of knowledge. NAR has so much research material. So this chart is an inventory chart and of course it shows a very low inventory number just past January of 2021. But what do you want to tell us about this?

So the inventory level is essentially at 1 million homes available for sale throughout the country. And just three years ago it was about 2 million. And then one looks at back in 2008, period at the start of the financial market crisis, foreclosure crisis, all that part, the inventory levels were 4 million in this comparison. I think the important point is some people say, well, with home prices rising so fast, surely it is simply a repeat of 2008. Price goes up, then it's going to crash. Well, you look at this chart and one major difference is the inventory level. Today we have only 1 million homes for sale. Back in 2008, 4 million homes for sale. So in a tight supply market, one will not see a price decline. There's a housing shortage. Shortage means no price decline. I hope the prices do not rise so quickly to give first time buyers some chance. But the point is, without the inventory, sales simply cannot grow. So right now we are experiencing some sales decline. But I would say that is principally due to the lack of inventory.

Right, right. So it's important for people to understand you can't sell what's not for sale. So people make this huge mistake. They say, well, look at sales, they're down. Well, that doesn't mean demand is down. People want to buy. They just can't buy things if they're not for sale. You know, that's not a good metric to say number of sales. Sales volume is just a faulty. You know, you could lead yourself to make a lot of poor decisions there. One thing I also want to say because we quote the inventory numbers a lot from Altos research and the way they calculate inventory is quite a bit different than the way NAR does it. You may or may not be familiar with them. Of course, you've been around much, much longer. You know, I can explain that on another episode. Episode maybe. Or if you are familiar with them and want to address any of that, feel free.

So the way we have Inventory count is all the inventory, whether it is for sale or under contingency, meaning that contract has been signed. So the other organization, you know, may just say, well, we're going to remove the pending inventory because there's possibility that some pending may not go to closing. Home inspection issues, appraisal issues. And just for the time series consistency we've been measuring both the truly freely available along with the contingencies, at least time series trend would be very reflective of say, other organization measurement like Altos.

Okay, that's good to know. So in other words, what you're saying, because I think this is just really important that we drill down on this for just a of couple quick second. When NAR calculates housing inventory, they include what's for sale and what is a contingent sale. So if the Realtor reports in the MLS that it's a contingent sale, that is still considered for sale inventory. Right?

Yeah, counted that as an inventory. When we say inventory includes even the contingent inventories.

Right. And now I know that NAR came out and I'm really glad they did because I like this index, the pending home sales index several years ago, I remember when I was in traditional real estate years ago, you didn't have that. And I think that's a great other metric that you use. So your inventory, does it include the actual pending sales? Because just so everybody understands, when a realtor sells a property and they the seller accepts the offer, they have the choice to report it to the MLS as a contingent sale, meaning that it's a less firm deal. Right. Or a pending sale, which means that it's more firm, but it could still fall through even then. So are you including pendings or just contingents in your inventory?

The pendings are included. So again, it's for consistency measurement for the history. So you know, whether one uses NAR data, Altos data, or how, you know, maybe the local association has a different measurement. What one will find is today it said historically low inventory. Well, say during the financial crisis, inventory levels would have been say 4, 5, 6 times higher than what it is today.

Right. Okay, so that's good to know. And what do you consider a normal or balanced market when it comes to inventory? Because when I look at the ALTOS data and I've repeated this before, it seems like that inventory, and it kind of alludes to what you were just saying, needs to increase by 3 to 500% to sort of get to a balanced market. That's not considered a buyer's market or what some would call a bad market. That's just a sort of normal market. What do you think at nar?

Well, you know, in terms of how does one define what a balanced market is? So in the past we just defined balanced market as when home prices rise in relations to people's income. Consumer price index. So say the consumer prices rise by 4%, home prices rise by 4% and there is no rush of people multiple bid or decision where people may calm measure decision about well do we choose house A or house B? And that was associated with generally about five or six months supply in our inventory measurement and these sales activity. But today the month supply is at two months supply. So very, very tight. And that's the reason why we have the double digit price appreciation.

Okay, so by NAR standard, just so people catch what you just said, you have now about two months of inventory. Meaning if sales continue at the same pace, it will take two months to absorb the existing housing inventory. And a more normal market would be about six months of inventory. So you'd have to have really triple the amount of inventory. Is that a fair statement?

Yeah, I think that's a fair statement. There's one caveat. I would say that given that today there's more home buying process done initially through the Internet search which the consumers are doing heavy work. So maybe the month supply as we go into the future, maybe the four month supply is associated with prices rising similarly with the consumer price index in the future.

Okay, great, great. So feel free to show us some more charts. I know you've got some sort of favorites that you want to share with us today. So please share your screen and let's look at that. But while you're doing that, I just want to ask you about the interest rates again. I mean, is the market going to cool off with the higher rates? It seems to be doing the exact opposite. But again, it might be too early to tell. And just for the record, I wish the market would cool off a bit now. Not too much, but it could cool off quite a bit. And I would be happy because I find this market a very difficult market in which to operate with everything being so, so red hot.

But yeah, I mean I think the realtors would like to see a commerce market because you know, the multiple offer again means only one winner and multiple losers. The losing group has to redo the contracts, they have to do the research and just the frustration of not being selected. And you know, people want that more normal market condition. Ideally we want increased supply, more home building and then we have more choices for consumers and then this is how we get the transactions. But what's happening now is that we may get towards the balance market in a non ideal way which is chalking off demand. And here's a graph on the mortgage rate. Sudden change. Everyone knows the blue line that you see on the graph, sharp upturn, is the mortgage rate. But note how the red line which is what the Federal Reserve directly controls. Federal Reserve does not directly control mortgage rate. It's combination of multiple bond market, the global financial market. But Fed has raised the interest rate only one time. Yet you see how fast the mortgage rate is rising. But furthermore, if one looks at the past history, one sees that at times when Fed aggressively raise interest rates, the mortgage rate barely budged. So it is possible in my view that most of the rate increases, mortgage rate increases may have already occurred. So any further jacking up of the interest rate by the Fed may not have any meaningful impact on the mortgage rate. So in other words, mortgage rate today say 4.7% by year end it could be about the same even as the Fed continues to raise interest rates.

I was just going to ask you that question. In other words, have the mortgage lenders priced in in anticipation of the future rate hikes that the Fed has already announced? And by the way, this Federal Reserve with Chairman Powell is. You don't really have to decode what he's saying too much like, I mean I remember back to Alan Greenspan, you never knew what he meant. It was always a big job to try and figure out what he was going to do. But they've made no bounds about it. They're raising rates. Have the lenders already priced that in? Is that what you're saying?

I think it's not necessarily the lenders, lenders want to use a competitive market in the lending industry and they see what the cost of getting the fund, what they can charge is really about. The 10 year treasury bond yields in the 10 year treasury bond yield has moved similarly with mortgage rates. And that's why the lenders are in a sense forced to raise interest rate because this is how the market has been turning. But essentially you are right, Jason. It's already priced in for about seven or eight rate hikes by the Fed this year. The wild card is really about inflation. If inflation continues to rise faster. The sad situation related to the war in Ukraine is not helping on the inflation because food prices may continue to increase. Ukraine has been one of the big exporters of grain and the harvesting time may not occur this year along with the fact that Russia, they cannot Sell grains overseas because of the sanctions. And of course the lack of energy coming from Russia will also hamper the gasoline prices to be elevated. And I think I have one graph on the inflation. Hold one second, let me try to turn that.

I'd love to see that mortgage payment chart you just passed as well. I think that might be interesting. Not this one, but you can talk about this one if you want. It looks like you had a payment comparison of how much the payment differs. Yes, this is, this is good. So what we're seeing here, everybody is we're seeing monthly mortgage payment on an $800,000 loan. Now in the, you know, $800,000 ain't what it used to be. Right. So this is someone who buys a million dollar house. And just let's keep that in perspective. A million dollar house you can now buy with an FHA loan in some areas. Right. That's like a program really meant for first time buyers largely. But at a 3% interest rate, that principal and interest or P and I mortgage payment is about $3,400 a month and I'll just jump to 5%. That same loan amount is almost $1,000 more per month. It's. Well, it is, it's $4,300 a month, basically. So comments on this.

So you know, this is just based on the same loan amount for a person who was going to buy that home last year. The loan amount would have been. Not that you would have been cheaper because home prices were cheaper. So this is a high degree of cost burden for the buyers. I put the 6% scenario, I don't think we will get up to mortgage rate being up to 6%. But just out of curiosity, you know, the payment goes up to 4,000.

Last year, 3,400. I mean these are substantial changes that is occurring from the rising mortgage rates. Market is still hot, but inevitably just this number calculation is implying that the buyer pool will steadily shrink later in the year. And consequently I expect overall home sales to decline about 6% this year. Home prices will still rise and by year end I think it will be a single digit percentage gain. Maybe only about 5% price gain in December versus 12 months ago. But clearly this cost burden, especially for the first time buyers, means that buyer pool will shrink at the same time the builders are building more, which means we will have more increased supply.

Yeah, and by the way, you know, NAR really made quite a splash when they talked about how we're what, five and a half million homes short in the supply we need. You know, can you update your thoughts on that and.

You know, how, how long is it going to take for that to rectify itself to where we get, or will we ever get to a, an even level where, you know, you don't even say we're 2 million homes short of what we need. Talk to us about that for a minute because there was, there's been a lot written about that. I'm sure, you know, I'm sure you've spoken a lot about it.

Let me actually try to find that slide. So let me just bear with me as I scroll down some of the slides here.

Problem. We, we. This is, this is hitting us subconsciously as you scroll through your slides. So it's great. Happy to see it.

So George Gammon, Jason Hartman and I have, we've created a high level mastermind group called the Collective. The goal of the Collective is for you to learn from the three of us as well as of course the other members on how to build and more importantly, how to maintain your wealth. In this video we're going to go into detail about what the Collective is and what it can do for you. Enjoy. So I'm Ken McElroy. I've been in real estate for over 30 years. Started with a two bedroom, two bath using my own money and now I own over a billion dollars worth of real estate that I bought over the years. Built a big company, we have a construction company, a development company, a property management company, and of course an investment company. And typically not now. We syndicate and work with large, both private and public institutions for the equity and the debt. And so what I bring to the Collective is how to scale, how to grow. Starting with one really small property with no experience at all and growing it into an organization which I've been able to do that basically runs almost without me. So that's what I'm going to bring to the Collective.

Collective.

We decided to start the Collective because one I met George Gammon and George brings a very interesting perspective about the economy and the Fed and the way money works and Bitcoin and alternative types of investments, which quite honestly I was super focused on real estate almost the entire time and even I want to be a little bit more diverse. So when I talk to George and to Jason, they're always doing very, very different things on the investment side. Jason specifically is more focused on the single family housing and what's going on in that market so that we could collaborate and have different viewpoints on different things. And so that's why I thought the Collective would be good Because I think everybody's kind of searching for the same kinds of answers. So the collective means to me basically the collective group, the whole. And I've always been a big believer of team and collaboration. So for me it really means collaboration of everyone kind of coming into a room and learning from each other based on their individual highs and their individual lows. And to be very, very respectful of all their independent views on things and to be more open minded, transparent and authentic. So I cannot wait for the group to get together each and every quarter because we all have very different walks of life that we're going through. And so it's very, very cool to get into one room with like minded people. I think the right person for the collective is somebody who's into personal development, somebody who's trying to be a better individual, somebody who's trying to, to have that work life balance, trying to figure out good decision making on the investment side, specifically good decision making on the personal side perhaps certainly on their health and on their wealth. The members that have already signed up are people typically that have businesses that they're growing, businesses that they've started or businesses that they've sold. So typically their higher net worth, net worth and they're trying to figure out what to do with their money. They're probably a little bit afraid of inflation, they're probably a little bit of concerned about where to invest. And they're obviously looking at real estate as one component. Somebody that's trying to do the right things both on the personal side and on the financial side. So some of the experiences that members can expect to get out of the collective are certainly the network and I think think that's always super powerful. I've been involved in groups like this before like EO and ypo, the Entrepreneurs Organization and ypo, which is Young Presidents Organization, which is kind of a peer to peer network. And I, that's what I envisioned and I think people are going to certainly get that out of there. They're going to have lifelong friends for sure from this and they're going to meet people at every single event. But also we're going to have fun. So as an executive example, things like race car driving and doing all kinds of really cool things and meeting celebrities and things like that and fashion shows are going to be part of it. So it's kind of a how do we have fun and learn together? And we're going to have that at each and every event. So thanks for watching. If you guys are interested, there's a link below. You can click on. It'll take you right to the website which has a load of information on exactly what the collective is, where the next events are are and what exactly you'll be getting if you become a member. Thanks for watching.

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