Housing Market Update: Where’s the Tsunami?



w copy


What’s happening to the real estate market?

Everything feels calm now but the real estate tsunami is still coming. And by the time it hits, it’s going to be too late to prepare.

How do you prepare for what is coming?

  1. Pay attention to your market. Study market statistics, people’s moving patterns, etc. Watch my previous blog about this https://youtu.be/YMYstOHTQiI
  2. Pay attention to the real economy. This is not the stock market. It’s about income, consumer confidence, and debt. These impact the cost of living.
  3. Get your mind, money, and market strategy ready.
    a. Keep your head in the game even when other people are panicking. Crisis always creates opportunity for those who are prepared.
    b. Be prepared with your money. Sell houses, make money and keep money so you’re financially secure.
    c. Work only with highly motivated clients and price your listings right.

If you want to get the best training on what’s happening (and what will happen) in the market, join me for 3 days of live virtual, interactive training at Agent Mastery Live Virtual 2020. Click here for more details. https://www.agentmasterylive.com/

Full Transcript

And what’s going to happen next with the economy? What’s going to happen next with the real estate market? This is what I’m going to call my housing market update. And the question that I’m asking right now is where is the tsunami? Where is the real estate tsunami that I’ve been saying for months is going to happen when home prices are going to start going down and all of that? And so, I have people asking, “When’s it going to happen? What’s going to happen next? I thought you said that the real estate market was going to collapse. What is going to happen?” And especially when I start seeing things like this happening.

This is from last week in Bloomberg. Bloomberg says, “Across American Cities, Evictions are Down.” Well, nationwide, a couple of weeks ago, they just lifted the moratorium on evictions and yet, instead of seeing this wave of evictions, there is not really that many evictions and below average evictions during the pandemic suggest a housing crisis might look different than a projected tsunami. So, the question is, is there going to be a tsunami, a real estate market storm or not? Because the reality is over 30% of all renters in America right now are not paying rent and in the commercial market, it’s even worse.

And then you see stuff like this and it’s even more confusing. If you look at NAR and you look at their economists are like, “We’re in a housing rebound,” and all that kind of stuff. And so you see this, this is on Bloomberg last week, one headline says, “FHA Mortgage Delinquencies Hit Record High with Economy Rattled.” And right next to it, “Low Rates Push Home Builder Optimism to the Highest Since 1998.”

Right here, it says things are looking bad and right here, it says things are looking awesome. Well, the question is, which is it? And when you see stuff like this, you see, and this was on Bloomberg as I’m recording, this was August 24, 2020, “Consumer Confidence in Canada Approaching Pre-Pandemic Levels,” which means now consumer confidence, people are excited. And now you look at the numbers.

So here’s some of the numbers, U.S. home prices right now across the United States at an all time high, up 8.5% year over year from July 2019 to July 2020. Home prices up over 8.5% from this time last year at an all time high, in terms of home prices across the country. Home sales are up 8.72% year over year from compared to last year.

Where is the tsunami?

What’s really happening? Well, here’s the answer. The tsunami is coming. It’s just that you gotta understand that tsunamis don’t always hit immediately. So think about the real word tsunami. A tsunami is what they consider to be, and what is often called, a tidal wave that comes as the result of a massive disruption deep beneath the ocean surface, either a volcanic or an earthquake, typically. And so you have the disruption, you have the crisis, which would be an earthquake. Tectonic plates shift, massive rattling and shaking and then that stops. But what happened was is that massive movement created an enormous wave deep in the ocean that starts moving through the ocean often at over a hundred miles an hour, this tsunami, that when it starts coming and they look at the tsunamis of the greatest tsunamis in history over the last hundred years and what they say is that a tsunami wave, when it starts from its place of origin when it’s deep in the ocean, it may only be three feet high.

And yet that wave is moving at hundreds of miles an hour and it’s moving all the way down from the bottom of the ocean. So as it goes from the deep water to the shallow water, when it starts getting shallow, and what happened in some of the big tsunamis that happened back in 2004 and 2011, some of the biggest tsunamis that have happened in our lifetime, is those three foot waves all of a sudden elevate to over a hundred foot tsunami wave that crashed into India, one crashed into Japan, and they killed tens of thousands of people. And nobody knew it was coming because the shaking had stopped.

And it’s the same thing with what’s happening here. You had all the problems triggered with the economic shutdown caused by the pandemic and people were like, “Okay, we’re getting back to normal. Everything’s kind of good. Again, the stock market’s still up. Housing prices are still going up. Buyers are still buying. Interest rates are at all time lows. It must be that everything’s going to be okay.”

And yet, my friends, tsunamis hit after the damage has been done. And here’s the other thing, really the point of this video. If you’re watching this and you are a real estate agent, here’s the reality, or even if you’re not a real estate agent, but if you’re going to be affected by what happens in the housing market, but everything feels calm when the tsunami is still miles off shore, but by the time it starts getting here, that three foot wave goes in a matter of seconds from three feet tall, as it gets to shallow water, to over a hundred feet tall. And by the time they saw the tsunami coming, it’s too late to prepare.

So what is actually happening in the real estate market right now?

Well, what’s happening is there’s a lot of things underlying this that are happening in the economy that we have to be aware of and that we have to pay attention to. So for example, this happened just last week, “Mortgage Delinquencies Jumped By the Most Ever.”

Now, this is now. This is in August of 2020. I thought everything was getting settled back down and everything’s good, things are kind of rebounding. Well, the reality is, “Mortgage Delinquencies Jumped 60-Day Delinquencies Hit the Highest Level Ever.” We’re talking about the Great Recession. These are the worst delinquencies ever. 16% of all FHA mortgages, delinquent. That’s real.

Now, why are you not seeing distressed sales? Why are you not seeing foreclosures? Well, because they’re not happening right now because everybody’s in forbearance. People that are unemployed, people that have lost their jobs or had a reduction of income that are having a hard time making the house payments, they don’t have to make them right now. They’re in forbearance. What happens when the forbearance runs out? They don’t all of a sudden get their job back. They don’t all of a sudden have money. So my friend, the tsunami is still coming.

Here’s another one, unemployment. So depending on who you’re listening to, and here’s one of the problems is, we listen to voices, you listen to the media, you listen to economists, you listen to politicians and you hear, “Hey, everything’s getting better. Everything’s going to be good. It’s going to be okay.” Well, even the Bureau of Labor Statistics showing their unemployment numbers, they talk about unemployment is not really that bad.

The Real Numbers

Well, okay, here’s the real numbers. This is a company named Alhambra Investments. They basically did it by studying unemployment insurance of actual initial jobless claims, which means these are real statistical numbers with no spin. This is weekly filings for uninsured insurance claims. Now this goes back to 2017. We’re going back three years. This just shows over the last three years from March 25th, 2017 until today, August, 2020 of showing actual jobless claims on a weekly basis.

Now right here, all of this, this is how it’s been for the last three or four years. Everything’s been pretty calm, pretty steady and they’ve just been averaging this. Now, if you go back to the total number of claims in the worst 11 weeks of 2008, 2009, in other words, go back to the Great Recession, back to the global financial crisis, during the worst 11 week period, there were 7.1 million jobless claims filed. If you go back to 1981, ’82, the big recession of the early eighties, the worst 11 weeks was 7.2 million.

Now you move forward, the first three months or first four months, first 18 weeks, going back actually into November of 2019. So the 18 weeks before the pandemic, there were a total of 3.9 million jobless claims. Not in 11 weeks, but in 18 weeks, there were half the number of claims in the worst 11 weeks here. So in other words, we’re talking about a bigger period of time, and about half the claims. So this is what was happening pre-pandemic.

Here’s what’s happened in the last 11 weeks, right here. In the last 11 weeks, this is what has happened. This is where we were pre-pandemic. This is where we are today. This is in the last 11 weeks. Now notice it says 11 shutdown weeks removed. Why did they remove those 11 weeks? Because they wouldn’t fit on the chart. If you take the 11 weeks before, those go way up off the screen and way up off of what you can see, because they were so much higher than the last 11 weeks. This is when they’ve been going like, “Oh, things are better. We’re down to only 1.3 million new jobless claims last week.” And yet when you look at it in the scheme of things, we are today, in the last 11 weeks, when things are back 14.7 million jobless claims compared to 7.1 million jobless claims in the worst 11 weeks of ’80, ’82, of the 2008, 2009 and 7.2 in the worst of the recession back in the 1980s.

Now let’s just go back to these periods, all the way back.
This is that same chart now going all the way back to 1980. So this goes all the way back to January 1980, when you had the early eighties, the 1980 recession. The worst weeks of jobless claims, this is on a weekly basis, and you see where you were in the worst weeks. So these are those worst weeks right here, averaging at a 7.1 or 7.2 million. You see the Great Recession right here. You see the 1990, ’91 recession, the dotcom recession around the turn of the millennia. By the way, if you notice, this is a cycle. This is economics, go in a cycle. Basically every 10 years, you see a recession. 2008 was bad. Now we went ahead, 12 years, 2020, and this is where we are today. And this, again, going along and I’m going to erase this so we can start over, there we go, erase all that so we can start over with our markers here. So you see now, right here is where we’ve been in the last 11 weeks. Now again, the 11 weeks of the shutdown are removed. Why? Because they’re off the charts.

Okay, my friends, that is the real scenario right now of how many people are not jobless. If you look at what the IRS is saying, the IRS is saying, and this was published last week in Bloomberg Economics, the IRS projects that there are millions of jobs lost that are not going to come back. In fact, they are projecting that it will be years before the jobs come back. So look at this. This is an IRS publication. This is basically what the IRS projects of how many W2’s are going to be filed, which means corporations that are paying, companies that are paying employees, how many W2’s are filed each year. And this is a projection going back to, let me get rid of all this, so going back to 2017. So now if you look here, this purple line right here, this is the 2017 update. This is what actually happened, the number of W2’s filed. This is 240 million, 260 million. This is in thousands. So the number of jobless claims filed in 2016, this was the projection for 2017 in 2017. This would be that many filed in 2018 and all the way up then through 2025.

Every year, then they have to redo their projections. So in 2018, they lowered their projection because there wasn’t as much growth as they expected. So they went back down, they projected, this is what their projections were for those years. Then in 2019 last year, this was their projection. So 260 million W2’s issued and then this was their projection to go over the next several years, up through 2027. That was all pre-pandemic. 2020 starts and this is where they started. This is what actually happened in 2019.

Actually good, a lot of W2’s. This was their projection for 2020. This is now their projection for 2021, 2022, 2023, 2024, 2025, 2026, ’27, ’28. They are projecting that it is going to take eight years for the economy to come back even close to where it was. And they’re projecting that next year, there will be over 37 million fewer W2’s filed than this year.

Now, what does that mean? It means that when they look at the real numbers, it’s not pretty. These are the IRS’s own projection. This is their publication. This is not somebody’s spin on it. This is not a politician. This is the IRS when they’re planning, what can we expect in terms of federal tax revenue to fund the government? This is what they’re actually projecting. So we’re not in… If you want to call that a V-shaped recovery, okay, but the point is something is coming. It’s going to be big. Where is the tsunami?

And the answer, my friends, is it is coming. Now, I’m going to erase all this again so you can see what this is. All right. So the question now is what do you do about it? How do you prepare for what is coming?

So let me tell you three things real quickly to prepare for the coming tsunami.

1. Pay attention to your market.

There is not a real estate market in general. The U.S. is not a real estate market. So the numbers we’re showing here, most of them are national numbers, but in independent markets, individual markets, there can be a big range of what is actually happening. For example, this is from this last weekend’s Wall Street Journal. Last week’s Wall Street Journal, “New York Real Estate Takes a Massive Hit.” And on the front page, you have a condo that was listed for $19.5 million in Manhattan. They just reduced the price from 19.5 million to $10.4 million. We’re talking about a $9 million price cut. And this is the Wall Street Journal. The date on this is Friday, August 21st, just last week on Friday, August 21st, last week. 56% fewer sales in Manhattan homes between March 23rd and August 16th compared with the year before, compared to 2019.

Home sales in Manhattan are down 56% year over year during the pandemic compared to this time last year. Months supply of inventory in Manhattan right now, 30.8 months of inventory. Some of your markets right now, there’s less than three months of inventory, but this is what’s happening in Manhattan. This is the kind of thing that’s also happening in places like San Francisco. 11.3 is the average listing discount on the luxury Manhattan homes in the second quarter, which means homes are selling. They’re having to do price reductions. Prices of homes are selling for a lot less than the list price. This, my friend, is the kind of stuff that’s coming.

But the thing is, you got to be aware of what’s happening in your market. So you’ve got to start studying your market statistics to see is inventory going up? Is it going down?

I did a video a few weeks ago on how to stay on top of the market in your market, how to track market statistics. We’ll paste the link to that video below so you can go watch that video on how you can pay attention to your market and know what is up.

So here’s some things you need to pay attention to. Supply and demand, because supply and demand is driven by a lot of factors. Where are people moving? If you’re in a suburb or if you’re in a small city, or if you’re in a big city, some people are moving out of one state to a different state all over the country. Migration, it’s not so much migration patterns, but moving patterns of where people are leaving. Right now, they’re all leaving Manhattan. They’re all leaving San Francisco. Not literally all, but you get the point. They’re moving and they’re moving into suburbs. So in some areas, home prices are dropping, inventory is going up, days on market is getting longer and others, it’s just the opposite.

There’s no inventory. You put a house on the market, it’s going to have multiple offers on it almost without a doubt. So you gotta know what’s happening in your market. Ask why are people moving? Why are people going to be coming to my market or why are people going to be leaving my market? So factors like cost of living, safety, jobs, people follow where the jobs are. So number one, pay attention to your market.

2. Pay attention to the real economy

The real economy is jobs. It is not the stock market. I’ve talked to you about this in previous videos. The stock market is completely detached from the real economy. You have the stock market bubble that is fed by the federal stimulus and then you have the real economy. Now, there is still stimulus that is coming for us for the average Americans, but it’s not coming right now and people are hurting. Okay. And the question is, what’s it going to really stimulate? Because it’s still adding to the government debt, adding to our federal deficit and all that stuff is happening.

But the real economy is something you gotta pay attention to all the time. Sellers and buyers, there are three factors that make sellers sell and buyers buy. Number one is income. What is the job situation? People that aren’t working, they’re not making house payments, they’re not buying, they’re losing their houses. If their income is down, if their income has dropped, which it is dropping across the country. If their income has dropped, not in every industry, but in a lot of industries, they’re going to be buying smaller houses, they’re not going to be buying, they’re going to be waiting, they’re going to be more conservative and all of that. Consumer confidence is a big factor. And right now you see consumers pretty confident. So what are they doing? They’re buying and selling real estate. And then the other big factor is debt. What is happening?

You got both national debt, but you also have individual debt. You have student debt, you have credit card debt, you have automobile debt, you have government debt. All of that stuff goes into play because it affects the cost of living and the cost of your past, which is what debt represents. Debt is you buying something and then paying for it in the future. You’re paying for something you already… When you make your car payment, you’re paying for car miles you already drove. If you put your vacation on a credit card, you’re actually then paying for that credit card, every credit card payment you’re making, you’re paying for a vacation you already took, you’re paying for food you already ate. And that debt has a huge impact on what is happening in the real economy.

So number one, pay attention to the market. Number two, pay attention to the real economy. And number three, prepare.

3. You got to prepare yourself. Get your mind ready, your money ready and your market strategy ready.

So first get your mind ready. How do you get your mind ready? Mindset, whenever this market starts to drop, and whether it’s led by the stock market, whatever it is that causes a trigger that all of a sudden makes people freak out and home prices start to drop, inventory starts hitting the market, when the forbearances run out in the spring of 2021, the 12 months from the beginning of the pandemic, if all of a sudden there’s a wave of inventory hit the market, all of a sudden something triggers a stock market panic or a sell off, those kinds of things happen and they happen for sometimes inexplicable reasons.

People start freaking out. You got to be ready and you gotta keep your head in the game. You gotta keep your head straight and know with your mindset, that crisis always creates opportunity for those who are prepared. So be prepared mentally.

Number two, you got to be prepared with your money. That just simply means stay lean. You got to stay lean right now. You need to be stockpiling cash. You need to be selling houses right and left so that you’re making money and keeping money so that when the market shifts, you are financially secure, emotionally, you’re secure, your family’s not freaking out, you’re not worried. And now you can look and go like, “Okay, where’s the opportunity?” And you’re ready to take advantage of it. And then number three is your market strategy. What is your market strategy? What should it be right now?

I’m going to tell you two things that your market strategy should consist of.

Number one is …Only work with highly motivated clients. If it’s a buyer, they better be ready to buy right now and they better have a great job, great income, great credit and money so that they can go in and buy a house and you’re not wasting your time.

Number two, Only work with motivated sellers. And with motivated sellers, you go in and they got to be ready to move, they’ve got to be realistic about pricing. And so only work with highly motivated clients, that’s market strategy number one.

Market strategy number two, for you as a real estate agent, is price your listings right. It is everything right now. Don’t get sloppy. Don’t get sloppy in working with buyers and aren’t motivated or pricing lists, taking listings, going like, “Man, the market’s so hot right now.”

They’re going to sell and you’re overpricing because here’s what’s going to happen. When everything turns and you got a listing that you thought was going to be okay, and all of a sudden it turns out to be overpriced, now you’ve got problems. You got stress, you’re going to have upset sellers, you’re going to have listings not sell, you’re going to be fighting that. And the worst thing is you have not developed the discipline and the skill to help sellers make good decisions and price it right from the beginning. And once the market starts going down, your ability to convince a seller to price their home where it needs to be to actually sell, we’re not talking about underpricing, we’re talking about pricing where it will actually sell, your skills have got to be great at that. Otherwise, you’re going to be working with sellers. You’re going to overprice their listings, and then they’re going to be chasing the market down and reducing their price over time as the market’s going down ahead of them. And they’re going to be losing a lot of equity and it’s your fault.

So you got to be tight right now in making sure you’re pricing your listings right. And when you’re doing that, not only are you going to then be able to sell your listings and make money, but you’re going to be able to serve your clients and they’re able to get out of that house while the market is still good, because it ain’t going to be going up. It’s going to be going down. When it starts turning, you gotta be strong on pricing.

And it also puts you in a position where you have the credibility and the track record that you know how to deliver results. And when the storm hits, homeowners are going to be looking for agents that have a track record of knowing how to deliver results and if you’re an agent and you don’t get a listing sold now, you’re going to be in trouble when it gets hard to sell a listing because right now, in most markets, it’s still easy to sell a listing.

The key is when the market turns, you gotta have the skills to be able to sell listings fast and for top dollar every single time. And when you do that, you’re going to be able to make a lot of money.

Now, if you want to get the best training for what is happening in the real estate market right now, go to https://www.agentmasterylive.com/ We’ve got our event coming up real quickly here. Agentmasterylive.com for three days of live interactive training with me. It’s going to be unlike anything you’ve ever seen before. Go to https://www.agentmasterylive.com/ to check it out.
If you’ve liked this video, make sure you give it a thumbs up. Post your comments and questions below. What are you thinking about the real estate tsunami and what’s happening with the market crash that is coming that I am absolutely convinced is coming? Do you disagree? Post your comments down below, let me know, play to win, and I’ll see you on the next video.

Facebook Comments