You're a home buyer somebody or a young Person looking to buy a home you need a Bit of a reset there there is a Possibility on the other side of this That that uh inflation could be could Actually be quite low welcome back to Real estate mindset today's video is Going to be absolutely Bonkers now the Data is in and today we're going to talk About five reasons why buying a house Right now is an absolutely horrible idea Now ultimately it's up to you Individually to decide when it's time to Purchase a house however there are Millions and millions of Americans that Are completely frustrated and confused As to whether or not they should Purchase a house is the housing market Going to crash are prices going to go Down for existing homes are they not Going to go down or interest rates going To go down what should you do and Unfortunately guys the reality is no Matter what happens next there's a whole Bunch of mosquitoes where I'm walking You see those Dunes back there horrible Horrible unbelievable but regardless Whatever happens next we know that the American dream of home ownership has Been taken from us guys there is no Affordable American Dream anymore and so Today we'll go over the five things We'll go over PE ratio payment to income Ratio the massive historical Equity
Runup we'll go over the job market and The fact that every indicator right now Is spelling an incoming recession and if You guys can for me coming out here as In the mosquitoes I don't know if you Guys can see all the mosquitoes but Literally they are everywhere for all of The effort like this video subscribe if You haven't already shoot me a comment Below but either way you guys I hope This gives you something else to Consider other than the normal Cheerleading that we hear everywhere so Enjoy starting with PE ratio let me Throw up a chart on the screen so you Guys can see how bad it is right now we Have historically high PE ratio which is Basically the price of the hous is a Price of the average house compared to The annual earnings of someone so right Now we're sitting at a historical high Of 7.4 so 7.4 years of someone's salary and You know as well as I no one's using 100% of their salary to pay towards Their mortgage so realistically guys the Fact that it's 7.4 right now means that If you purchase right now essentially You're shackling yourself to your house You're trapping yourself it's Essentially a prison has come out in Said 15 to 20 years depending on the Metro area so again when we look back at 2007 2008 the PE Ratio never even got to
Seven it got to 6.9 and for the people That make the argument like we're going Through something similar to the 70s and 80s look at the PE Ratio back then it Was super duper low it was in the 3 and Fours so essentially what I'm saying is Is the consumer was much stronger back Then and and quite frankly the fact that The PE Ratio is so bad right now and no One is talking about it is astonishing But that is the number one thing you Guys and I'm always trying to keep your Attention on price too many people are Being sold on payment we see that Happening with new homes you want to Look at the price the price is important If anything happens the recession Unhinged unemployment anything like that And the economy goes home prices are Going to start going down we already see It with new construction homes and we Already see in commercial real estate And I'll be honest guys I have seen Prices go down numerous times throughout My adult life so it would be nothing new Fact that people want to act like home Prices going down is new or only Happened once I just don't understand it Do me a favor guys I really want you to Think about this why are people saying That home prices have only gone down one Time think about it we have historical Proof historical president that that's Not true they've gone down several times
And again it's localized depending on The metro area but again I want you guys To understand that purchasing right now Would be purchasing with a historically High price to earnings ratio number two And I had to sit down for this one Payment to income ratio right now you Guys the payment to income ratio is 40% actually over 40% 40% of your gross Income not your net income 40% of your gross income goes towards Paying your principal and your interest Only not your taxes and not your Insurance so the payment to income ratio Right now is extremely extremely awful Now the problem with that is is any Disruption in income any hours loss any Overtime loss commission lost if things Are that tight there's not a lot of Wiggle room and if your payment is too High you can't cash flow odds are you're Going to be laate on your mortgage if You're late on your mortgage you could Do a forbearance it will hurt your Credit you could do a short sell you Could sell but either way you guys you Don't want to get trapped in the Honeymoon phase of purchasing a house And disregard the payment remember the Payment sticks with you for 30 years it Stays around for an awful long time Wouldn't you say 30 years so think about That don't make any rash decisions and Just to let you guys know just how out
Of whack the payment to income ratio is Let let me read the last paragraph real Quick now in order for things to get Back to affordability okay and this is Wild it would take a combination of Interest rates to go down 4.44% or for Us to have a 62% raise in meean Household income or a 38% decline okay so a 38% decline but Remember they had assumable mortgages Back then so buyers were circumventing The high interest rates because Assumable mortgages were legal right now That's not the case except with FHA VA And conventional and also put this in Perspective you guys the consumer is way Different from the 70s and ' 80s now in Just two years the average mortgage Payment and think about this has gone up Over ,000 in just two years over $1,000 so Again if you rush purchasing right now And you're not purchasing wisely you're Not using the data you're not finding Something with wedge with cash flow You're not taking your time it's Possible you allow yourself to get Trapped in a super high payment where You have no wiggle room as far as income Decline and then you're stuck with that Super high payment if you think you can Refinance remember refinancing you start Your amortization schedule over again And you have to pay all of the fees all
Over again plus you have to qualify so You can't just refinance regardless you Guys number two was the payment to Income ratio being absolutely wacko Number three the world's biggest asset Bubble and when we look at the CPI and K Schiller we can see much easier much Clearer over the PE Ratio just how bad This housing market bubble is the equity Runup is so unhealthy so substantially Unhealthy it's crazy to think and again Looking at this graph look at the 70s And 80s and here's where we really see The lack of consumer strength okay you Can see that here look at how close Those lines are together the Divergence Starts to happen later on and then it Just blows up personally I don't believe That the consumer can support these Values and I understand the rules of Supply and demand and quite frankly you Guys as far as prices right now as long As we have elevated interest rates the Rules of supply and demand are working In the favor of prices going down Because right now we have more inventory Growth than demand throughout this Entire year of 2023 and this was Shocking we had more demand than Inventory so even though demand was Wrecked and completely crushed inventory Was so low that it didn't matter there Was still more buying demand we already See new home values going down once
Again 15.7% and that's a price crash because When we talk about the buying incentives That they're offering that they're not Reporting on their appraisals y'all home Prices with new homes are absolutely Crashing because they have to sell it's The forced selling and that brings me to The next thing but regardless you guys Number three is the Astronomic Outrageous housing market bubble that we Are in number four the job market now You may think the job market right now Is super strong but obviously guys the Federal Reserve is trying to the Labor market I mean Jerome Powell has Told us several times now the thing is As a result of that once things do break I'm telling you guys unless you've been Through something like this before you Don't know what it's like not to be able To get a job I know what that's like and It's absolutely devastating let me show You guys a couple articles on what's Going on with the job market starting With Bloomberg the job market slowdown Is getting hard to ignore the payrolls Data still looks fine but under the hood Are signs of deteriorating for the Growing number of people who are Unemployed and Keen to switch jobs so is It here yet no it's not and that's What's so important to understand any
Type of turmoil that we've seen so far Has been with a historic low Unemployment rate again everything Commercial real estate meltdown all of This stuff guys no unemployment so when It finally starts to break that's when We're going to start seeing those forc Sellers now if the job market doesn't Break and the job market somehow Sustains and we all start making more Wages up to about 62% like we just went Over well then maybe things will come Back to balance but regardless the job Market right now is completely under Attack and quite frankly none of us Knows whether or not we're going to be Able to keep our job once the recession Hits one more article us applications For jobless claims Rose in a labor Market that remains very healthy more Americans filed for jobless claims last Week and while the labor market remains Broadly healthy there have been recent Signs that it may finally be Cooling and Let's not forget you guys okay most of The job growth we see is part-time jobs And government jobs we're losing Full-time jobs now will that switch Going into 2024 perhaps but right now It's not and right now Jerome Powell has Told us that we're going to have more Unemployment and he does not want wages To go up too much which is exactly what We would need to sustain the prices
Something's going to happen I believe The labor market is going to be a huge Ingredient to whatever happens in the Future No Matter What Happens watch the Labor market maret it is crumbling apart Still healthy hasn't happened yet but Keep your eyes on it number five and I Had to take a break from the mosquitoes They are absolutely destroying me again If you want me to continue doing these Videos like the video let me know in the Comment section below I love pushing Myself I love coming out here doing this Type of effort number five which is the Incoming recession and this is not Something that we are basing on feelings If we look at the Historical president And we look at the facts of the Situation we know when we look at this Chart the 10 and the 3 month whenever This has inverted it has led to Recession 100% of the time look at how Inverted the 10 and the 3 month is now This might be a lot better to actually Look at versus the 10 and the two but we Are highly inverted right now economic Warnings of an incoming recession which Basically is job loss and not only that Guys I want people to understand that Things take time now this is taking a Little bit longer to shake out than I Person personally thought but when we Think about how much money was printed Through Co it makes sense that it's
Taking a little bit of time so to put This in perspective let me throw this Chart up you could see going back to 1978 it was 17 months going to 1980 it Was 9 months 1989 it was 15 months 2010 Months now the great financial crisis Was 22 months a lot of people including Myself got blindsided do you guys think That something similar is happening like That right now comment below do you Think people are going to get blind Blindsided I think so in fact I think People are already blindsided when you Don't take into consideration the Historical president of recession Warnings now 2019 it was 10 months they Say in order to have a recession people Can't see that coming so maybe that's What is happening right now too many People were seeing the recession coming So it didn't come either way you guys There was a ton of money printed through Co if you want to go buy a house right Now go ahead and do it now I'll tell you Though what I'm doing I'm renting right Now looking for a house I'm looking for Houses that have wedge cash flow Something that I love but something that Has a good price price is a huge thing For me I'm not going to use my emotions To purchase a house I'm going to use a Market analysis and I'm going to use Great professionals to help me with this Process now other than that guys let me
Know if I missed anything let me know Your opinions on what I covered we don't Know what's going to happen next exactly But there are certain facts that we can Review that would give us caution on how To move forward now other than that guys If you're out there investing in real Estate you know I wish you luck and I Hope you win I almost think you'd scare The public if you put this out like why Are they telling me this should I be Concerned about my bank I think you've Got to think of the unintended Consequences of taking a public that has More Full Faith and confidence in the Banking system than maybe people in this Room do just close the door close the Door
