[Music] I'm so in love with you welcome back to Real estate mindset today's video is Going to be absolutely Bonkers and I'm Taking you guys into the field today to Try to show you what's happening exactly With this rental market meltdown which I Believe is going to be one of the Catalysts moving into 2023 and into 2024 And reducing home prices now take a look At this map here's where I brought you Guys today now as you can see this is Basically a pocket of Homes single Family resident homes that were Converted to rentals and that are now Just sitting on the market so today I'm Going to do the video and I'm going to Walk around this community and as you Can see it's actually a relatively nice House so really you guys the question is Why is the rental market crashing down Right now when historically most of the Time the rental market is safe and real Estate is safe and so the fact that Those Trends are actually reversing is Really astonishing and really to put This in perspective and this is why I Think so many people are going to lose Here back in 2008 when we had our last Housing market crash the rental market Historically goes up because less people Can buy they tend to go to rent but Right now we are not seeing that at all And I believe one of the primary factors
Is obviously well I think there's a Couple factors but I think definitely a Primary factor is unaffordability things Are so unaffordable right now whether You're purchasing a home or renting that A lot of people have essentially exited Out of the housing market and just to Put things in perspective again take a Look at this chart by Black Knight and As you can see here things have not been This unaffordable since the 1980s so quite frankly I believe the Primary factor is on affordability now As you can see there's a single family Residence behind me that house is up for Lease as well you guys I'm about to get To another house right here and this Whole subdivision I believe is actually You know was converted to rentals you Can see this house as well it's a rental Now if you really take a look at you Know how unaffordable things are we have To ask ourselves are people today better Spenders and better Savers than they Were in the 1980s I don't think so you Guys in fact according to the data 50 of People between the age of 19 and 29 Still live at their house and again why Is that why are people not renting right Now you know it's pretty easy you know Rent went up too fast making it so Unaffordable for almost everyone Across The Nation so again you guys the number One factor that I believe that's going
To cause the rental housing market to Continue to decline in price is the Overwhelming affordability that's Starting to change and rent is going Down in many areas Across the Nation now Here's another one you guys and this is Especially intriguing because this is a Brand new neighborhood but the house Behind me is up for rent and just Sitting there now they've been able to Rent out a lot of these houses as we Move by here but the houses that are Still up for rent I don't think they're Going to be able to rent those houses Out now the other thing so not only Unaffordability the other thing that I Believe is going to be the Catalyst to Melting down the rental market is the Overwhelming amount of inventory there Is so much inventory that's not even on MLS right now we really don't you know We really don't understand just how much Inventory is off the market for rental Houses right now but there is an Overwhelming amount of inventory right Now for rentals and the reason that is Is again typically historically Investing in real estate is such a smart Move such a solid move historically 2008 Showed us that rental prices gone up and What happened is there's so many people That thought investing is easy right now That they're trapped in the market you Guys we have never had such a high
Investor demand for real estate and what We're seeing right now is as most of These investors purchased over the last Three years and most of these investors Are brand new investors that did not Anticipate rent going down because again Historically it doesn't but again Primary factors you guys on Affordability and the overwhelming Amount of inventory and not just normal Residential houses like you guys see Behind me there's also an overwhelming Amount of inventory in commercial Residential real estate like for Apartments in fact actually apartment Demand has gone down already in the Third quarter but I believe what's Happening is as more and more of these Communities like I'm walking through Right now that was turned essentially Into rental communities so these were Built as single-family homes and have Essentially been converted to rentals I Believe what's possible is as these Homes continue to sit on the market the Investors are going to say you know we Can't make a cap rate anymore and we may Have to sell some of this inventory to Get rid of it there's another one right There you guys it's amazing how people Are just building you know blocks and Blocks of single-family residences just Like this and converting them into Rentals again there's no assumptions
Here we already have data that rent is Declining Across the Nation now the Market that I'm in right now which is Based basically Kingwood let me explain To you what's happening in Kingwood Right now in this rental market so I've So I recently did a video and I broke Down what the median rent was in Kingwood for 2022 which is a dollar and One cent per square foot now the median Rent for 2021 was 97 cents a square foot Okay so 97 cents a square foot in 2021 a Dollar in a penny per square foot in 2022. again really important to Understand those numbers because a lot Of people think that that actually rent Doesn't go down but not only is rent Melting down right now people are not People are not even picking up the Houses that are well under rental value Let me give you an example so in this Market right now the most affordable Home as far as price per square foot is Trying to be rented for 79 cents a Square foot which is basically 21 under Median rent and the thing is that home Has been on the market for over 30 days And they can't rent it out but not only Can they not rent that out I was able to Find another home at 82 cents a square Foot which again is close to 20 percent Below median rent value and they still You guys after 90 days being almost 20 Percent under median rent they still
Can't rent it out and that's what's just Happening right now I've also heard Reports that certain places in Northern California are experiencing up to 30 Percent decline you guys in rent and Again all that's going to do is cause These investors which they bought so Many houses this year it's going to Cause them to obviously have to Liquidate their houses and cut prices Even more there's actually another house Back there I missed that's up for rental As well but fast forward today there's About 12 homes right now in this Community sfrs that are up for rent and They're trying to rent these out for a Dollar and twenty to a dollar and thirty You guys a square foot way above Market Rent and no one really cares if it's new Because you're renting they could just Count call the landlord up and have it Fixed the whole appeal for new you know Doesn't really apply now here's another One right here you guys you know that is For rent but I definitely wanted to Point out to you guys that this is Actually happening these new Builders Are converting entire neighborhoods and Entire blocks into rentals and here's The beautiful thing about it they can't Rent them and they haven't even started Going below market value yet as soon as These new houses understand that they Cannot rent this out for what they need
In order to cash flow that's when the Price cuts for homes starts getting Better so when all is said and done it's Really important to be objective because This time around the Federal Reserve is Putting us in a housing market crash the Federal Reserve is destroying demand and Now that the Federal Reserve has slowed Down per se their quantitative Tightening we need to stay objective and Again there's three main sticking points For me as far as why I believe we're Going to continue the trajectory of this Housing market crash the first one as I Mentioned is unaffordability Unaffordable ability is sticky and it's Not going anywhere actually some things Are getting even more unaffordable Despite what the numbers say so Unaffordability and the second thing is Is prices just went up too quickly and Basically broke all the fundamentals Needed to sustain that type of equity Growth so the fact is that prices guys Went up way too much that's the second Sticking point and that has to change Because that is not in line with wage Growth and normally Equity growth needs To match wage growth and we're far out Of whack now the third Catalyst I Believe is going to be the rental market Now I believe that's going to be a Catalyst because again there is an Overwhelming amount of investor shares
And I believe that the wealthy or the Investors are actually going to lead to This housing market crash and maybe not In the form of foreclosure so if they Can't sell these houses I don't think They're necessarily going to be turned Into foreclosures I believe a lot of These investors that actually are Trapped upside down in these houses Expecting that cash flow realizing they Can't get that cash flow I expect to see A lot of short sales from investors Coming into 2023 because quite frankly You guys things are way too unaffordable And there's just way too much inventory Demand is absolutely crushed and these People need to make money right now and If they can't make money right now they Will have no choice but to liquidate These houses in this huge Community Right here and transition that hardship On over to us as buyers on the sideline Waiting for a deal of our dreams but the Amazing thing is guys is there are Communities all around this area just Like this and this is in Houston and I Understand some markets aren't Experiencing this and that's why I keep Trying to get you guys boots on the Ground data so I can take you guys Behind the scenes to see what's really Going on because not all of this is Reflected in the data but again if You're on the sideline freaking out you
Know listen to those three catalysts That I believe is going to be the Sticking point heading into 2023 that is Essentially going to govern this housing Market crash now obviously a lot of Things can change the Federal Reserve Can you turn the government can pass a New law or some legislation that bail Out a whole bunch of renters we can put Another ban on things obviously the Federal Reserve is in control but I Definitely believe it's important to Acknowledge all of the other data that's All around this other than that guys I Really hope you like this video I really Love doing these videos and kind of Showing you guys what's going on in the Market but either way you guys I really Hope you guys got some value insights And perspective from today's video and If you're out there investing in real Estate you know I wish you luck and I Hope you win
