Housing Nightmare - It's Worse Than You Think

The media is lying to you and people have no idea what is actually going on on the ground in the real estate market in Florida and with the state of the consumer. And so watch this video. It could end up saving you thousands of dollars if you're looking to sell a home, buy a home, or you're just interested in economic data. Let's jump in to what is actually going on in the economy by looking at the market data.

The first thing that you really need to know is that the entire real estate market is based on sentiment. And sentiment is super important because the consumer and how they feel is going to determine whether or not they're going to jump into the real estate asset class. Let's see how the consumer is feeling right now at this moment. First things first is a lot of consumers are starting to see some shifts in the in the jobs market.

We are starting to see some layoffs here locally in Jacksonville. There are layoffs around the country in certain pockets like Washington DC. Um this is obviously the February jobs cut uh macroedge job cuts tracker and it is showing that there is a spike in February primarily because of Doge but we're seeing ripple effects around the country and many other supporting industries around the government that are starting to show up and we expect this to continue moving forward. The sentiment of basically employees is that things are getting a little rough and people are concerned or becoming concerned about losing their jobs.

Here's a little uh survey that was put out there. Unemployment expectations are at crisis level expectations at 2008 level expectation. Consumers are very worried about losing their jobs. And this was a survey that was put out there for personal finances.

For consumers. There's the dimst outlook for personal finances on record. Expectations of personal finances couldn't be lower. And so this is a huge concern.

This is a survey that came out from the University of Michigan asking consumers how they feel about policy, the economy, and markets. And consumer sentiment isn't just falling amongst lower income groups. It's also fall falling on higher income groups. Consumer sentiment is declining across all income groups above $100,000 and below $100,000 here and they're starting to pull back on their purchases.

Savings have basically evaporated from the $2,000 stimulus checks that came out during COVID. We expect that savings will continue to really dry up as people dip in after having years and years of inflation into their uh savings accounts. Higher income households are also pulling back their spending. You can see here, here's just another way of looking at it.

And further, demand is starting to drop as evidenced by this trucking index, which is down more than 30%. This is partly because of Trump's COVID uh I mean, sorry, Trump's tariffs policy against China, and we're starting to see a big drop off because there was a bunch of shipments that arrived. People were trying to frontload the tariffs. We saw a lot of demand last quarter, but next quarter we're going to start seeing demand dropping if there is not an arrangement that is set up between the United States and China.

Obviously, there's talks that are going on now between the two. And we'll see where things go, but we should start seeing shortages probably in late May and June if there isn't a resolution from products that we see from China. Credit card debt is basically at an all-time high and delinquencies are starting to skyrocket and we're seeing a lot of consumers be really hurt on uh the interest rates that they're seeing on their credit cards. One of the interesting things that we're seeing is the buy now pay later new new environment for basically banks to continue to extend people credit even for purchasing a burrito from Chipotle in through their CLA deal.

So, we'll we'll talk about that at the end of the video, but it's really interesting what's going on there. So, the consumer is stressed and there's a lot of debt that they they're holding now and there's delinquency. So, let's jump into that. So, here's the percent of loan balances that are 30 days plus delinquent by loan type.

So, you can see that people are starting to be delinquent on their credit cards, their autos, and even their mortgages. I know that helilocs are low for their delinquencies, but we expect to see more delinquencies in the future as equity starts to erode away and prices start to drop in various regions around the country, including Florida, which we'll jump into the local data in a little bit. Student loans there at the bottom, one big issue that we'll talk about, is that when they're going delinquent, I know May 5th was just the other day. Now they're starting to show up on people's credit reports and they can even have their wages garnished and uh their credit score can drop 150 points.

So they're maxed out. Here's a study that said new student loan delinquency can reduce credit scores by more than 150 points, which is really rough. This comes from the New York Fed Consumer Credit Panel. So this says given these estimates, we expect to see more than 9 million student loan borrowers face substantial declines in credit standing over the first quarter of 2025.

That's happening right now. This is a problem if a consumer is going to purchase a house and their credit score is too low where they can't qualify or it increases their interest rate to a level that's just not possible for them to be able to purchase and and basically prices them out. So, this student loan crisis is a problem and it's impacting the affordability of houses. Here's just a picture of the true federal student loan repayment.

Just shows that a lot of people are just not repaying their loans at this point. They're in default. Another aspect is auto loan applications are starting to get rejected at just a record rate. This comes from the New York Federal Reserve.

So people trying to buy a car no longer qualifying for financing for that car, which is a huge problem. US household debt. This is this is pretty interesting. We're starting to see total credit card debt delinquency increase every single year and we expect that trend to continue and it's at a record level of more than a trillion dollars.

One of the major issues that we see out there is that the gains from the inflation uh from prices going up are all going to the people who own assets obviously and this is usually people who are in the top 1% and the bottom 50% and the bottom half just really are struggling. They are just seeing prices going up their wages be stagnant and they're trying to just make you know ends meet but the top 1% continues to accumulate more wealth. And this goes into the major issue that we are seeing in Florida, which is an affordability crisis in inventory. And this is probably the most interesting information of this presentation.

This is a chart from creative planning that shows that the gap between the actual median household income and qualified income and the value of of the price like they have to basically have 50% increase in their median income for them to buy a property. This is just one way to look at it. It's brutal out there. I mean, people are getting their parents to cosign with them.

They're getting family members to cosign with them. Uh, and it needs to generally be a married couple with dual incomes that are able to afford these houses or they have to relocate from a high-cost area to a lowcost area to be able to afford houses at this price point and at today's interest rate. This is a chart from Braavos Research. It says US housing is extremely unaffordable.

One of the most unaffordable times to purchase a home since the the Great Depression. So, sorry, the great recession of 089. So, just thinking about an affordability standpoint, prices are not going to be moving up, at least in the state of Florida anytime soon. And so, if anybody's telling you that, hey, prices go up 4% every single year, it's just a total lie.

This is a blurry chart that I found of the home price index, and it's inflationadjusted. But as you can see, we have a boom bust period almost every decade or two. So this is nothing new. We see prices of real estate go up and down.

Generally, yes, they are up, but we've been in a 30-year cycle of mortgage rates coming down. And now we're starting to see an inversion point where where mortgage rates are starting to move up. So this is something that you want to keep in mind. This is not unusual for there to be some sort of boom bust process.

Especially when you have the Federal Reserve coming in and basically reducing interest rates to zero for a few years. It's not going to be surprising that you know really large assets with a high level of debt will start to blow up once they start raising rates and it creates an affordability crisis. One big issue is inventory. We're starting to see inventory across the United States for new homes starting to get back to those prior crisis time periods.

So, these are builder homes for sale and uh it's starting to skyrocket. We're even seeing some local builders stop their second, third, fourth phase. We're seeing people in phase one who bought in the last two years really struggle with uh selling their home now. They're stuck in their house.

Plus, the cost of selling their house is 6 to 8% and they're underwater. So, we're going to probably see a big wave of short sales and foreclosures over the next two to three years because frankly and at least in Florida, there were builders that just completely overbuilt single family rental single family properties, condos, town houses, and um in multif family. There's there's way too much multif family in our area. And then new one single family homes is another way to look at it.

This is from Fred. This is the south specifically. We actually have now more new single family houses for sale than we had during the prior crisis which is just an indic and this is just the beginning. So this is a really really powerful chart that comes from the commerce department.

Now we were told this lie from the media that there was a housing shortage and but when you actually look at the total number of units divided by the population there's no out there's no there's no shortage of housing at this point. So we we have enough inventory to house people. We're actually overbuilt at this point in the in the cycle. Home sales are dropping because of this unaffordable market.

The Fed, you know, raising rates, rates going from under 3% all the way up to 7 7 and a.5%. Today we're around 6.8%. But that, you know, afford it rates coming down at this point isn't going to be enough to change the market unless it comes down 2 to 3%. And the reason why is just because prices are just so high.

Insurance has come up 72% in the last five years in the state of Florida. And so prices just have to come down. It's not going to be just a function of interest rates going lower. And by the way, there's no incentive for the Federal Reserve to lower interest rates at this point in the cycle.

Contracts to buy US homes are dropping, so low sales. Can see that there. And this is hurting real estate agents. Real estate agents are making less and less each year since the boom years.

This isn't surprising in the boom bust cycle, but total transactions per agent are dropping. Um, you know, at our company, our average agent is selling 10 to 11 homes, about, you know, two to three times the number of homes as the average agent in the market. And they're they are uh continuing to produce and put the work in and build the systems and processes. The most of agents, I think it's 80% of agents in Florida are part-time.

They're not doing the work and they're starting to see their sales uh decline. You can't live off of selling four homes a year. It's really, really tough. So, they have so they're generally part- timerrs.

You can see here that the February 2025 home sales was the lowest in 14 years. This is a really crazy chart to look at. So, you can see that sales are down across the country about 30 33%. And let's see, what do we have here?

We've got US pending home sales. Another way to look at it from Double Line. US pending home sales have just, you know, fallen off a cliff. This was right when the Fed raised rates in March 2022.

Pending home sales started to just drop pretty rapidly from there because of the affordability problem. And by the way, investors who bid up the the properties now aren't buying anymore. The hedge funds stopped buying in 2022. And in Jacksonville, at least about 30% of the homes purchased each month were from investors prior to that time.

So all those properties that were getting gobbled up are just not getting gobbled up anymore. There were some crazy slogans that came out that didn't make any sense. Uh like uh marry the house, date the rate. It never made any sense because you can't refinance if rates go higher, it's probably not a good idea to do that.

Or if the pro price of the home comes down from the time you purchased it to whatever it is today, then it possible that it won't appraise for the price that you're looking to to refinance for and you might have to do a cash in refinance. So these this slogan was very went viral in 2022 2023 and it was completely misleading to the average consumer and so we are starting to see refi mortgage refi rejections skyrocket up to 40% which is just absolutely insane. We expect to continue to see this as we see people's credit start to tighten. They're loaded up with debt.

Their student loans are coming due and you know prices start to fall. They're not going to be able to refinance their properties. Let's look at the foreclosures and the FHA crisis. So, foreclosure starts are starting to spike.

I actually talked with a local attorney here in Jacksonville who said that his foreclosure demand has tripled from last year already and expects it to triple again from here. He says that banks are serious about taking back properties. The government is looking at their FHA and VA. Trump went in and gutted the heads of those organizations and is looking to see what where the damage is.

And if people aren't paying their bills, they need to start paying their bills. So all this kind of COVID programs are going out the window and and the bill is coming due for a lot of people. Meanwhile, government also has a bunch of debt that is maturing in the next 12 months that they need to refinance. So it's not just the consumer that's in debt.

Obviously, our country is at a high level of debt as well, and they need to refinance their debt. The US government interest expense is up two times in the past five years. So you can see that we're at $1.2 2 trillion in US interest payments. This is unsustainable and that's why Doge is going in there and trying to cut everything.

They're going in with a sledgehammer on a lot of things. Um and so they're going to break some things and I'm sure they'll bring some things back. But this is a really um interesting chart to to look at because it is kind of terrifying. You can see how this could snowball into a very bad crisis if we weren't able to handle it very soon.

Multif family, this is absolutely huge. There's a ton. There's $570 billion worth of debt that needs to be refinanced this year on multif family and multif family cap rates in a lot of areas has blown out 2% and they're underwater, you know, 30 40% from when they purchased the property if they bought in between late 2022 and 2024 and had a three-year term debt. So, we could see a multif family debt crisis.

We're starting to see a little bit of delinquency spike here and it's going to be really hard for the banks and interesting to watch the banks and see what they do in negotiations with these investors who purchase these multif family properties at the worst possible time that they could. Back to residential delinquency rates for FHA have just skyrocketed. They're up to actually 15%. Why?

Because when you're doing FHA, you only need to put 3.5% down to get the loan. You don't have a lot of equity in the house when you purchase it. So, if you buy it at the peak and then it falls, you're underwater. There's no reason to continue paying the property.

You rather just give it back to the bank. So, delinquency rates going up, especially if there's job loss or other issues with these people who had tougher types of credit. Usually, you go FHA instead of conventional because you do not have good credit in the first place. And so the reality is that we're in an FHA FHA subprime bubble right now with the share of borrowers debt of a debt to income ratio more than 43% is 64.47.

So the people getting these FHA loans are absolutely loaded up with debt at a high level where they they're already maxed out. So if the prices of their homes go down, they're not going to be able to to pay and keep up with their payments, especially if they lose their jobs. It's become such a big issue that they literally removed the tracking for FHA loan performance from the government website, the US Department of Housing and Urban Development. I mean, that's how bad it's getting is where they've just decided, well, we're not going to release that data anymore because we want to get a look internally on it and see how we're going to solve it.

And that's a really big red flag when the government stops their reporting on a specific issue. I did the math, by the way, in Jacksonville, and we have about 6,000 FHA loans that are originated each year. So, you can just do the math on that. If there's 15 uh% of those that are delinquent and eventually going to be foreclosed on, you know, we could see another 2 3,000 homes on the market from FHA alone that are in short sale or foreclosure type situation with the bank, which, you know, would add another 25% of inventory even to today's inventory levels.

Other Tampa. We're starting to see relocations out of Florida. So, this is a huge red flag. A lot of people came to Florida for the good weather, the affordability, everything during COVID.

They wanted to have an open market because COVID was while we were here, everybody was, you know, not masking up and just still going about their day for the most part. And people wanted to relocate here to to kind of have that type of freedom. And they did. And they also were able to work from home.

But now that CO's over and PE and employees want their employee employers want their employees back in office, they're calling people back. They're calling people to return to office and they, you know, they're or they're just getting their job cut because let's say somebody relocated from New York City to Tampa and they were getting paid $300,000 and they could buy a house here. You're not going to get another $300,000 job in in Florida. Generally, you're going to have to go back to the Northeast where they pay a lot more.

And so, if you get laid off, you're going to have to relocate back and sell your house or you're going to have to find a or you're just going to have to sell your house and downsize because you're not going to have the income to be able to sustain sustain that lifestyle. Another thing is that the Canadians are starting to sell their houses that people who have Airbnbs here are starting to sell because the demand isn't as high and it's become oversaturated of Airbnbs. So, there's a lot of different factors here. We have investors, we have international conflict, we have the reverse COVID trends that are going on here.

All while we have interest rates moving up. So, it's just the perfect storm. Real estate agents are going absolutely berserk, at least in uh the Florida markets because the sales are down to record lows. There's record number of realtors out there.

So, the competition is fierce and the listings that they do have are taking longer and longer to sell each month um that they're on the market. So again, this is really really scary out there. The Door Dash Clara deal is just a huge indication that the consumer is completely tapped when you have to take out your uh you know, buy now pay later to even just get food and groceries. You're obviously at the end of the market cycle and this is a this is a we're in a credit bubble at this point and so every speculative asset that's out there is likely going to to have a little bit of a correction here.

How high of level of correction that is, we don't know. So, it'll be interesting to see. But this was when I saw this, I said, "Ah, this is the end. This is absolutely the end of of the peak of the market." Um, and actually moved out of stocks and into into bonds.

And I'm happy that I did. I avoided that uh, you know, 15% drop in the last few weeks. It's recovered some, but my full expectation is that it'll continue to go down. So, look, if you're watching this video and you're saying, "Wow, John, the this is the real data that we're seeing on the ground.

The consumer is tapped. Inventory is coming on the market, costs are really high. The Fed can't bail us out because there's an affordability crisis. What do I do?

And the reality is uh there's a lot of things that you can do. You need to realize first is the stocks react fast to to market news. They eventually go back to the median trend line. We actually think that stocks at this point are overvalued by about 30% according to the price toearnings ratio historic.

It usually always end up back to the mean. Um either earnings go up and prices stay the same or prices come down um and earnings go up. So, the real estate is slow. We're just going to see a slow market from here moving forward.

And it's not going to be unusual to see a house be on the market for 120, 180 days and only have a few showings. The houses that are going to be that are in great condition and are well managed by a professional listing agent, a top agent will still sell. It's going to be the ones that are outdated that are going to sit or the ones that have strange floor plans or are unique. And that's why we decided a few years ago to sell all of our rental properties that didn't fit the criteria that we figured would be the hot the hottest selling properties in the future.

Also, real estate is slow in the fact that it takes years to hit bottom. If you don't if you remember 2008 2009, bottom didn't hit until 2012. So when you're looking back, it to, you know, we hit the hit the crisis in 2008. It didn't it took four years for real estate prices to finally settle.

So a lot of people will say, well, you can buy now and just, you know, wait out a a decade. You can, and that's that's a good idea if you're renting and it makes more sense for you to buy versus rent, but if you're looking to sell in the next two to three years, it's going to be a really big challenge. You're probably going to be underwater if you're buying at this point in the market, unless you've got a killer agent who's going to negotiate killer rates for you and they're going to negotiate killer terms for you. So, you got to work with the best of the best.

So, what are we doing immediately? We're doubling down on sales activities. This is for real estate agents. Double down on your sales activities, your organic sales activities.

You're cutting costs wherever possible. Nobody ever came back and said, "I wish I I would have cut less." Everybody said, "I wish I had cut more during these type of situations." You can always add back everything later. Just get to the bare bone. Maybe cut even a little bit of bone and get lean so you can extend your runway for your commissions and focus on the key price points that actually sell.

So, every time that we see an event like this, it's usually $20,000 above the average price point for your area. That's the best sellers. This because those are the homes that are in the best condition, need the least amount of upgrades, and they're still affordable for your marketplace. So, what is our plan for the next few years?

We are stacking cash. We're getting access to liquidity. We're getting creative. We're learning sub 2.

We're learning seller financing. We're getting experience in all of those. So, we're ready to scale. And then we're looking at a 10-year vision of of accumulating a thousand properties.

Now, of course, we have our private lending and our real estate brokerage that sells over 1,800 homes per year in Northeast Florida, and we've expanded very rapidly, but we're thinking very, very long term. We want to extend the way we think for instead of thinking year to year or monthtomonth, we want to say, how do I set myself up for success to ride the next wave over the next 10 years? And sure, it might take four years to get there, but I'm going to build the system now and the foundation now to be able to get there. Down markets like this is when you want to build that foundation and set yourself up for success during the next upturn.

Partner with the best people out there. This goes for if you're a buyer or a seller looking for a realtor or you're you're a realtor looking for a brokerage. You don't want to be at a brokerage where everybody's sitting around the water cooler complaining about how there's no sales. You want to get around people who are positive, have high energy, and are winning.

And that's what our company's all about. And keeping that grit and focus alive ahead of everything else versus the the noise because the noise level is going to continue to get higher and higher over the next couple months. With that, I thank you for watching. I look forward to connecting with you more.

Comment down below what do you see happening in the real estate market in the next, you know, 6 to 8 to 12 months and share what you're seeing on the ground. Awesome. And you can also subscribe to my newsletter, Think Big and Question Everything. I've got 30 27,000 followers and subscribers on that newsletter and I put out content every week.

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