Powell Just CRASHED the 2025 Housing Market

Well, the Fed came out and there's still no help for housing as the market continues to deteriorate. Every single week, we see worse and worse data out there. Let's jump in and see what you need to do with your property, your investment properties, if you're looking to buy right now. Find out if it's a good time to buy or a bad time to buy.

The data is going to tell you everything you need to know in this video. So, let's jump into this. So, the Fed Fed update, right? So, the Fed holds key rate steady and still sees two more cuts by the end of the year.

So this is nothing new. What is new is that seven of the 19 participants indicated that they want no more cuts this year, up from four in March. So more of the Fed participants are basically saying they don't want to see rate cuts anymore. And there's a bunch of reasons why that is.

And broadly speaking, the economy grew at a solid pace with low unemployment and somewhat elevated inflation is what the committee said. So they still see a solid pace. They think the economy is just hummingong along just fine. The reality is the stock market's completely disconnected from Main Street.

If you feel that, drop a comment. We're seeing it left and right every single day. Our buyers on the street, they don't have enough money to even pay for an inspection or an appraisal in listing agents are are stacking up inventory left and right. And so, the Fed is not doing any housing favors with this move today.

So, here's the summary. Fed leaves rates unchanged. The FOMC median forecast still shows a 50 basis point of rate cuts in 2025. That is not enough to change anything of for the direction of the housing market.

And the Fed holds a benchmark rate in the same range that 4.25 to 4.5 target range. And here's the thing, the Fed lowered its GDP estimate a lot to 1.4% and then lifted its inflation expectations to 3%. Right? And their target is 2%.

So they are saying, "Hey, the economy is still doing just fine. We don't need to do any rate cuts and we're absolutely not going to do anything for the housing market, which is starting to crack." So we've recently seen the oil prices jump. Oil is a key factor to almost every single aspect of everything in production that you buy. It's in everything.

And so because of this war between Israel and Iran, the conflict that's going on, the US might get dragged into it. There's been speculation just in the last few days that has caused oil prices to skyrocket from, you know, $60 a barrel to 74. And if that continues, that is a big reason why the Fed might not want to cut rates because that will impact inflation. It'll drive up the prices of a lot of things that you purchase.

And so, if they cut rates, they don't want to have a situation where there's tons of inflation going on throughout the throughout the economy. We're already at super super high levels and it's disrupting a lot of families already. They don't want to make things worse. What happened to the 10-year Treasury?

It's been rangebound for the last few months. Um, kind of bumping between 4.6 all the way down to where we are today, the four 4.36 and then it bounces up and down. We're expected to be rangebound, continue moving forward until we figure out what's going on with the big beautiful bill and the spending there. We'll see how the, you know, bond vigilantes deal with that situation.

But ultimately, you know, if rates remain elevated, the housing market's not going to be able to recover. And that's that's the ultimate problem here, especially in specific areas that benefited Florida and Texas in from that time period. So, the spring selling season started off really weak for real estate. It's weaker than previous years.

As you can see, the red line 2025, this is from home builder traffic, and we're watching the home builders very carefully. They collect a lot of data. They are struggling right now. The consu the reason for this is that the consumer is maxed out.

The personal savings rate is at at one of super lowest levels out there. There's a lot of pressure on the consumer. They're running out of cash. And that's important because the home buyers now are 38 years old and the recent college graduates, the first-time home buyers, there's the unemployment rate is starting to move up.

So, I hear a lot of graduates out there saying, "Hey, it's harder to find work than we've ever seen before." And it's really strange. Are they getting replaced with AI? I'm not really sure on the details of this of why exactly recent college graduates are having a harder time or they're just coming out into a harder market where companies are just being really specific of who they're looking for. But either way, you know, these home buyers in the 20s and early 30s are having a really hard time affording the payment required to purchase a home today.

And that's why the median age continues to move up every single year now to 38. Used to be 30. There's job cuts in the service industry. This is massive.

You can see this spike here. There's significant service slashing. This comes from Challenger Gray and Christmas. And the recessions are shaded.

This is the type of activity that you would see in a recession. Temporary health services for employment dropped 21%. This not this has never happened outside of a recession. So we are seeing all of this really interesting information come come along right at this time where the Fed's saying we're not in a recession and the market's actually going along just perfectly.

Well, who's right? Drop in the comments who's right. Is the Fed right? Everything's coming along perfectly or is the market really in trouble and they're ignoring the underlying data.

Now, there's job cuts again are at recession levels here. So, let's take a look. In 2025, US-based employers announced 696,000 cuts in the most recent 2020 crisis, up 80% from 2024. This is the second largest count for the first 5 months of the year since the financial crisis.

So, the US jobs market is deteriorating very quickly. I can tell you I personally know people who are losing their jobs left and right. People who are business analysts, people who are making, you know, 60, 70, $80,000 a year at their job, they're getting laid off and they're not able to find work as quickly as they were previously. And this is a massive problem for the economy.

And obviously, these people, if they don't have a job, they can't purchase a house. The South is just getting smacked around. This is credit card delinquency rates. This is from Wallet Hub from January.

You can see these areas that benefited again from the from the stimulus during 2020 to 2021 in the south specifically. They're really hurting with credit card delinquency rates and those rates aren't cheap. More than 20% on the delinquency. The other thing that we want to look at is the student loan payments for the big beautiful bill.

It's not beautiful as Elon said. It's my opinion. You everybody can make the up their mind for themselves. But this bill really helps the top, you know, 5% of people out there income earners and and doesn't do much for the bottom.

So, let's see what it does. There's no pause for job loss. There's no forgiveness after 30 years. The bill changes everything and not in the borrower's favor for student loans.

Student debt delinquencies jumped all the way to 7.7% in first quarter. Over $2.2 million, $2.2 two million saw their credit scores drop 100 plus points. This is really important because your credit score goes into if you can purchase a home or not. So, if they drop below, you know, the 580 mark, they're not going to qualify or they're going to qualify for private lending, which your rates will be in the 14 15 16%, you know, and if it drops 100 points and you, you know, get below basically that 740 threshold, then your rate will be higher as well.

So, there's also going to be wage garnishments are going to resume this summer. Paychecks will be seized and now it looks like they want to cut the court on future borrowing, right? So, no pauses for job loss, no forgiveness for 30 years, subsidized loans eliminated. So, this risk of default right now there's 50 million, you know, stu people with student loans that are at risk of default and it could easily become 10 million and that is a generational disaster incoming.

These people are just completely filled up with debt and there's no out for them and it's impacting their debt to income ratios and their ability to purchase. We're seeing this every single day. We'll see somebody get denied. I mean, we have a loan company as well, so we we see people get denied simply because, you know, their student loans, you know, they they didn't pay.

And and the worst part about it, too, is if they have a parent who co-signed for it, their credit's getting impact, too, if they didn't pay. So, if this big beautiful bill passes, I think it's going to be really painful for the real estate market because people will begin to, you know, continue to have even a worse situation with their credit being hit. The income to buy a home is just absolutely insane. This is the annual household income required to buy a home.

This is coming from realtor.com, right? They're supposed to be bullish on real estate. They sell leads to real estate agents. When you go on realtor.com, by the way, what they do is when you click contact agent, they sell your contact information to several agents you've never even talked before.

Most of the time, they're not even the listing agent. So, that's what happens. Contact your agent directly, please. You know, go research one of the best agents in your marketplace.

You need help with that, let me know. I I'm more than happy to get you in touch with somebody who is actually knows what they're talking about. But realtor.com put out this information. It assumes a 30-year fixed mortgage, 20% down payment, and housing costs of less than 30% of gross income.

And it's saying there's a 70% jump in what you need to make from April 2019 to April 2025. That is a crazy statistic. And we did an analysis on this on one of the previous calls. Investors are jumping out of the real estate market, right?

We're seeing basically 60% decline from the peak in the number of properties that are being purchased for investment purposes because they no longer underwrite for cash flow. You know, a lot of them are underwater, three four $500 a month cash flow. A lot of the other ones are doing it for flips. There's always going to be a flipping market regardless of what's going on.

There's going to be somebody distressed who wants to get out fast and is willing to take a haircut on their property. And we're seeing less and less of those type of deals go on until we see sellers capitulate, which we expect will happen, you know, October 1st, November time frame. We think that sellers are going to continue going to start capitulating and start trying to basically get out of a falling knife situation. Hey, I'm willing to take a haircut now so I can avoid more pain later by holding on.

Prices, the real issue that happened was prices skyrocketed. Look at this. 68.7% 5-year home price gains since Q12020 to Q1 2025. That is absurd.

That is crazy type numbers in such a short period of time. We're way above trend line for those numbers and that's why we need to have mean reversion to come back down here. So this is comes from NAR analysis of the FHFA data and the inventory because prices are so high the inventory is starting to stack up right it's an affordability crisis so this is the one-year change of active inventory for sale 32% up in Florida 30% you know in Texas look at look at these other areas you know 51% in California up 51% so you can see the whole country is completely different that's why you hear people say different things I'm talking about Florida specifically We have a lot of info on Texas as well. We're right here in Jacksonville, Florida.

If you can see that active listings are jumping and just skyrocketing. This is from Red Fin versus prior years. This is obvious and that's why prices are falling. People are doing price cuts left and right.

This information comes from Alto's research. We're down 1.2% you know since basically the peak. So 11 states have home prices at or below 2024. This is pending sales price, single family.

And of course, that's pending sales. That doesn't mean what they're actually going to trade for. Usually homes in Jacksonville are now, I think it's like a 94% sale to list price ratio, which means if you list it, you know, at $200,000, chop off 6% and that's what you're that's what the price is going to be for when it goes to sell. And that's what it is currently.

And it's getting worse every single month. And of course, that leads to the price cuts that we just talked about, right? So Florida's number two, listings with a price cut. This is for home price cuts surge as sellers overestimate the market.

Sellers are still pretending it's 2021. Who has a seller that like that, right? They pretend it's still 2021, 2022. They don't realize that the market has changed so rapidly.

And one of the scariest thing is that the builders continue to build inventory even with migration down 80% to Florida. And so Arizona and Florida have led the nation in price reductions to get competitive, to get to become affordable again so people can actually live here. And this is what we're talking about. This chart is mindboggling to me.

This is the cost of buying a house with a mortgage in the United States. This is the key chart of this entire presentation. Monthly payment to buy a house including mortgage tax insurance. And this comes from Fred St.

Louis in Reenture. You can see, look at this. Even at the peak of the great financial crisis, it was 1,500 $1,600 to as your monthly payment. Now 2700 2800 we are in such a crazy period of time caused by the Fed.

All of this was caused by the Fed. In our last video, you should go watch that too. It explains why inventory may come up 33% from FHA and VA foreclosures that should have come to the market that didn't because of loss forbearance programs brought around in 2020 2021 from the government to prevent foreclosure. Now, all of those that are delinquent are coming onto the market by the end of this year, next year, and the year after that as they process through the system.

But this monthly payment thing is just absolutely crazy. And if the rates don't fall like we're talking about today, if the Fed's not going to reduce rates on the short term of the curve, it's not going to impact the long-term curve. They're going to let the mortgage back securities roll off their balance sheet. There's no help from the Fed in regarding to housing.

So, they're okay with a situation of, hey, deflating the real estate market. Now, people are buying new homes over existing homes. All right, so this is average price to income for new homes versus existing homes. Why do people prefer the new homes?

Well, they're getting massive incentives. This comes from LAR. This is LAR sales incentives on homes delivered as a percentage of revenue. And you can see in Q2 of 25 13.3% which is a really high number.

It's basically the incentives that they had in ' 09 and 10 over here. And it's going to continue to go up. I mean, they used to not pay realtors anything. I If you're a realtor listening to this, remember when LAR would just be like, "Sorry, you can bring a buyer, but we're not going to pay you." And now they're begging people and providing 5 6% commissions on some of their communities to bring a buyer to their community.

They realize they actually do need the real estate agent and they're providing a ton of sales incentives. They're buying down interest rate. Usually, it's a payment problem. So, what they're doing is they're buying down interest rates from 7% all the way down into the fours to make the numbers make sense for the consumer, but they're still trying to sell it at that super high price.

They would rather sell it at a high price with a lot of other incentives so that way they can keep the price up for all the other inventory in their community because what they don't want to have is this spiral downwards of their sales price, which they're going to have anyway. They're trying to avoid it and praying that the market comes back. It's likely to get a lot worse before it gets better, but it's the best strategy that they have because once one of them sells and it's a comp for the other properties, they can't sell it any higher than that because of the appraisal issues, right? Because most people purchase with a loan and the bank is going to require an appraisal.

So, they're offering massive incentives, sometimes $50, $60,000 to buy down the rate for 30 years, which is just crazy. And home builders are hurting. This is the index for the National Association of Homebuilders market index. Right?

You see there's not a lot of showings happening as well. And the site builders I'm talking to, you know, the site agents at builders, they are they're having a really hard time, right? A lot of re retail real estate agents are dumping basically out jumping out of the retail market and going to be a site agent because they can get some sort of income as a salary, but then they're not selling any homes there either. So, we're seeing, you know, a really, really challenging time here for the home builders.

We expect this to continue. When you look at home builder stocks, look it up. Go look up KB Homes, all these other companies. They are just getting crushed.

And that's why existing inventory is skyrocketing, right? Because if all if the consumer wants new construction, right, obviously they don't have to do any of the repairs. They can buy, you know, everything looks really nice and new. They can get massive incentives.

Why would they buy existing inventory? This is a huge problem if you're not in a super A-class area with high demand and not a lot of options. So, this comes from Morgan Stanley. Existing inventories growing at their fastest pace since the great financial crisis.

Absolutely crazy information. And this is a really interesting chart that shows, you know, what is the percentage of your household income is the mortgage payment. It used to be back in the day, a long time ago, back in the 2000s. It was all the way down I believe from my understanding about 10%.

It moved to 2016 to 15%. Now we're talking about 25% 26% of your income is going to the mortgage payment. So people just are having a really hard time. It's again an affordability crisis.

This has led us to have the coldest May since 2020 and 2010. Here's the number for it with a this is the monthly shift in home prices only up6%. You can see the the prior years obviously the crisis years even 2007 it was up 0.5 right as before and then 2010 it c it came up 6 we're back down to that 6 level and it is cooling off from prior years very very rapidly we expect us to go very negative starting in August when school starts usually from August until November price you know prices just drop and then again busy season is March through July and if you're a buyer and I'm looking at this chart wait until the end of the year. Wait for seller capitulation.

Work with a top agent who can get you massive discounts on purchasing the house when they know how to negotiate in this type of market. Get in touch with me. I'm happy to put you in touch with people. And ultimately, at the end of the day, it's about the consumer and the US consumer's financial situation is getting worse and worse.

And so, this is the University of Michigan current financial situation compared with 5 years ago. It's getting ugly and we think it's going to continue to get uglier as things move on. The Fed's not going to help the consumer either. Private equity performance sucks, right?

So depending on your vintage year of when you got in, a lot of people who, you know, who bought 2020, 21, 22, 23, they had money flush. They're not getting any distributions. And this is investors haven't got all their cash back since 2016 vintages. And it's we expect this to continue to be an issue.

A lot of this stuff was just in the bubble, right? The Fed created another bubble as usual and it's slowly letting the air out and the investors at that time who bought at the wrong time are getting punished for those purchases. One other thing that's really interesting to look at is the stock market because the stock market is crushing it, right? We had scare a scare there with the tariff situation and now the stocks are roaring back.

But this is the Buffett indicator and according to Buffett indicator stock market is significantly overvalued based on today's updated data the market cap the GDP is 200.8. 8%. It's almost near like an all-time high. So, this would be an indication that you need to be careful, right?

Obviously, real estate market and what drives real estate market is consumers who need to purchase and get a payment generally, right? Institutional buyers for real estate are only about 3 to 4% of the market. But when you look at the stock market, there's 1% that control 60% of the market, right? It's the wealthy who control the stock market and it's retail people, the bottom 80% of the country that really drive the residential side of the real estate.

So, they're different markets. There's different buyers for these things and frankly AI is real and there's a lot of productivity growth and growth for companies and profitability with that type of disruption. So, we could see the a disconnect between the stock market and the real estate market where stocks continue to move forward and real estate just really suffers. That is a very likely possibility.

And the worst part is is that the workforce growth has slowed drastically, dramatically, and is fueled by immigration. But if we have an immigration policy where we can't let people in, then we're not going to have workforce growth. And that's population growth is one of the number one factors for housing. And if that doesn't do well, then frankly, the long-term benefits of, you know, owning real estate and seeing it appreciate every single year goes out the window.

Now, why has real estate done so well the last 40 years? And I'll bring another chart in on this, but it's basically because the interest rates have gone down for 40 years, which made the payment more affordable, which allowed the prices to go up. Okay? So, right, we used to have 20% rates and 15% rates, then 10%, 5%, then zero, and now we're back up to 7%.

That's why you're going to see the correction happen. And a correction usually happens 8 to 12 months after rates move up. We're past that period, obviously, because it's 2022 when the Fed did all that. But now, since we're holding them steady, we're going to see these prices come back to to mean reversion.

And as a final comment here, if you're a real estate agent, you want to look at this. There's so many real estate agents out there. There's about 500,000 more real estate agents than there really should be. When you look at these numbers, this is the red line is the average NAR membership, right?

And obviously it's it's dropped just slightly, but the units sold versus the membership or the units per agent is not even one. Not even one. Look at this data. Units sold, right?

So it dropped from basically a little bit over 6 million units. This is across the US, below 4 million, but the number of realtors stayed the same. So we're about 500,000 agents over I don't know how many will leave the industry. It's cheap to have your license.

There's brokerages that collect agents who do zero to one units per year and that's all they really focus on is those type of people and they just collect them at their brokerage and make it affordable for them to hang their license. There's nothing wrong with it except for the fact that if you only do one sale per year, you're going to mess up the deal. And that's horrible for the industry. It's horrible for the buyers.

It's horrible for the sellers. We want professionals just like every other industry. And I think the industry can do better and we should do better. And real estate brokerages should think more about how they present themselves to the public versus just trying to get a quick buck by accumulating all these zero producing agents.

Um, so look, I'm I'm in the 1%. I don't think like everybody else. I'm feel like I'm the only one who is sharing this information about how bad the market really is and what is what we're likely going to be heading into. We can't act like the 99% here with just sticking your head in the sand and going to do something else.

We want to find a path forward to have massive success for our real estate agents, for our investors, for everybody in our ecosystem. There are so many opportunities coming down the pipeline. The Fed is not helping us today. That will create likely seller capitulation, which will give us an opportunity to be able to pick up properties at a more affordable price.

That obviously helps the seller move from where they are today to somewhere else. But look, if you're an investor, I think the time period to to look at real estate is going to be the next 3 to four years. Real estate is slowm moving. It's an liquid asset class.

It's not like the real estate market that's going to change overnight. So, if you can be patient and collect your chips and be really thoughtful and careful, I think you're going to have a really successful business and that eventually the market will come back and it's going to be just like it was before. Hopefully, not so crazy. We don't need this type of growth where it's 10% growth every single year for 5 years like what we just had.

Just a normal market environment. Thank you guys for watching. Really appreciate it. If you need anything, follow my substack below.

We talk about things that we can't talk about on here. Love you guys. Thanks for watching.