The Collapse Has Quietly Begun. Real Estate Can't Survive This

Every week it gets worse and worse. The consumer is getting crushed and that is causing real estate to really struggle and it's about to get a lot worse moving forward. Let's dig into the data that's been coming out. How that's going to impact you as a buyer, seller or investor because this information is coming at us fast even with the government shutdown.

A lot of data is coming out and pointing to a lot of red flags coming up in the next year. So the first thing that we should all be concerned about just as a society is that 69.2% 2% of people are living paycheck to paycheck. And the majority of people who have already been qualified to purchase a home have already purchased. About 80% of the people that could have qualified over the last few years have already gone out and purchased a home.

So, you're fighting over buyers that are already made all of their money and they're relocating to your area or you're fighting over people who are just scraping their pennies together and being able to just afford a home for their first house, usually a dual inome family. But for the majority of people, they're priced out and they're kept as renters. And the amount of money that renters are putting paying is unbelievable. And we will show you the chart that breaks down what percentage of renters in each market are paying more than 50% of their income to rent.

I mean, I don't know about you, if you're paying 50% of your income to rent, there's no way to save for anything else after taxes and other living expenses. So this chart is a really big insight and it comes from this uh payments intelligence figures. Consumers living paycheck to paycheck by month and you can see that since 2023 it's moved up about 7% on that green line that says live paycheck to paycheck and struggle to pay bills is 26% live paycheck to paycheck without any issues and then just living paycheck to paycheck overall. It is a huge problem.

The poor seem to get poorer and the rich seem to get richer and it's compounding at a faster and faster rate in today's economy. And this is causing obviously consumer sentiment to be low. So consumer sentiment is near lowest levels ever as worries build over the government shutdown which is now the longest shutdown ever in history. Worries over the government shutdown surged in the uh early part of November pushing consumer sentiment in its lowest in more than three years in just off the worst level ever according to the University of Michigan.

So the index continues to fall and it does not look good moving forward as well. So, here's the rent burden chart I want to talk to you about. This is rent burden by state in 2024. The share of households where rent is 50% or higher of the household income.

Look at this. Florida is one of the worst for rentals. This is where we are. We're here in Jacksonville, Florida.

You can see it says Florida added 195,000 renter households from 2019 to 2023, pushing the state's median rent up nearly 500 per month during the same period. I can tell you it's way more than that. I I owned a bunch of single family rentals and multifamilies. And we raised um I mean in some cases nearly 50% of the rent.

We would have something that was 2,000 and we would move it up to 3,000. A 50% increase uh in the rent amount to the tenants. And we felt bad, but we had our property taxes increase. We had our insurance increase.

Our margins continued to move lower. Everything became more expensive. Repairs were more than 50%. We felt bad raising the rent every single year.

But we would be underwater if we didn't because frankly, a lot of the houses we owned were 1980s, 1990s. They needed everything replaced every single year, not including when the tenant moves out, you got to turn the whole unit. And it would cost another five or $6,000 to turn the unit when the tenant moved out. So, I understand why rents have gone up.

It's because everything else has gone up. Uh, you know, the cost of an HVAC unit used to be $3,000. Now, a lot of people out there selling the same unit for $5, $7,000. This goes into the cost that it takes for a homeowner, uh, a landlord to be able to rent out the units.

Now, of course, there are larger institutional buyers that go out there and purchase all these single family rentals and then basically gouge the prices up as much as humanly possible from Wall Street and private equity perspective. And try to minimize the amount that's available out there for people to buy in the affordable price points. This is what happened in Florida. We had massive speculation, a tons of new construction building and it's still going on.

So now we're in the situation where we're like completely overbuilt and we have a ton of rentals at the same time and the tenant are starting to get their power back. We really need this to happen because when you have that rent burden overall this high, it really destroys the consumer and it could turn things in a really negative way. Look at this. New York is also having issues with rent burden.

California seems quite obvious. Uh Nevada, Oregon, uh and you'd be surprised to look at Texas. Texas is doing a little bit better. But it is interesting that Florida is indeed the the highest on the entire chart.

And the majority of the growth that's been happening across the United States in terms of personal spending by income group, this is happening by the top 20% of income earners. Now, this is uh usually baby boomers are driving about 50% and older of the economy as well. So, a lot of people, you know, a lot of the boomers are getting priced out of real estate, too. If they did not get in on the massive boom in the price appreciation of housing, they were left behind as well.

So, it's it's pretty much everybody who did not own assets. It's not an age demographic thing, although the age demographics do determine who owns what because of their starting point. It's who was an owner and who is not an owner. And if you're not an owner of assets, it's a really big problem.

And if your income isn't in the top 20%, it's a huge problem for you because inflation in a lot of cases is outpacing your wage growth. And this is causing the wealth gap to accelerate. So net wealth of the top 1% continues to just skyrocket while the net wealth of the bottom 50% remains kind of low. And we're starting to see this disparity continue to frustrate people.

You can see a lot in Gen Z. They're starting to get upset that the system feels unfair. The government continues to print money, spend money. Things don't seem to be getting better.

It just gets more expensive. More money just ends up accumulating at the top. And it's become a huge problem for the housing market because you're not going to be able to have the bottom 50% be able to purchase a home. And it's slowing down the number of sales.

And the Fed is is acknowledging this and economists are acknowledging this. Fed cuts may widen the generational wealth gap that we're already seeing. Lower interest rates can speed up economic growth and lead to an increase in hiring, but they can also be associated with rising levels of wealth inequality. Well, you know, Trump has said many times he's going to replace Jerome Powell in May of next year as the Fed chair and he put somebody in there who's going to slash rates as low as humanly possible.

If that happens, we're going to see a massive amount of inflation again. It's just going to hurt the middle and bottom and it's going to drive more wealth to the top. If you are concerned about this, you definitely need to start buying real assets and start coming up with a game plan now. But if that actually happens, we could see this massive run in the in the stock market.

And I don't think real estate will do as well because who is the next buyer who hasn't purchased already that is able to purchase and actually be able to finance it? And we've done an analysis even if rates go down to 2.5%. That's not low enough. Prices have to come down.

Uh and so we need the Fed to stay out of all these industries and stop manipulating them. We're going to show you a chart that says that anything that the federal government touches or influences, the price of it skyrockets. Anything that they leave alone, the price drops. It's pretty sad that this is the case, but the government continues to stick their hands in places that it really shouldn't be when we'd be in much more healthy economy for everybody if they stopped intervening in the marketplace.

Right now, we're seeing a huge problem on the employment situation. It gets worse every single month. Layoffs for any October is the highest since 2003. This comes from the Challenger Gray and Christmas survey.

I mean, this is not looking good, guys. We're looking into a situation where we could have some sort of '08 crisis or even worse, my prediction is that we're going to see a 31 to 42% decline from the peak that we had in home prices in October of 2022. That was truly the peak. And these job cut announcements are coming from warehousing and technology sectors led last month's surge.

Warehousing, I mean, they're starting to use robots. I don't know if you heard about what they're doing at Amazon, but they're using robots now. Technology sectors are laying off their middle management, upper management, trying to replace people with AI. This stuff is very real.

It's coming through. I know a lot of people say it's all just talk. It's not just talk. The AI employment issue is going to turn a lot of people into being becoming way more productive, but it's also going to replace a lot of people or people are going to do their self-ressearch and do the work themselves versus hiring other people.

So, everything will change. Now, this is the chart I want to talk to you about. It's the government manipulating everything. Look at this chart.

Price changes from January 20, 2000 to June 2022. It's more expensive in red and less exp more affordable in blue. Look at hospital services. I don't know about you, but if if you get your insurance from the exchange, which I do, um, and I have done it in the past, I mean, the price went up 32% year-over-year for me, and you're basically covered for nothing.

It's like catastrophic insurance. A family of five will cost, you know, my family about $40,000 in premiums and deductible. And we usually hit the deductible. I mean, with three kids, something comes up something comes up with me and my wife and we hit our deductible.

How can you afford $40,000 just for the insurance and deductible premium? I mean, it's it's unbelievable. College tuition, right? The government and um putting their nose into that tuition and fees.

It's unbelievable. I came out of college with $80,000 of debt and that, you know, spent two or three years getting that paid down. College textbooks, why are college textbooks more expensive? That makes no sense.

Medical care services, child care is insanely high. I would love to see that go lower. A average hourly wages, it's it's good to see those go up. However, they have to in order to keep up with inflation.

And then food and beverage and housing. I mean, housing is the number one issue that we see out there. Food is definitely more expensive. Of course, you can go and make food at home versus going out.

Um, housing is one of the number one issues and hospital services or we'll go over there's a lot of default coming out on on a lot of the other things, but look at all the things that the government doesn't intervene in. You know, new cars, household furnishing, clothing, cell phone services, computer software, toys, TVs. This stuff is going down. Looks like the services are going up and then the products are going down.

Uh, and we should actually be seeing services move down. Unfortunately, it shouldn't be moving up this much. It's just unfortunate the government keeps keeps putting their their head into these things. And of course the grocery prices, this was fun this week, you know, Trump saying that the Thanksgiving meal is actually less and then pulling back on that from the prior years.

And it's just because they removed four products from the actual Thanksgiving meal and instead of using brand names, they use their own in-house name. Great value. So the reality is, I don't know about you, when you go to the grocery store, we go to Target, whenever we see the food, we're just like blown away by the prices of the produce, meat, meat, and dairy, and we don't drink alcohol or anything like that. But I'm surprised actually alcohol has gone up so much.

I know a lot of people are in the GLP1s and things like that, but grocery prices are really high. They've reached the highest records in 2025, and we could actually see them go higher, unfortunately, from here. And that will obviously impact the the middle class. Mortgage payments because rates came up, right?

So, in 2022 of March, the Fed started raising interest rates. This caused mortgage interest rates to skyrocket and be influenced by that. And we see basically it went from a $1,200 monthly payment all the way up to 2,000 for a median home. And and I can tell you that type of increase in such a short period of time has priced out a ton of people.

And now, unfortunately, the people who paid the high price in 22, 23, 24, and even today, a lot of them are underwater if they didn't negotiate correctly or uh put enough of a down payment. They're way underwater in their property, especially if they're in a new construction community. That's where we're seeing the majority of the pain in the market today. And this is the most unaffordable market that we've ever seen in decades.

This is how much uh money Americans need to afford a home, right? So the the median income is $84,000. Here in Jacksonville, it's only $67,000. So it's actually less.

And the income needed to buy a house is 110. Locally, it's like $120,000. So again, this is going to be a dual income family or somebody relocating who already has money who's going to be the buyer of a property. Or it's going to be somebody who needs to sell their house and then they want to buy, but when they sell, they have to give up their low interest rate that they refinanced in 2020, 2021.

And they hate to do that. They absolutely hate to do that. We're seeing a lot of pain also come through now that these efforts to remove the delinquency from 2020 2021 time period has now come up and they left that happening for periods a year. The government just manipulated everything and said, "Look, we're not going to have a lot of delinquencies.

We're not going to default on people. People can stop paying their student loans, etc. Look at this transition in serious delinquency 90 plus for student loans by age. And the blue line is is crazy to me.

That's 50 plus. So people who are 50 plus years old, 20% of them are defaulting on their student loans right now. People 40 to 49 are defaulting on their student loans right now. This is insane to me.

I think we're going to have some sort of crisis in student loans just like we are in autos. And we're already seeing a crisis in credit cards where we're seeing massive amount of delinquencies in credit cards as well. It seems like nobody wants to pay each other back. We're seeing even lenders, private lenders that I'm talking to, they are having issues with their borrowers paying.

They're having to take back houses because they ran out of cash to fund the interest payment. So, this is not just with the 67 69% of people who are living paycheck to paycheck. This is with investors, too. Things aren't looking very good for the future.

And this is a huge warning to the marketplace. The median age of the US home buyers since 1981. The median age of all buyers is 59 years old, a record. The firsttime home buyers are 40 years old.

These numbers are devastating for families because usually people want to have kids, get married, and buy their first house. And I know a lot of my friends, they're opting to not have kids. They're saying it's too expensive because it's too expensive to live and they can't afford the child care, the lifestyle changes, all of these factors. And they're delaying either to the point where they can't have kids because they're too old or they're just opting out of doing it, which is causing a huge demographic shift because of this affordability crisis that we're in.

And so we can see the repeat buyers are 62. Uh this makes sense because they bought their house originally and now they're selling and then they're buying again. And usually these are the baby boomers who control but baby boomers are older control the majority of the real estate assets in this country. So that makes sense.

And of course in commercial real estate it's bad. Uh especially C-class multif family uh the rents are going down and it's it's not looking good. But also for office commercial real estate this is like the highest level ever of office delinquency rates since the great financial crisis. This is what we're starting to see.

We're not in a crisis right now. The stock market, crypto, everything's near record highs. Although we are having a sell-off right now, a very brief sell-off. We'll see what happens.

You know, obviously, it'd be great. Like, I think the stock market is actually propping up the majority of the housing market right now, especially for the cash buyers because they feel comfortable. The stock market's roaring, their portfolios are looking good, they're okay going out, spending a little bit more money and that type of thing. But if the stock market starts to roll over, that will really impact the confidence in the housing market.

But obviously, if you're an office investor, there's a lot of reports going around. People are buying these office buildings and then years later they're worth 20 cents on the dollar of what they purchased it for. And so it is financial crisis already for office and for other asset classes, you know, like the car market already and the market's all, you know, still at all-time highs. We're also seeing a tale of two markets, right?

So the north northeast is still doing pretty well. It's really just the south that's really hurting. Uh Florida, Texas, we're starting to see some issues in Colorado and um Arizona and areas like that. It just depends.

This is the average days on market, which is an indicator of what it is going to be, but we can see every single month more days on market, more days on market, houses are sitting for longer, and so the market is cooling off in the South. I do think it will impact the Northeast over the long term. Watch out. I think Q2, Q3 of next year, you're really going to see the Northeast start to feel what the South has been feeling for the last two years.

And unfortunately, the government's playing right into it just like they always do. They're removing the minimum credit score requirements for uh DU underwriting. So, they're doing basically their automated underwriting system. They used to have like a credit score of 620 to be able to do that.

The credit score is still considered. They're just changing the rules on how that they're going to implement that. And so, this is bad. Anytime there's loosening of regulations, it just reminds you of 2008.

Hey, like if we can't if if nobody's buying a house, let's just make it easier for them to buy a house. This is where you get into more delinquency, more distress. You're at the peak of the market and we should actually be getting more strict on our appraisals, more down payment, all of these type of things because it sucks. But the the same people get in this cycle of purchasing a house at the peak of the market every single time and then they get screwed over because they put a little bit of money down and they buy at the highest price uh possible.

And unfortunately, these are generally people with a lower credit score that got hit the last time around and we hate seeing them get caught up in this. So, please be careful if you're purchasing a house today. You need to get in with a top real estate agent if in your market who knows how to protect you uh and make sure that you're getting the best deal humanly possible if you have to buy. In some cases, it's a lot better to rent in tons of markets.

Reach out to me if you need help with that. I'm more than happy to to assist you in getting a top agent for your local market. We're seeing auto repossessions. This is a huge red flag, right?

So, people stop paying their credit card, then they stop paying their automobile, and then they stop paying their house. Uh, and so auto repossessions are increasing. So, people are stopp paying their autos. We're almost near the great financial crisis level.

There actually says vehicle seizures are at the highest level since 2009, and we're just getting started. So this is a really scary chart and just shows you some of the underthewater stuff that's kind of happening behind the scenes withricolor first brands and uh companies like that in the the used car market and the lenders and things like that. It's just not looking good for the future and prices in rent already are starting to decline and we expect this decline to continue as we see a lot of owners who are accidental uh rental owners because they tried to sell their house, they couldn't sell it, they turn it into a rental. We're seeing a ton of rental supply come onto the market.

So in the red is the home price growth. You can see that that was insane at 17.1% uh during the ZER period and now it's all the way down to 1.5% about to go negative. Rent growth is slowing from to 3.2% in our market. We're already actually because this is nationwide uh from Robert Schiller and BLS the Bureau of Labor and Statistics.

If you actually look at what's happening locally here in Florida, we're negative on home price growth. We're negative here on rent growth. But you can see it's starting to decelerate from uh from a national point of view as well. But it gives you kind of a great chart here on what where the boom periods were.

World War II, we had a boom period. The 1970s inflation period, the late '9s, uh mortgage bubble. So the there's certain periods of time where things just seem to massively inflate and then boom, there's a correction. 8% 8% 8% across the board.

And it looks like we're about to probably have another one of those corrections in the next few years as this plays out. Doesn't happen overnight. It takes time. And one thing that we're noticing is, you know, even with the last uh Fed rate cut, we're seeing mortgage rates actually still move up even with the start of the market correction.

The rates moving up and staying elevated. We're obviously seeing more sellers who want to sell, less buyers who want to buy. And so we're seeing this disparity. We're clearly now in a buyer market.

Buyers have control of the marketplace. There's more than 500,000 more home sellers than there are home buyers. And we expect this trend to continue going into next year where we're going to likely see a lot more distress come through the system. And sellers are right now locked in at 3 to 4%.

This is why we don't see a lot more people selling their house is that everybody refinanced who was in 2020 2021 and they got these low rates in the twos and threes. Why sell that house if you don't have to absolutely do it? And so only 11% moved in 2024. This was the lowest mobility rate on record.

And we expect this to continue because if if you have to buy reby a house, you know, at 6 7% interest rate and you're not getting the price you need for the house that you're currently in to get the down payment for the next house, then of course you're just going to stay put and and figure out how to make things work. So many are trapped in their homes unwilling to trade in a low uh mortgage rate. And this is what part of the reason why we're seeing the number of existing home sales just drop dramatically and we're just grinding along the bottom. You know, just as bad as the great financial crisis already because of this mobility slowdown.

It's not that the demand isn't there for these buyers and sellers. They want to move. Just the economic conditions for the buyers to buy is not there. And the sellers who want to sell and then buy, they can't move because they got locked in.

So, we're really seeing a lock in effect. Now, I want to know from you. Do you think that the stock market, if it actually breaks, could crack the housing market as well? Because I think one of the reasons why the housing market has kept up a little bit more than it probably should is because we're seeing record highs in all of these other asset classes and the fear is less.

Once the sentiment comes in, because sentiment drives real estate, just like every other asset class, once the sentiment comes in where, oh, I need the money. I'm not going to go buy and make that big purchase. People get fearful. They wait.

They think prices will continue to fall. And that becomes a self-fulfilling prophecy. How far do you think that prices will drop in the next 12 months, in the next two years? Again, this does not happen overnight.

You're not going to see a decline in one year of 20% on housing prices. That just doesn't happen. It goes slowly moves every single month. Right now, we're seeing about.7% decline every single month over the past few months in housing prices, right?

So, it's a monthly thing and it could play out over three to four years. Love to hear what you think. As always, you can go to my Substack where we talk about things we can't talk about on YouTube. Would love to hear from you.

And you can also follow me on Instagram or X. My information is all down below. Thanks so much for watching. And see you next time.