The Housing Market Is WORSE Than The Great Financial Crisis. Here's Proof

the consumer is stressed and it gets worse every single month. There's data that's coming out showing that this is impacting the real estate market, specifically residential sales where we're just grinding along the bottom and the lowest number of sales for a very long time, even worse than the great financial crisis. Let's dig in why this is happening, what's happening with the consumer, and what this could mean going into the end of the year in our prediction on how much home prices will fall from now until the end of the year. So this is the crazy part about it is that consumers simply just don't have money.

The middle class is getting eroded away very quickly and they're maxed out with tons of debt. So you might see charts showing that you know 40% of properties are completely paid off. Yes, that is owned by this top 10%. The bottom 90% are absolutely struggling in this economy.

If they don't own stocks, they don't own assets and they're just getting into the market right now. They have been completely left behind. So, this is from Reventure. It's income and home price growth from 2019 to 2024.

So, look at this. Median household income, a 5-year change went from 68,000 to 83,000. Now, this looks great on the surface. A 21.9% increase in in income.

Phenomenal, right? But look at what the monthly mortgage payment and we live in a payment economy, right? Mostly everyone finances everything. If you think about your car, you think about your house, you think about other assets that you buy, your credit cards, everything like that that you use, but your monthly mortgage payment jumped from $1,400 to $2,800 per month.

And that's nearly a 100% increase in the mortgage payment just within a 5-year period. So, if you are a young buyer looking to purchase in today's market, it is so much more expensive relative to your income to be able to purchase a home. Now, this is holding back the entire real estate market. We're calling we hope that prices come down so that the next generation can get into buying their their real estate.

Will it all depend on what the government decides to do from here and if they're going to prop up and bail out basically boomers or people or people who own a bunch of real estate or if they're going to let the prices actually adjust down to a market rate and let the economy be a real economy that's unmanipulated? We don't think that's going to happen. We think the government will continue to push and pull on the housing market, but the reality is I'm not sure there's much they can do at this point to avoid this type of spread when you're looking at those numbers over there. I mean, that's insane.

That's absolute insanity. So, either household income has to come up or prices have to come down. I don't think manipulating interest rates going to be enough. Now, this home price to median household income ratio is worse than the great financial crisis.

So, I see a lot of people out there saying, "Oh, it's not worse than the great financial crisis." Well, it depends on where what data you're looking at. If you're looking at number of sales, yes, we're getting near that point. We're actually worse than the great financial crisis. If you're looking at inventory for new homes in the south, yes, we're worse than the great financial crisis.

But the worst part of everything is the affordability crisis right now is worse than what happened in since the great financial crisis. So, when we are looking at this chart, it is just terrifying. It looks like we had a little bit of a pullback because rates came down and then, you know, rates moved back up. Recently, we saw rates move down a little bit, but now again, they're starting to move back up.

So, it's been very volatile as the government continues to put political pressure on the Fed to move in, you know, short-term overnight borrowing rates down. Uh, but that does not necessarily influence or impact the long-term rates. Actually, it could cause long-term rates to move up because of fears of inflation, which is what we've seen in the last 24 hours. So, cheaper to rent than to buy.

So, this is the other thing you need to take this into account. Yes, there are full communities that are being sold to hedge funds for build to rent. Sure. But those buildto- rent communities still have to rent out those units and that rental supply is coming on and it's driving rents lower in the south.

So look at this. It says rental affordability is superior to mortgage affordability. This comes from Goldman Sachs. So it is much cheaper right now to rent a property than to buy a property.

So buyers have options. They can either double up in a property, they can move locations to go somewhere that's more affordable, or they can just decide to rent and not have to buy. So, if they're not buying, then you're going to have these houses sitting on on the market. And, you know, I don't think people are stupid.

The data is out there. And people understand, I can rent this same exact house that I could buy for 7, $800, $900 less per month and not have to deal also with the maintenance and insurance and the taxes and all that type of stuff associated with it. So it is now less affordable to buy than it is to rent in most circumstances. And this is causing housing demand to just plummet, right?

So everything is about affordability. Affordability drives home sales. We see affordability crisis peak up. That drives home sales down.

And now we could be grinding along the bottom here at a rate. This is for um existing home sales annualized. Um record low home buyer demand to start 2025. I mean, we could be grinding along the bottom here at the great financial crisis levels for some time here until the affordability returns back to the market.

So, demand is really slowing. This is a great chart from Darth Powell. If you see him on X, I'd highly recommend you follow him. He says a bunch of things on there, but I like his charts and the data that he shares and the perspective he shares.

But look at this. The on this side, um, the the mortgage payment percentage of income, this is the percentage of income. That's insane. And so it was really low right after the great financial crisis.

But now we're talking about 40% of somebody's income is going towards their mortgage payment. That is insane. There's no way to save money if you're a younger generation and you're buying now if 40% of your income is going to your mortgage payment. So affordability ultimately determines sales volume.

You can see that on the chart. The orange lines are the number of sales. So, you know, obviously if affordability as a percentage of payment to income skyrockets, then the number of sales drops. And that's a chart that I think is is a really interesting one to look at.

And I hope you spend time looking at this one because I think it tells the entire story of housing, right? And if we've had dropping interest rates literally for 40 years, obviously that's going to push prices higher because they are more affordable from a payment perspective. The inverse will happen right when when interest rates start moving up. So the existing owners are doing okay, right?

If you bought back in, you know, the 2013 to 2020 time period, you still have a lower rate. Now, if you bought more recently, obviously your payment's going to be higher, but if you're buying uh with a mortgage right now, so this is monthly mortgage payment to buy versus the existing outstanding mortgages. Look at that. I mean, the gap is is huge.

And so this is creating a lock in effect. So, the people who have their existing owner mortgage cost, why would you sell to go buy another house, it just wouldn't make sense. You would be increasing your your payment basically nearly $1,000. So, it's creating a lock in of these older generations um and people who already own homes to not sell because they want to hold on to their low monthly payment.

And that's a problem because 70% of people who sell go to buy. So, it's pushing all these transactions that would naturally happen are no longer happening now because of this locket effect. And this is causing new homes to just skyrocket. The number of new homes for sale is greater than August 2006.

We're past the peak of the great financial crisis of these for sales. This is, you know, south region. You can see the states that this is including. Uh but, you know, this is despite the incentives, right?

These builders are saying, "Hey, we'll buy down your interest rate. We'll give you upgrades to the house. Will give you all this and still the number of new homes for sale are skyrocketing. I know here locally in Jacksonville these communities that started in 23 24 it's taking 2 to three years to build out.

They are still being built out to this day and we're going to have tons of inventory coming over the next year or two that's going to continue to stack up these new homes for sale and we think that's going to continue to drive prices down. This comes um from the US Census Bureau and a couple other sources. Now, Florida home prices, obviously, when you see, you know, so much inventory go up, especially on new construction, which is what the next generation actually wants because they don't want to have to put a bunch of money into a house. They want everything to look great.

They don't have the cash to be able to make the repairs. Um, that's going to drive down new construction. That's going to drive down the price of existing homes. But, Florida prices are coming down.

This is um from the Zillow home index, and this is comes from Macro Edge chart. But you could see that things are starting to reverse. We are positive, positive, positive. We saw this massive spike because of the Federal Reserve's intervention and now we're going negative and it's likely that we'll continue that negative decline into the coming months of next year which has put us squarely into a full-fledged buyer market in Florida.

So this is the seven major cities that are now buyers market. So you can see here that you know four of them are of those seven are in Florida. One of those is Jacksonville. That's where I'm at.

You see Miami, Austin, Texas. Austin is getting absolutely crushed. My friends there who flip houses and sell houses are just saying, you know, prices are coming down. There's not as many relocations here.

There's, you know, there's they continue to build. There's a lot of area to build. Just like Florida, relocation slowed down. There's not there's a lot of area to build.

The builders overbuilt. They thought that the people from the north and from the west would continue migrating at the pace that they did between 2020 and 2022. It's just not the case. And a speculative bubble.

And now that bubble is starting to have the air let out of it. And I'll let you know what my recommendation is by the end of this video. If you want to drop a comment, let me see, you know, if you're in Austin or any of these markets, please comment because we'd love to see what's happening with your month's supply of inventory. Are you seeing, you know, basically hope for sale signs all across your neighborhoods?

I can tell you here, I'm seeing them in my own neighborhood. I'm seeing everywhere I drive, there's like two houses for sale on every street and then there's new construction still being built on every corner, which is crazy. So it shows here Jacksonville, Florida, 6.3 month supply, which typically is a balanced market. But the reality is these markets swing like a pendulum.

It's either a buyer market or it's a sellers market. And right now we're switching from a sellers market to a buyer market. And it accelerates here at the bottom. And we're going to swing right into a full-fledged buyer market by the end of this year.

And what is the Fed doing, right? They're going to try to print print money because things are only going to get worse. And they're anticipating now that things are going to get worse in the labor market. And they did a 25 basis cut point rate cut and they expect to have two more by the end of the year.

Obviously, Trump is and POW Trump is trying to pressure Powell and others on Fed chair, other people on the Fed to reduce rates even more than what they're currently projecting. So that way it can drive the economy. But again, this dual mandate of inflation and employment and inflation is still a problem and it's likely to show up big in the numbers in the next couple months. So, I don't think it's going to get any better anytime soon.

So, I don't know what the Fed's going to do, but I can't imagine that they're going to significantly cut rates the way that Trump is wanting uh to happen. And look, like owners are already starting to hurt even though, you know, things are pretty normal right now. They're just getting crushed. Owners are hurting.

Like this is a search from Google for help with mortgage from 2004 to now and it looks like it's just jumping up. People are actually having they're starting to go underwater. People who purchase from 21 to 25 like now they're now underwater in their house in a lot of areas. Not every area, but definitely here in the south um in specific areas there's just pockets where there's tons of new construction that you're competing with.

The relocations have stopped and the inventory just continues to stack up and that's causing multiple problems. So, I see why people are having problems with their mortgage and frankly all the costs of maintaining a house have just gone up as well, right? Fixing fixing your house, those costs have gone up 50% within 5 years. Insurance is up 72% and their property taxes have basically doubled.

So, I get why these homeowners are hurting. But not only are homeowners hurting, but renters are hurting. This is a chart that came out from Shanden Economics that late payments on rents are up 2%. This is mind-boggling.

2% might not seem like that many that much, but it's up about 1.5 million units that that are now late on their payments in July, which is just mind-boggling. And so, this could be a bigger risk. You know, if people aren't paying their mortgage, they're not paying their rent. I mean, those are the last thing that you stop paying.

You usually stop paying your credit card bills. You stop paying this is this just goes to uh your your car loans. This just goes to how stressed the consumer is by the amount of inflation that has been caused by our Congress and our Federal Reserve continue to print and borrow money that makes our the value of the dollar, you know, much less and pushing these, you know, everything more expensive. So, you know, I don't think the tariffs are going to help.

Again, I think that's going to show up later this year in the inflation numbers and could pause the Fed uh from moving forward with more rate cuts. Now, the red flags are up, right? Even, you know, Sherwin uh Williams suspends 401k matching amid uh weak sales. Like businesses are struggling.

Anything around the real estate market is starting to struggle, including, you know, this is a paint supply company. This is insane to me that this stuff is already happening because, you know, uh we're just at the beginning of this. So, if they're already struggling, that's a big red flag. And, you know, of course, owners are plagued by insurance, repairs, and taxes.

This shows the average annual projected home insurance costs by state. You can see Florida is one of the worst. Obviously, we have hurricane issues, but it is crazy the amount of insurance that we pay. Even on my house, I pay like $15,000 for more than $1,000 a month.

And of course, whenever you make a claim or anything, it's like impossible. And the deductible's high. It's like it's it's kind of crazy. And I live over here uh right under Georgia.

So, we don't usually even get hit by hurricanes. But just because we're in the area, we're in the state, we are responsible for paying for basically everybody else's issues that they have. Now, what the one of the interesting things is that there's surveys that are coming out, right? So, there's this divide between boomers and younger generations and there's a little bit of strife.

Boomers say, "Yo, the younger generation needs to work harder. They just need to save more. They need to double up just like I did." But the problem is it's actually four times from a from an income to, you know, you know, shelter cost. It's four times more expensive than a lot of these boomers when they were purchasing.

So, it's like, how are you going to save when 40% of your income is going straight to shelter costs and you have everything else that's four times more expensive than you had when you were growing up? So, I understand both perspectives. Yes, there are a lot of lazy younger generation people. There's no question.

And they're terrible with money and they don't they don't manage it well. I think that's true with almost every single generation. But also, it is legitimately four times harder for these younger generations to get by. So, this was a survey that came out.

Almost 3/4ers of boomers, 73% say that they value stability in their community over affordability for younger generations to move in. This makes sense, right? The majority of boomers that their net worths are tied up in their houses. They cannot let housing prices fall because they would then not have you know really good option for the future to sell and uh you know take care of themselves in their in their golden years.

Meanwhile, not 59% of Boomer homeowners would vote for a political candidate that prioritizes protecting home values even if it meant fewer people could afford homes. This is just self-interest, of course, right? This is not surprising that homeowners uh would try to pick candidates that could prop up houses uh housing prices. But this is a divide that I think is going to be really important because the government will have to decide whether they're going to bail out boomers who are in charge of the government generally or they're going at the expense of the younger generations or if they're just going to let the market be free and let the younger generations actually have an opportunity to purchase because they have to move the you know they have to move the cheese from one or the other uh because both will not be winners in this type of um environment unfortunately.

But it it does show an interesting divide between the wealth that we're seeing and frankly the next generation. I don't know what's going to happen in the next 20 30 years because it is not looking good from a demographic standpoint. Gen Z leads the biggest drop in FICO scores since financial crisis. This is already happening and again the stock market's at record highs.

Bitcoins are at record highs but the consumer is stressed. So and by the way like this next generation, my generation too, we don't have pensions. We don't we will probably not see social security and many people are loaded up with massive loads of student debt that they feel like they can't get out of. So I'm not sure how this next generation if and if they can't buy a house which is an automatic wealth builder, right?

It acts like a piggy bank. I'm not sure how we're going to be able to get out of this. And I think you know a lot of people say well they're going to get inheritances from the boomers sadly passing away. I'm not sure that that's going to happen because that a lot of that wealth will be gone to hospitals, long care, long-term care facilities and things like that.

I think that's going to drain the boomers before they leave because people there, you know, people can extend their life by an extra 10 years in some cases if they have really good health care. So, I'm not sure that would actually transfer down to the next generation. And by the way, if it's a house that transfers to the next generation, 70% of the time the estate will then sell that house because they don't want it, right? They don't want the old carpets.

They don't want to have to do all the repairs. It's not where they live. It's not the type of house that they want. All those type of things.

So, that's just going to go right back in and then get split up a bunch amongst multiple people. That's probably not going to be enough to to pay to make a significant change. But look, look, this is this is crazy. This is FHA.

The next subprime crisis is FHA. That, you know, you can only have like a a 580 credit score to be able to get an FHA loan. You know, you only have to put 3.5% down. Honestly don't have a lot of skin in the game.

So, if you buy at the wrong time and the market goes down, your chances of handing the keys back to the bank are really high. Now, this shows that roughly 200 billion already of FHA mortgage loans are currently delinquent. I've seen stats that go up to, you know, 15.3%. The government stopped reporting a lot of this data back in February.

Um, they just removed it from their website, which was really scary. But look at that. I mean, that is just crazy the number of active loans for FHA. So, you're probably going to see going into next year a lot of foreclosures that are being processed through um FHA or another government programming come that comes out to prop up FHA and keep the housing market propped up.

But there are underlying issues that are coming up across the real estate world that you might not have heard of. Now, this is also kind of terrifying, you know, from if I'm looking at like a healthy economy. The problem is the majority or not the majority but a lot of the spending from consumer is coming from the top 10% of households. It's not coming from the middle class.

The middle class is just getting eroded away. And those are the ones who would be purchasing the house, right? If you're wealthy, you don't need multiple multiple houses. You usually get one house or a vacation home.

Now you can, you know, Airbnb and things like that. But the middle class is loaded up with debt. They're not spending. They don't have the cash to spend.

And that what is driving the economy right now are generally these wealthiest top 10 to top 20% of households and the bottom 80% are frankly getting left behind. Uh you can actually see this in the the housing market as well by the age distribution of home buyers and home sellers by generation. You can actually see that the younger boomers are currently driving the the buyers and then it's the it's Gen X after that. Um and then older millennials.

So you can see that uh in the older boomers too are doing are purchasing more than the older millennials. So this is really crazy as a stat and then so it's basically boomers trading houses to other boomers. I don't know if this is good or not but it doesn't look like a healthy economy to me. What I'd like to see is tons of people in these younger generations to be you know younger millennials to be able to purchase you know people in their in their 30s uh young 30s late 20s being able to purchase homes.

They are doing it but they're a very small percentage. I mean, look at that 12% of 15% if you add in Gen Z. It this does not look like a healthy economy to me from a from a purchasing standpoint and a selling standpoint. And this chart is the scariest chart of all.

Young boomers are driving what remains of the market. So, you can see repeat buyers 61 years old. The median home buyer age that all buyers is 56 years old. That's kind of crazy to me.

And the first-time home buyer has basically moved up, you know, 9 years from 29 years old to 38 years old. That's just because people are loaded up with debt. They can't afford. They usually need to get a gift from family or it's a dual income family that's been, you know, saving their nickels together to be able to get a down payment to purchase.

This is not not good. I think this is just a a what's happening just due to this affordability crisis because the the government has just pushed prices up so much. And frankly, if you're in the bottom of 50% in the United States, you are falling behind from a wealth standpoint. And the majority of gains are going to, you know, the top top percent.

Look at this. The top 10% is has the biggest uh amount of gains over the last, you know, a couple decades here. And the bottom 50% of households only own 2.5% of US wealth. I think that this is going to continue to, you know, happen.

Most of the gains will go to the top who own assets and then the bottom will will continue to lose, you know, market share basically. I don't see how it can get much worse than this, but it does typically seem like it's going in that direction based on what the government is doing with their massive amount of printing and propping asset values up. So, I think a lot of people are getting left behind. And of course, now we're seeing job weakness.

You know, we can see every modern recession has been preceded by rising unemployment. We're seeing rising unemployment here. You can see that on the red line. It's very slight, but it is moving up.

But the big red flag is that the job openings are slowing down. Probably because of AI, probably because there was a lot of businesses that were expanding and the tariff concerns, all this stuff people are starting to pull or people are trying to replace people with technology or make frankly, you know, give me a comment below. You know, people I I know my brothers are like this, but they give them the job of like four people to one person and they're just like, you got to figure out how to do your job and we'll pay you a little bit more to be able to do that. You know, the layoffs are rising.

You can see Florida is one of the top states for layoffs and the consumer has so much debt, right? We've never been this much in debt. I mean, it is crazy and it continues to compound and I think that we'll continue to see our debts go exponential, not just with consumers, but with the government. Credit card delinquencies are ticking higher.

We're almost already as bad as we were during the great financial crisis. And the consumer sentiment is at the worst since the great financial crisis type levels. So, we are already there. It's going to get worse.

And my prediction for housing because of these issues in Florida specifically and in Jacksonville where I am, my expectation from the peak, which was in October of 2022, to the bottom, we should see at a minimum a 31 to 42% decrease in home prices based on my financial models from my prior investment banking experience and my experience of being in real estate for the last decade, transacting more than $3 billion of real estate. That is my expectation based on how I run the numbers because at certain point there will be buyers that will come back in to the market once the price gets to an equilibrium gets comp gets competitive with renting and the builders stop building because it doesn't make sense to do so and the buyers catch up with that. But during that time period which can play out over multiple years. Real estate is an illquid asset class.

It can take four to five years for this price discovery to actually occur and get back to reality. So, you know, this isn't going to happen overnight by any means. This is going to be slow declines every single month for a matter of years until it gets to an equilibrium. So, I'd love to hear from you.

You know, consumers keep this market going. I think it's unlikely. Um, I think they're tapped out. How much I'd love to hear your thoughts, though.

How much do prices need to come down for you to be able to purchase in your areas? Let us know. Like and comment the videos. Always appreciate you guys supporting the channel.

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