Transcript

Mike:

Welcome to this episode of Mike on money. Oh my goodness. This week, we’re talking about the hottest thing out there and it is of course

Mike:

Real estate. That’s right. Just like Marsha, Marsha, Marsha it’s real estate, real estate real estate. We’re going to talk about asking the question really? Is this going to go forever? Is it never going to end? I’m going to answer that one in just a minute before I do remember this. If you like this video hit the like button below. Hit subscribe. If you haven’t done so already. And of course, please share this with your friends, family, relatives, neighbors. Heck send it to your coworkers, your enemies. Just send it to everybody. That’d be great. All right, let’s go ahead and dive in real estate real estate real estate. Everybody’s talking about how hot the real estate market is. You know, my daughter just bought her first house. I wouldn’t want to wish anyone to go through what she went through just to get a house. I mean, she would go bid for a house and there were like 17 and I’m not exaggerating 17 other people bidding.

Mike:

There’s not, I don’t know of a single house it’s gone for asking price lately. Why? Because they all go for like a hundred thousand dollars over asking price or more. It’s on believable, how hot the market is right now. You know, you put your house up on the market right now and it’s sold that weekend at a price. That’s well, let’s be honest. We can all agree. It’s pretty stupidly ridiculous. So here’s really the more important question. How long is this going to go? Right? Is it going to go forever? Is the real estate market just always going to grow? I mean, heck Austin’s growing. Everybody from California is moving here. We all know that Austin is becoming Silicon valley Easter. Gosh, maybe it already is. When is this going to end? And by the way, it’s not just Austin, is it? It’s all over the country.

Mike:

This is going on. When’s it going to end? Is it ever going to end? Well, I’ve got three forces, three forces that you want to watch out for that could bring this real estate market to a screeching screeching halt. I don’t know when they’re going to hit, but they will hit at some point. So here we go. Number one, force. Number one that could really cripple the real estate market force. Number one would be rising interest rates. Now think about this right now. Money is dirt. Cheap money is cheap. I just talked to one of my clients the other day. They’re refinancing their house, actually getting a they’re pulling equity out of their house on a 15 year fixed note at like 1.99% a year, 2% a year. You might as well be free, right? A 30 year loans are, what are they? Three.

Mike:

I mean, they’re like nothing. I remember. I’ll never forget. When my parents bought a house in 1975, 5, they bought this house in 1975 and they had perfect credit, perfect credit. They got a traditional 30 year loan. They put 20% down just like everybody else. Guess what? Their interest rate was 3% in 1975. I don’t think so. Hmm. Was it five or six? No, eight, nine. I had to keep going 13%, 13% a year. Can you imagine what would happen to the real estate market today? I mean, interest rates don’t have to go to 13%. Do they? What if they just went to five or six? The buying power of all these people buying houses would shrink dramatically. It would crush the real estate market. So yeah, if inflation, here’s what you keep your eye on. If inflation keeps growing interest rates are likely going to rise.

Mike:

Guys, the real estate market is not going to be happy. All right. Number two. What’s a second force that could cripple the real estate market. Number two would be a stock market crash. Now, here we go. Here’s another thing. The market is gone up, up, up forever. Right now, as we’re recording this, the Warren Buffet index, you know, he measures the value of the market here to the economy. It is more overvalued than it. Any time he can find in history it’s oh, it’s like crazy overvalued at some point that thing’s going to collapse. There’s just, it’s just great. I mean, it’s just fundamentals, right? It will collapse. At some point when the market crashes remember 2008, when the market crashes, suddenly people don’t have money, your extra money laying around to buy real estate market crashes. Oh, that’s number two. That’s going to be ugly news for the real estate market.

Mike:

And finally that brings us to number three. Number three is cycles. Everything goes in cycles. The market goes up and then it drops for a period and it goes up and then it drops for a period. And it does it over time in cycles. Now over time it moves up, but the ups and downs do go in cycles. The same is true in every market. It could be the wheat market, the corn mocking you, these commodities markets, but it could also be see the real estate market values go up. They go down, they go up, they go down over time. They go up over time, but it’s not in a straight line right now. Real estate by most accounts, the most overvalued it’s ever been just like the stock market. At some point, it’s going to go the other way. Keep your eyes peeled.

Mike:

Here’s why I don’t want you to do. Don’t get caught like people did in 08. In 08, you had these people, they were buying land or buying real estate at ridiculous prices only to fix it up and sell it at even more ridiculous prices. Don’t get caught in that trap because what happens is before you know it, when the market does go the other way, it’s going to go fast and just like, go wait. You might find yourself upside down. Never a good place to be. All right. That’s real estate, real estate real estate. Hope you enjoyed this little discussion. Keep your eyes peeled on those three things. Rising interest rates, market crash, or just real estate cycling out of favor. If you liked this video, click the button, subscribe, share it with your friends. Talk to you next time.