Is the Next Crisis Unfolding Now?
can you hear that can you hear it wow it's a sound of lots of bubbles popping we're going to be talking about that specifically with real estate coming up i'm lynette zhang chief market analyst here at itm trading a full service physical physical gold and silver dealer specializing in custom strategies and never ever ever has that been more important than it is today i mean you know people always ask me when when when well um i'm going to say open your eyes and look around because the fed giveth the fed taketh away they're going to giveth again but at the moment globally central banks with all of this money printing that they did ad nauseum created bubbles in all of those targeted asset classes remember after 2008 they actually came out and said that we are going to target stocks bonds and real estate for reflation so big shocker that we have the most expensive at least in nominal terms the most expensive real estate bubble in history and with the interest rates rising i don't know these markets are starting to flash warning signs after all global central banks raising rates is popping the real estate bubble adding risks at a slow down shocker could ripple through the economy because remember real estate is roughly 30 percent of the global economy that is a huge piece it's also very unaffordable for many right now but the threat a world economy already contending with raging inflation thanks to all of this okay stock market turmoil also because they were severely overvalued and who cared about income but we're dealing with that and a grueling war is facing yet another threat the unraveling of a massive housing boom that was created by the central banks but now it's passing a test and i mean it it's taking a test i would say because if you look that's happening in every single area it's happening in the cryptocurrency area it's happening in the stock market it's happening in the bond market and it's clearly happening in the real estate market and are we watching this crisis unfold in real time because frankly i think that we really are now they did a list the on the oecd countries of those that had let's see the this is a gauge the top 10 countries with the bubbliest real estate markets and it's not really a surprise that the u.s was right here and you can see them new zealand czech republic etc on and on and on and the way that they do that is by a gauge of different property risks one of those risks being the price to rent ratio in other words is it cheaper to rent or is it cheaper to buy a house now typically above oops a little ahead of myself above 20 is high and if you look on this list every single one of them is in excess of a hundred which means that buying real estate for most people is severely overvalued it's not going to happen it's not affordable well what about the price to income ratio including even the rents well above 30 so your mortgage payment or your rent payment is above 30 percent and when you look at all of these countries wow they're all so far above 30 percent meaning that people cannot afford real estate they can't afford to rent and they can't afford to buy this is actually a pretty big problem because then they're looking at the adjusted the inflation-adjusted price growth of the house and that's growing faster than incomes as even the nominal price grows faster than incomes so it's not really a big shock that whether you buy or whether you rent housing putting a roof that shelter right that's one of the pieces of the mantra the shelter you've got to have a place to live but it's become very unaffordable for most people as borrowing costs rise real estate markets face a critical test if central bankers act too aggressively by raising rates they could sow the seeds of the next crisis but quite frankly it doesn't really matter if you have a fed that is presumably so aggressive we're going to be talking about that actually with a guest on a coffee with lynette coming up next week but you know they have to raise rates to attempt to combat the inflation but that also is pushing us into a recession right because look there's only one way to tame inflation and that's with deflation which is what a recession is which is what a depression is on the other side of that there's only one way to fight deflation that's with inflation so when you know that there's only one way to approach this and if the fed doesn't raise rates they lose their credibility so they have to raise rates so they can lower them into the next crisis but if they don't lower them then they run the risk of inflation running even hotter it doesn't matter what they do there's going to be there is a policy error period whether they raise rates fast enough or they don't raise them fast enough or they keep them or they drop them back down because in my personal opinion that is exactly what's going to have to happen how much pain the fed is willing to allow is going to determine when they turn around and drop those rates again is it going to help no it's not going to help raising rates is not going to tame this inflation although a lot of job losses that are coming up we'll talk about that in just a second let's move forward because people are now noticing so where people were thinking about selling but oh god the prices keep going up are we going to sell no let's wait well now the home listings jump in a turnabout for supply starved u.s markets so that means that people are now rushing to put their house on the markets so they can capture the price somewhere near a top well you know we're not seeing a big slow down in the prices we'll talk about that in just a second but housing markets are bubbling all over the world and look at this after years of declines in home listing inventory is finally rising there you go last two months you've seen an increase in inventory and actually a pretty substantial jump trying to cash out at the top people are now rushing to sell so that is a very good indication you might recall it was probably about five maybe four five six months ago where we got the indicators that we were somewhere near a top well now we're seeing it in fact metro areas with biggest annual jumps in active livings as you guys know i live in phoenix and the listings up 113.2 in austin round rock and texas 144.5 these are listings even in tampa st pete up almost 56 new listings while we anticipate that more inventory will eventually cool the feverish pace of competition that the interest rates the typical buyer has yet to see meaningful relief from quick selling homes and record high asking prices so in other words there are a lot more houses that are coming on the market but we aren't yet seeing a big huge decline in prices but i anticipate that if you're going to keep getting more listings and people are kind of well let me just finish this whole piece and then you can formulate your own opinion so the mortgage surged towards six percent slams the brakes on red hot housing markets home sales are slipping as torrid price gains and now costlier loans push more u.s buyers to delay
their searches so you see you had wall street backed um entities going into the mortgage market to buy houses did they really care how much the houses cost no you were getting they were getting this money for virtually for nothing it was free money so you push up the price of houses and the normal person and remember this used to be a mom-and-pop world it's not the way it is anymore that this is now also a wall a wall street world and they've turned real estate homes buildings into commodities just like anything else paper commodities but now it's starting to cool off the fed dropping interest rates to nothing yeah that definitely it definitely created that boon in real estate and with all that free money just sloshing around like crazy i mean what difference did it make how much something cost i mean like i remember these arguments doesn't matter how much something costs it matters what the monthly payment is well now that you're looking at six percent versus two and a half or three percent that really makes that monthly nut a lot bigger so you can't afford people can't afford as big a house they're going to have to go down in size or down in price and i think we will see prices change but that hasn't really happened too terribly much in lots of places yet but it is definitely happening a decade of qe has fueled frothy housing markets and we could be entering the other side of this soon how about now how about we're entering it now as housing affordability is stretched and debt service ratios could rise sharply because what has been the central bank's answer to every downturn more debt more credit home sellers are slashing prices in a sudden and this is on july 1st right and a sudden halt to pandemic boom the rapid rise in mortgage rates is cooling demand jolting markets from coast to coast now not all markets are witnessing this yet but i do believe that all markets will be experiencing this and soon in the month of may everything came to a screeching halt we have a rule of thumb that says if you don't have any showings in 14 days it suggested that you're 10 overpriced well you know we we were in a period and we saw this too before the the real estate market crash back in 2007 2000 and and the formulas told us it was august of 2005 that you know that we were that the indicator said that we were somewhere near the top of that market well this is really no different and when things stop they stop very quickly because you're looking at interest on real estate now that is somewhere near six percent still a house flipper is trying to pull out of a contract to buy a property the investor had 40 properties listed for sale and nobody looking at them because they're looking at what their monthly nut would be and also if they have something that they have to sell to get into something else this market is shifting like really quickly like sand underneath your feet are you ready for this i hope you weren't one of the ones that were sitting on real estate that you really wanted to sell it's a fast change and that has made people feel concerned that it could get worse and it could get a lot worse in japan for example in the early 90s residential real estate dropped 85 percent commercial dropped 95 in 2008 they only allowed the markets to drop 45 percent before they went in and put a floor underneath it but the prices even prior to that had gone so far so fast that the central banks never actually allowed free market forces to equalize and stabilize the price instead they went right in there and zost those markets creating the housing bubble that we're now going to experience so hey you may call me crazy and i can't tell you i'm not sitting here telling you a hundred percent that we're going to see real estate prices drop 85 percent but we could we definitely could there is historic precedence for this and this whole market because of all this free money was just so it's so over inflated and what goes up must come down could it get worse yeah because the price drops have already begun sellers with lofty ambitions are having to pair expectations in the austin phoenix and las vegas metro areas almost a third of listings in june had price cuts a third of the listings in june now where you're seeing these circles those all indicate where they have been or where there have been um where they're slashing prices or i don't know that slashing is probably a good word uh yeah as much as dropping prices and the darker the blue the bigger the price drop and there is a question from body feel good so does this mean that rentals will go up or down you know that's a really good question because i don't think we've ever quite been in a market like we are right now rents have been going up astronomically in miami in fact i think i have this in here somewhere year over year monthly rents up 45 rents are gonna have to come down because of that affordability factor but this whole market is going through a major adjustment right now so time will tell normally when houses are too expensive well then you have reasonable price a rental price increases because more people are renting than are able to buy unfortunately right now it's kind of like the stock in the bond market too these markets are all of them are dropping right all of these fiat funny money markets are dropping and so you have the same thing when you're looking at buying or renting right both of these markets have gone up so quickly far faster than any of the income increases that i think what we're going to see is i think we're going to see both of them drop and we're certainly starting to see price controls come into play and that's something that typically happens during a hyperinflationary event because the rents go up so high that people can't afford it and guess what if they've got to choose between rent or food guess what they're going to choose they're going to choose food so that's why as that's why i've been saying for a long time look i like real estate real estate for me has an important function but a lot of people have been using it like a piggy bank because the fed you know don't fight the fed the fed was saying buy it buy it buy it regardless of the price buy as much home as you can but uh so that's a good question and we're going to find out but i think that both prices will ultimately have to come down in both areas because people can't afford it and those places those apartments those houses don't do you any good if they are left empty there is part of the strategy to accommodate all of that also for those of you out there that maybe earn your income through rental income they're part of the strategy is how you can replace that rental income that you're getting in case or when they put in those price caps or people stop paying et cetera that should have been laid out pretty bare that this was an important feature back in 2020 we need to make sure that if you're depending upon this income that you have that income replaced that's part of the strategy so if you need to know more about it just just call our consultants give us a call and talk to them about the strategy but as they say i'm worried that this mortgage affordability crisis this year will spill over into a worsening rental affordability crisis well yeah we're already there u.s home price growth decelerates for the first time since 2021. so that doesn't mean that the prices are coming down yet it just means that they're not growing as much so even when people have lofty ideas and they put their houses on the market i want two million i can tell you in one of my daughter's neighborhoods she bought that property right before right when covet hit like right before and i was like so grateful because she's got a big family and they would have been not in a good place in the small little house that she had before that um she paid in the high fives for it and now properties in her street are listed in like 1.4 1.6 i mean what can i say so us home price growth decelerates doesn't mean that it went away but in the smallest and the biggest gains the metro areas so here's phoenix and that price appreciation was 31.3 percent the fastest price price growth in april but even in the slowest levels so minneapolis it's the prices still grew 12.3
so you're getting a lot of conflicting information here because on the one hand they're talking about a third of the listings in phoenix cut their prices after they listed them but it does still doesn't mean that the price growth hasn't been 31 maybe they were looking for 45 or 50 ridiculous numbers the house is someplace where you're supposed to live and have the ability to make your last stand this is where i'm going to be i need to make sure that i can do food water energy security barter ability wealth preservation community and shelter in this space that's the function of a house to keep my family safe but either way whether it's the slowest or the fastest it's not affordable homing homes these days are not affordable but in a flashback because the piece that everybody seems to miss this isn't a normal inflation or recession this is the end of the currency's life cycle and the last time that we were at an end was back in the 70s and i found this so interesting remember you've got the links to everything um in the blog so go in and listen to this uh pierre rimfray speak about the real estate bubble and it's popping back in the 70s because it sounds awful lot like what we're seeing today when again central banks and governments were trying to goose the housing market because that's one of the largest components if not the no i think financial service is larger but that is one of the largest components in the global gross domestic product all the money that flows through the whole system it's an abrupt shift for a sector that was just recently experiencing a hiring boom because these mortgage lenders now all of this hiring now they're starting a fire so the federal reserve wanted unemployment to tame that inflation well good goody gummers looks like they're getting it there were one but this is the piece that you have to understand it's like a domino effect it's not just this one little piece that we can see we're like an iceberg is a better example it's all those pieces underneath there were 1.8 million americans working in real estate in may that jobs figure does not include all the people working in housing related roles throughout other industries like finance or i don't know how about big box stores like home depot or ace ace hardware or any of those this is all real estate related painters etc furniture stores well you should always be careful of what you wish for because you may just get it so all that hiring boom is gonna is now turning into a firing boom wells fargo layoffs and home lending unit jp morgan lays off hundreds in home lender ling after rate surge and this is the pace of existing home sales down by 1 million units and you can see it right here this was back in in 2000 uh 2000 and 20. so we can see what's happening in here and they want to say that this will tame inflation it's not going to tame inflation you're just going to have less income along with rising prices this is a supply side issue but it's this is what it is it's all that money printing that they did and the impact that that's having on all of the assets what goes up must come down and when you have a boom you're also going to have a bust this is what i was talking about before so you're asking well what's that going to do to rents look at we're in an over expensive real estate market in both dubai and into lease and into rent 41 i mean this is ridiculous it's never been sustainable i mean this is a place where you have to live but once wall street comes into it do you think they give a crap no they do not they only care about squeezing every last dime out of you and with rents exploding at that level and income's definitely not going up at that level do you think it's possible that their income to rent or income to mortgage ratio if they're buying is above that 30 percent because that 30 percent is really i mean i remember back in the day in the 70s since my father was a developer and i worked in banking then and i was doing mortgage origination we were looking at a 25 not 30 but they had to raise that uh income to rent or income to mortgage ratio they had to increase that because of how quickly the prices were going so if if a reasonable amount was 25 of your after tax income and these things are well above 30 percent of most people's income we're going to have a problem do you see that it can't go up forever everybody always thinks things can just go up forever and ever and ever they can't it's not the way markets work even when you have an accommodating fed another month another record which us u.s single family rents which jumped 14 that's an average year over year in april making the 13th period of record-breaking annual gains except there is that little affordability factor in there can't afford to buy can't afford to rent we're in deep doo-doo but i came across this and i don't know who ever thought this was a good idea but leveraging your stocks to buy a home margin loans right we talked so much about margin borrowing to buy stocks but you see if people wanted to cash out of their stock portfolio to put it into the real estate market did wall street want them to do that oh no wall street does not want you to take your money out they make money off of your equity they want you to take that money and leave it in their system so they can make money off of you in oh so many ways but a hot new trend among would-be bar buyers to borrow against their investment portfolios to access cheap funds as traditional rates soar and it's called an alternative path to all cash and it works fine as long as all of the markets are rising maybe not so well on the other way down if the value of the account goes below a certain threshold there there's a margin or maintenance call where the borrower is responsible for depositing additional money into the account otherwise the brokerage firm can sell the account holder securities to meet that call now why would people do this well because when the markets were going up and the house real estate was going up it was like how can you lose but to do that and a margin account at least at this point is definitely less expensive at three percent than a mortgage at six percent so you know i mean when i think back to those adjustable rate mortgages prior to 2008 and the same similar kind of thing that happened in europe where with the swiss franc when it was so cheap against the euros so people took out that earned euros took out mortgages in terms of swiss francs well both of those things have ramifications that people are still dealing with today including in switzerland and now they've come up with this one yeah i mean i'm not really sure that this is such a great idea for most people but the margin loans allow you to borrow a percentage of your brokerage portfolio though those rates change daily and if the value of the account goes below a certain threshold well then they're going do you got to come up you as the borrower have to come up with more money or they're going to sell out your stock portfolio so now you bought an overvalued house that's dropping in price and the stock markets are dropping in price yeah can you see that you also have a mismatch in terms of maturity because these margin loans are a day-to-day basis but real estate you know is not as liquid as that it's not on a daily basis i know people were thinking about it like that but i think we're getting a wake-up call now when you get a margin call you have to sell what the market will bear and wants to buy not necessarily what you want to sell and so i get this question a lot well how come gold is going down when all the markets are going down we're gonna i'm gonna show you that in just a second but you'll notice that gold holds up remarkably better but that's why you'll see spot gold go drop at the same time you'll see the stock market drop as well because they've got to meet borrowers have to meet these margin calls and they've got to sell what the market will buy doesn't matter what you want to sell or not it may not be liquid you may not be able to sell it but i think this is more a pathway to wealth transfer just like inflation is right across the board so when you're looking at putting up your portfolio to buy a house this is the yes the worst ever for a 60 40 portfolio in other words 60 stocks and 40 bonds they're both going down at the same time but i thought this was super interesting so i wanted to talk to you about this you just saw the three lead red boxes cover year 1930 1931 and 1937. this is when they were really big time kicking off the fiat money experiment i mean it started obviously in 1913 and then you had the roaring 20s because one of the things that central banks and governments always allow when they're making a currency regime shift is that they want the public to not be paying attention to what's really happening so make money they let them make money we've just seen that in the cryptocurrencies quite honestly but we had the roaring 20s as they were shifting and the public got involved in it they made money until boom credit dried up liquidity dried up and we had 1929 and then we had 1930 with the decline in the s p 500 of over 25 percent down another ford almost 44 and then 1937 which was still part of that kickoff so after the first 31 then more credit was available supported things again but then again you had some fiscal tightening and you had another crash so these are the crashes the stock market crashes that happened as we were kicking this experiment off and then as we were going through another transition 73 this to 74 bear market that's when we went off of a quasi gold standard into a pure debt based standard and now here we are again because interestingly enough when i checked it so through july 1st the s p 500 was down 20.25 which would put it right here between 1973 and actually 9 2002 they're calling that the dot-com crash and it was the dot-com crash but just before that was long-term uh capital management it was the derivative the first speculative derivative implosion i didn't want to get too complicated on this but i want you to take a look at how stocks bonds and spot gold that's contract spot gold is a contract cheap easy to manipulate okay so where we had the s p down 20.05
we've got spot gold essentially even so no losses right and you've got the treasury bond market this is not the yield this is the principal price down 8.44 so out of these three stocks bonds gold which one do you want to be holding i know what i'm holding i'm holding gold because what none of this actually even takes into consideration is the inflation that's eroding whatever purchasing power is left in the value of those currencies so you know this these are just nominal numbers but i want to take you back in history because history repeats itself armed with a new currency backed by mortgages on germany's agricultural and industrial property and empowered by the reichtag to issue emergency decrees under 1923 enabling act the government now renewed its efforts to revive the housing construction industry the very inflation which had left many destitute had provided a handsome dividend to those who paid off their mortgages with worthless currency because what happens to gold when we go into a hyperinflationary event and i've been saying since inflation kicked in that i think that this is it and i'm going to sit here and i'm going to tell you i think this is it so we're running out of time but this is what happens to gold every single time could this time be different no if it's happened well over 4 800 times a hundred percent of the time it's not going to be different this time because gold is real money this is by the way i will tell you what this specific coin is i've been uh june 28th was my 20 year anniversary here at itm trading 2002 wow it's gone fast and this was a gift for me achieving my 20 years here it's a wonderful gift because this is what protects myself and my family and those people that i love and that i care about because my family's pretty broad i'm not talking about necessarily blood family i mean we can be family on many many different levels but this is what i know holds my purchasing power intact so that as we go through this will real estate drop 85 percent on residential and 95 and commercial i don't know maybe but history has proven time and time and time again and edgar maybe you can put that link to the 25 ounces of gold buying an entire city block in berlin buildings and all in all these different countries it happens over and over and over again and this is what i know there will come a time where i will take my some of my gold not all of it for sure but some of my goal and convert it into income producing real estate and other assets so that i cannot ever outlive my retirement and voila i have a nice stable income for my family and generations to come because i would really like to think that i will leave a legacy that gives them enough so that they have their choices they can they can dream and they will have the ability to make those dreams come true but i don't want to leave them so much that they do nothing because that's just a wasted life and we are all here to be of service that's what we're here we're here to share our gifts and that's how we build this community and part of what's really important is not just gold and silver i mean that's got to be your foundation because that's what enables you to maintain what you have and expand what you have but you also need that food water energy security barter ability community and shelter and so if you have not yet gone to beyond gold and silver channel please do so and make sure that you subscribe because frankly there's a lot of co content from my off-grid property that is posted on an ongoing and constant basis because we've got to be ready we've got to be prepared so i'm showing you specifically what i'm doing for myself and and hopefully these are some things that will benefit you because we're really trying to approach it at a number of different levels so wherever you are whatever your budget is whatever your skill sets are and whatever your need is that we're meeting you there that's what we're working on hard but if you haven't already established a strategy click that calendly link below make sure that you subs that you that you get with one of our wonderful gold and silver strategy specialists that can help you develop your own personal strategy it'll look similar to mine because that's the foundation it's it's the same but we all have different goals so this is specifically for you and if you haven't done this yet please make sure you subscribe and give us that thumbs up it helps spread the word more and that's critically important these days so i hope you know that it is time to cover your assets get them covered and this is how you do that do not be a deer in the headlights get it done can you see that the system is imploding under its own weight will the fed turn around and do a pivot and print more money than we ever thought possible well look at that they ran out no they never do that's a button push but guaranteed guaranteed they are destroying what itty-bitty bit of purchasing power is left i want you to have choices that's why you have to have physical gold and silver in your possession and you have to have a garden you have to have or some kind of food source look at security security and food in water in energy in shelter and in your community get it done please get it done no more waiting no more hesitating when's it going to happen look around you it's happening now and until next meet please be safe out there bye bye
2022-07-07 20:32
