Something is going deeply wrong in Housing Market

Added: 2026-05-30

[00:00:00]If you're planning to invest in real estate, then forget about it because real estate is no longer a good investment and from now onwards, real estate is going to be a terrible investment for the vast majority of people. You probably seen a lot of videos on the internet where people purchased properties, rented them out, and then found out that real estate isn't as easy as they thought. But what if I told you that real estate is about to get a lot worse? Because there is something strange going on in the housing market. So, if you're planning to invest in real estate, if you're planning to buy a house, then you absolutely must watch this video. There are two ways fundamentally to invest in real estate. First of all is, of course, if you go and buy the property with cash. This is a good option because instead of just keeping millions of dollars or hundreds of thousands of dollars, you're keeping your money in an investment that generates you at least some kind of income. Because with the inflation that we have, cash is losing a lot of its value. But there is a more popular way to invest in real estate and that is if you go and get yourself a mortgage since you're using leverage.

[00:01:04]You're using other people's money to build capital for yourself. And this is by far one of the most famous, if not the most popular way to buy property. In fact, more than 60% or probably even like 70% of all the houses are purchased with a property or with a mortgage. And there's two ways that you can make money with real estate. Either it's rental income. This is what people usually talk about. You have a bunch of properties.

[00:01:29]They pay you rental income every single month and you are financially independent. You're financially free.

[00:01:36]Congratulations. That's the dream that a lot of people want to achieve. Second way you make money is of course capital appreciation. If you just go to your father and ask him, "Dad, how much did you pay for the house?" he will tell you that he paid a fraction of the price that it's worth today since house prices always rise. So, these are by far the two most popular ways to make money. But if you go and invest in real estate today, you're probably going to get anything between 4 to 8%. And 8% is really astronomically high when it comes to real estate. And usually people get 8% on their property when they have kept the property for many years. And rent prices since then has actually shot to the roof. which is why they can make 8% or 10% but usually it's like 4% 5% and usually it's even less than 4%.

[00:02:25]Sometimes something breaks in the house and unless you fix that problem in the house there is no way that you can rent that property which is why that property will simply stay there and will not generate anything. That's why usually in the first couple of years when you make your property investment you're not making any profits or whatsoever.

[00:02:44]Usually the return is really negative.

[00:02:46]And what most people don't realize is that it's a real job. When you have a property, it takes a lot of your time.

[00:02:52]You have to pay taxes, you have to pay insurance, you have to pay maintenance, you have to do this, you have to fix that. And it takes so much of your mental energy. It takes so much of your time that if you took that time and invested that time in your main job, you would have probably made a lot more money. But with the real estate, unless you're going to dedicate so much time into that, there is no way you can make a lot of money from that or any money or whatsoever. And if you delegate that to a company that will do that, trust me, they will charge you so much money that at the end of the day, you will look at your property investment and you're like, why on earth did I make this investment in the first place? So, if you're actually buying property with cash, it still makes sense because in the long run, you're going to win anyways. But if you're going to take a mortgage to invest in real estate right now, then you're making a really big mistake. Let me just give you a very simple example. Let's assume that the property worth a million. But for the sake of example, you will pay a 20% down payment, which is a typical down payment that you pay. And in this case, it's going to be $200,000.

[00:03:59]So the mortgage rates right now are about 6.5%. And let's assume that's what you pay. Of course, if you have a bad credit score in different places, people get different kind of mortgage rates, but in this case, let's just assume that it's going to be 6.5%. And your return on investment will be 5%. And now 5% is actually pretty generous because if you kind of p purchase a property in places like California and you have so many expenses that comes alongside that property, trust me, even if your overall or gross income will be 8%. After covering all of these expenses, your gross income in the best case scenario is going to be 5%. So, if you're paying 6.5% on your mortgage, but you're making 5% at the end of the day, then you're already incurring a monthly loss of 1.5%. So, fundamentally, even if you look at the basic math, you can see that it's actually a really bad investment.

[00:04:53]And we haven't even considered the fact that you're tying $200,000 of your money into this property. So even if you go today and purchase a property with the current mortgage rates, you know for a fact that you're actually making a bad investment. Now if you're buying a property for yourself, that's a completely different question because you want a place you want to live in your own place. You want to decorate the place the way you want it. You maybe you have family, you have kids, maybe you like a particular area and you know that you will live in that place for a very long time. So over time the capital appreciation will basically pay for itself. And if something breaks up it doesn't matter whether you're renting a praise or whether you are living your own praise it's going to take some time and money which is why it actually makes sense. But from the financial perspective when you're making an investment it seems like a really bad investment. Now here's the question why it made sense up until now. What exactly has changed right now? Buy before prices rise farther. So if you look at house prices especially between 2020 and 2021 they shot to the roof. They literally increased by 30% 40% and in some areas you would see that prices have increased by 100%. So yeah, even though that I will get a mortgage today and they will buy that property for the first year or maybe for two years, I will be incurring a monthly loss, but after that the price of the house is going to rise and interest rates are going to fall and I will refinance my mortgage with a lower interest rates and suddenly it seems like a good investment. And the reason that I did not wait and I purchased the property today is because if I waited a bit longer, house prices would have risen and now I'm paying a higher interest payments, which is why it still made sense to buy that property. So, you'd wait for one year or two years, refinance it, and it's still a good investment. However, the US government just reverse the strategy, and that no longer makes sense. And that's why you have to pay a very close attention to 10-year treasuries. 10-year treasuries are basically the most important indicator of what is going to happen to mortgage rates. So if the treasuries are going to rise the yields on them, then you can expect mortgage rates to rise as well. If the treasuries will fall down, then you can expect the same thing to happen. So in 2021, when the yields on 10-year treasuries have been 1.3%, of course, mortgage rates has also been about 2% or 2.5%.

[00:07:20]Today, the yields are 4.5% or 4.4% 4%.

[00:07:24]And the problem is that from now onwards you can expect these yields to continue rising and there is a good probability that they will even cross 5% in the foreseeable future. Maybe even 5.5% by the end of next year. So here is the difference. Here's exactly what changed.

[00:07:41]The initial plan was we're going to increase the interest rates to bring down inflation. So when we saw inflation back in 2022 that crossed 9% of course we had to increase the interest rates but everybody in the economy including the government knew that it's a temporary measure. So the government back in 2022 and 2023 paid a lot of money in interest payments but the government basically was very patient.

[00:08:06]Why? As inflation is going to cool down the Fed will lower down interest rates and the interest payments will become sustainable. mortgage rates will go down. So, it made sense for you to actually buy that property. But that is not going to happen because the current crisis will keep the yields at around 5% if not higher, which means that mortgage rates. Now, the US government right now has fundamentally changed the strategy.

[00:08:33]It started this war with Iran and it means that we need more money to fund that war. But there is very lack of demand for the US treasuries. And if are there aren't many people who want to buy your treasuries for multiple reasons?

[00:08:48]Look, let's look. Reason number one is that people look at this war, they don't see an end. So how much money exactly do you want for this war? Oh, you don't know how much money do you need? So if I'm loaning money to you, I'm a bit worried about that. So I'm taking a bit more risk, which means that I will demand a premium on my investment. So you will offer me a premium to borrow my money. Now secondly, the debt is already too large. It's over 100% compared to the GDP. So you're refinancing that debt. And then on the top of that debt, you want to borrow even more. So you have to attract capital from other parts of the world. They might not be willing to invest on you. And thirdly, there's so many nations across the globe who need to refinance their debts. So everybody's fighting for this pool of capital. And that means that we can expect the yields to continue rising to 5%, maybe 5.5%. And if that happens, then we can expect a mortgage rates to rise. And if we know for a fact that the yields on 10-year treasuries will be at about 5% in this foreseeable future because we are not expecting the US government to pay off the debts, at least since uh up until Donald Trump is the president of the United States, then you know for a fact that mortgage rates are not going to come down. So if you're going right now and purchasing property and taking a mortgage on that investment, you can be counting on the fact that mortgage rates will go down and you will be able to refinance them.

[00:10:19]In fact, there is a good probability that if the yields on 10-year treasuries will cross 5%, then you can expect the mortgage rates to cross 7% or 7.3%. And we have recently seen that the Department of Treasury was struggling to sell more debt. So there was an auction where the US government wanted to raise more money and they auctioned those long-term bonds and 10-year treasuries, three-year treasuries. And guess what?

[00:10:46]The government found out there is a lack of demand. The demand is very weak. And now the government is in trouble. And when you're in trouble, you basically offer higher yields. Imagine you are an investor right now. And you have options. Option number one is that you can just put your money into a government bone and receive 5%. So imagine you have a million dollars in your bank account and now you're thinking what exactly am I supposed to do with this million dollars? How can I invest this million dollar? You're a smart person. You are you understand that there is inflation and that money must be invested, right? So if it's invested in government bones, you're making 5% from that investment. And here's the question. What exactly do you have to do to earn this 5%. And the answer is simple, nothing. You just sit down in your house, do nothing, and your money is generating you 5%. Because that's how much the US government is paying you. Now, the second option is that you go to real estate and you invest that million dollars into real estate. And here's the question. You could make in the best case scenario probably 5% after covering all of your expenses. But here's the thing. If you would ask anybody that has ever invested in real estate, that person will tell you for a fact that real estate is not a walk in the park. There is a lot of things. There are a lot of things that you have to take care of. Pay for this, fix that, deal with the tenant. You have bad tenants, maybe lawsuits, god knows what happens next. And that all kind of sucks your energy. And here's the question. If you are an investor with a million dollars, 5% from real estate, 5% do absolutely nothing from the bone market while you can focus on other things. Maybe build your business, grow your business, grow your career, spend more time with your family, who knows.

[00:12:38]What are you going to choose? Something is telling me that most people are simply going to choose the boat. Well, if that's the case, then there is a lot less money is going to go into the real estate. And that brings me to the next most important question. Shouldn't you be making a lot of money from capital appreciation? And here's where the problem gets because these are the house prices over the last 10 years from 2016 up until 2026. And you can see that something happens in 2020 that between 2020 and 2022, house prices rise from $371,000 to as high as $525,000.

[00:13:19]And that's a 41% increase. So if I will be making 41% of my capital appreciation, why would I even invest in the bond market? Here's what a lot of people don't realize that all that demand that boosted house prices back in 2020 and 2021, all these houses were indirectly purchased by the Federal Reserve. Now, what exactly are you talking about? It makes no sense. Have you ever heard the Federal Reserve ever buying any house? Well, let me tell you how it works. Every piece of mortgage or probably pretty much like more than 90% of all the mortgages or at least in the US are turned into securities which we call mortgagebacked security. So it's a security, it's backed by a mortgage and then it's sold to investors. So because they are sold to investors and there's demand for them, these banks can offer you these mortgages otherwise it's very difficult for bank to offer so many mortgages.

[00:14:15]So in 2020 because the Federal Reserve is so afraid that the pandemic crisis could possibly c create a crisis in the housing market just like it did back in 2008. The Fed is afraid. So the Fed is like wait a second we don't want 2008 style crisis because if there is a COVID style crisis people will massively start selling their houses. So here's what we do. We will start buying mortgage back securities. So the banks will offer you the mortgage and then this mortgage will be sold to the Federal Reserve and the Federal Reserve will print money and will buy them. So if you're let's say JP Morgan or City or whoever or Chase and you're offering the mortgages. So here's the thing. On one side you have people who want mortgages. On the other side the Federal Reserve wants to buy these mortgages. So you as Chase all you do is that create mortgage offer it and sell it to the Federal Reserve and that huge demand by the Fed allowed the mortgage rates to go significantly down. So which is why everybody who purchased a property back in 2020 and 2021 was because the Federal Reserve subsidizes houses which is why house prices showed by 41%. If you remove the Federal Reserve out of this equation, you would not have this 41% capital appreciation.

[00:15:39]But here's what people will say. Well, if the Fed did that once, why wouldn't the Fed do it twice, right?

[00:15:46]The chairman of the Fed made it clear that from now onwards, the Federal Reserve is no longer going to buy MBS or mortgage back securities.

[00:15:56]Why? because it artificially boosted house prices and made housing unaffordable for so many Americans.

[00:16:04]And now the new chair of the Fed who is Kevin Worsh he also said multiple times that he is against quantitative easing and with quantitative easing usually we mean when the government buys the US treasuries but in this case he's definitely against the mortgage back securities because if you don't want the Fed to buy the US treasuries then how can you possibly expect the Fed to even buy mortgage back securities so that's not actually happening so house prices won't be growing as as since they're still adjusting. Now, here's another thing that people don't pay attention to. Look at this. Because house prices rose so dramatically fast, since then, house prices almost haven't actually increased at all. They're very still.

[00:16:46]Why? Because all of this increase in houses made housing so unaffordable. And now the Fed is out of the housing market, which means that not many people can actually afford houses like in 2020 and 2021. So, there isn't a strong demand to actually push house prices to rise. A combination of high house prices and high mortgage rates is leading to a slower demand, which means that if you're buying a house, you can't be expecting house prices to rise by that much at all. Now, another thing that you must pay attention is that even if they go back to annual appreciation of 4% which has been the historical norm, you got to understand that your house is not a liquid asset. If you wake up tomorrow and you realize that, oh, one year has passed since I purchased my house. So, the value of my property have increased by 4%. Now, here's the question. Does that changes anything? No. Nobody wakes up and looks at what's the value of his house. Nobody cares about the value of your house. You can't be selling a portion of your house. Now, if you're investing in the stock market, of course, it makes sense because you can just take a portion of your stocks and just sell them. But if you're investing in real estate, either you sell that into our real estate or you don't sell that real estate at all. So it's not like it's not a liquid investment. So here's the conclusion. If you are investing or if you're buying a property with cash, it still makes sense because you're actually making some returns, especially if you're buying that house for yourself. So it's still a good investment to a certain extent because you don't have to move from one place into another. You know that you're basically living in your own property.

[00:18:21]But if you're taking a mortgage to invest in real estate, then that's a really bad deal for now. And that's how it seems. So here's the question. Where exactly should you be investing? Now, a lot of people can't get into real estate. And real estate seems like a bad investment. But you can still invest in the stock market. Look at what happened to stock prices over the last 5 years.

[00:18:42]The stock market has made so many people multi-millionaires. And every single day that you're not in the stock market, you're missing so much. Especially right now since we are going through this AI boom. Look at what's happening to AI stocks. Some people will claim that this is AI boom and the market is going to crash. Let's assume for a moment that the market is going to crash tomorrow.

[00:19:04]Do you think it's going to stay like that forever? Well, of course not. It's going to recover. Let me give you a very simple example. All the tech companies back in 2001 crashed when the docom bubble crushed. But here's the question.

[00:19:17]If I would ask you, if you had the opportunity to go back in time and invest in Amazon in 2001 when it was at its peak, would you invest? Well, of course, yes. If you invested dozens like 20, $30,000 back then in Amazon, today you would be sitting on millions of dollars and not a single piece of real estate would actually get you that many returns. So, if you haven't started investing yet, if you don't know which stocks you should be buying right now, then you can jump on the one-on-one strategy session with my team. We'll map out exactly your situation. We'll find out what are the best investments specifically tailored to you and how you can start building an investing strategy that will get you to financial freedom.

[00:20:00]And the first 100 people who are going to use the link in the description of this video will get the strategy session completely for free. The link is in the description of this