The Next Real Estate Bubble – Is Economic Collapse Here


Doom doom doom! The world’s coming to an
end! It’s collapsing! No for real, it really is it’s actually what real estate
does every twenty years and today on Limitless TV I’m gonna share with you
when I think that is actually going to happen, I want to watch this one. Middle of October 2007 I’ll never forget
sitting with my real-estate power team in my office right over here and we had
25 deals we were in the process of closing with our deals with our clients
and we were thrilled and excited and all of a sudden we get the call from a bank
that said, hey your 6% interest rate on this house you’re about to do with this
client we’re um we’re bumping that up to seventeen percent. The day of closing the
bank comes back and says, we want an 11 percent hike in interest rate. There’s
something going on that day was the first day of the collapse of 2007. And I
got to tell you it rocked the planet. I mean we had banks shutting down left and
right we had a whole swathes of homes going back to Fannie Mae and Freddie Mac.
And real estate, the sky fell down and harder than it had since the Great
Depression. Well guess what? It’s happening again. Why? because it’s always
happening again. The sky’s always fallen in real estate every 20 years. I want to
share with you a cycle because the question that I want to answer today is
when is the next collapse gonna happen? Do you want to know? I can help you get
fairly precise on the answer to that with today’s information. Now first of
all, let’s just understand the basic way that a market moves. We know that real
estate is always going up but we know it doesn’t move in this kind of linear line.
It actually moves up more like this and what we have here is, you know what
that’s called? that’s called a what? it’s called a bubble and bubbles eventually
burst. Down here, we have something called a trough. Which means we have to go
through a low period. Right now I’m gonna pinpoint exactly where we’re out in the market
but I want to talk about 2007 and what we learned from it. First of all, go back
80 years earlier. What was happening before then?
The Great Depression. The Great Depression was definitely one of the
really really bad drops in history. And the truth is the kondratyev k wave cycle
documents the fact that every 20 years real estate goes through a high and go
through a low. Sometimes it’s a little less than 20 years sometimes it’s a little
more than 20 years but for three thousand years just go ahead
and Wikipedia this thing it’s amazing what has been tracked through the
history of our world with this particular cycle. And let me share with
you what’s actually going on. So let’s just talk about this idea of supply and
demand. Now if you’ve ever taken a college course on economics and had a
bad experience like me don’t freak out. I’m gonna keep it super simple today.
Supply is what? need for houses. What’s demand? Population. There’s a correlation
between population and houses. For example if I were to snap my fingers
very powerfully and all the sudden double the inhabitants in America and go
from 350 million people to 700 million people, oh I did it I just created a
housing crisis! Why? we don’t got enough houses for all those people. That is
demand dictating supply. Well right now here’s what you need to understand. This
line do you know what it really represents? It represents the average
cost, the average cost to build. So for example when the market drops
below the average cost to build, can we afford new construction? We can’t. The
commodity of a nail and a board and the things that you need to construct a
house the shingles? they cost more than the market will bear. So what’s happening
during these recapture periods is nothing’s being built. Almost nothing is
being built and yet what’s happening with the passage of time to our
population? It is expanding. Right now in America, we we keep making babies. We keep
allowing immigrants to come into this fine country and what it means is we
have more and more and more people occupying our country. This is happening
in most places all across the world and as the population grows it eventually is
going to put a burden that says, hey I can’t have my aunt and uncle living
under my roof anymore and moved in with Grandma and Grandpa
like when we had the crisis. Guess what? things are turning around. The stock
market’s recovering people have good jobs the markets improving. And guess
what? Go get your own dang house. Which means we now need to build something. We
know if this line represents the average cost to build a home then construction
really gets picking up when? Between here and this point right here. This is build.
Time same thing right here, this is build time. Same thing right here, this is build
time. Now we’re going to talk about this clock and talk about what happens. When
we get to a point where, hey we’ve just started building look at what’s
happening in the housing market. How long does it take a developer to take a raw
piece of land, work with the city, put an infrastructure, get all their approval,
put in sewer and electric and water, and all those pipes and then paving it out
and putting in sidewalks and then they’re getting ready to parcel off land
for spec building or speculation homes because remember population is saying we
want homes and then they start building and they do phase 1 build-out and phase
2. Do you know how long that takes? That can be a three to five year process
to get a development going. And you know what? Once you start you kind of got to
see it through. And so what ends up happening at this
start of this as builders will go find land and they’ll start that multi-year
development process. Well along the way population is out the gate kinda like, oh
we can breathe again there’s houses to buy this is really really exciting right
now. So they start buying houses and buying houses. And you know what happens
when you start buying houses? The value properties could go what? They go up and
all of a sudden you get neighbors turning their heads like, dude yeah
so-and-so moved out they bought a house they got it for 160 now it’s worth 180.
aAnd then all the sudden 180 turns to 200 and all the sudden neighbors start
turning into what? Investors chasing the market. The skeptics are still kind of
leaning back. You know right here this is when your your community starts getting
involved and then eventually the prices go up so much that the skeptics come out
of the woodwork so like, fine my neighborhood made sixty thousand an
equity I’m gonna do a house. You know when the skeptics jump in? Right here. And guess what? there’s too much real estate in the
market and there’s not enough population to buy and so all of a sudden if we have
more houses than we need, a house is only worth what? someone’s willing to pay. If
no one’s willing to pay any more then actually what happens to the value of
the home? It drops dramatically and we get a bubble burst. And what that means
is this period of time is called liquidation. So 2007 I was buying homes
at Phoenix and Vegas for 80,000 to $100,000 that we’re selling at the height of the
market for 250 or 300 thousand dollars. And then the market goes into this
recovery. This is where there is a huge tension of population. People still
making babies and saying, oh my gosh we need a house, we need a house, we need a
house. No one’s building, no one’s building, no one’s building. And
eventually boom it starts happening, Because there’s a delay in a developer
needing three to five years, they cannot forecast when the bubble will pop. So
when it does pop, many builders get hit really hard because
they don’t know how to time the market and then they get spanked. They’re just
looking for jobs, they’re looking for ways to earn money. But the greedy really
get hit hard. So this is helping you understand the
fact that we build bubbles and they burst and we go through troughs and it’s
natural. It’s normal. In fact this type of economics is really a cleansing. What it
does is it weeds certain people out of the market that didn’t know how to time
it. We’re an intelligent and understanding how to run their business
and work with the market and it’s a 20-year cycle I mean this cycle happened
when I was in my mid-20s. Right now I’m in my late 30s and I’m asking this
question and I’m getting asked his question when is the market going to pop?
Well I’m not gonna be like the Mayan calendar that tells you when the end of
the world is. But I’m gonna show you how to know when it’s gonna happen and how
you can get as close as possible. Right now in our specific market, construction
is happening everywhere and there’s very few homes at all in the market that are
available for sale. Everything’s in that, in that, mega building mode and right now
if I list a home for sale it’s a market where I can sell and I can get my price
but that’s not gonna last forever. That’s gonna change. So right now what we’re
feeling is the pent-up demand right here where there’s not enough inventory,
population is saying, we need more houses. And then we’re gonna get into this zone
right here. This is what has to come next and I want to tell you how to know when
we get there. This is the danger zone. This is when you
want to be very careful in your investments this is why I go into very
certain specific markets and I know when to time and I know and to come out.
Because what will happen is, remember you can measure where you’re at and what
your rebuild cost is. For example, it costs two hundred thousand dollars to
build a home but I can sell it for 280. Guess what? There’s $80,000 dollars
more above what it costs to build and the bigger that discrepancy, the more you
got to be cautious. If it costs two hundred thousand to build a house and
right now, that house is worth two hundred twenty thousand, there’s a very
minor discrepancy. That’s gonna put us closer into the market in this zone and
this zone and this zone and the markets going to go up and up and up. And you’re
looking for a wide gap. Now if you want to cheat on what that is, right now you
can actually just survey the builders on what are you building and what
selling for. And the bigger the discrepancy, the more you want to look at
when it’s time to get out. The second factor that you want to look for is
volume of houses in the market. Right now in my area there’s so few homes in our
entire county. I mean it’s a few hundred homes that’s it. When that few hundred
turns into five hundred, turns into one thousand, turns into two thousand, what
that population is telling us is we no longer want the houses that you’re
building and that’s gonna create a discrepancy. When the market turns from a
from a seller’s to a buyers market and there’s too much
inventory that’s when this process has likely already begun. Right now if I were
to pinpoint exactly where we’re at, in Utah because even though we’re
experiencing something that the rest of the nation is, the entire United States
is made up of 350 sub markets and they all move slightly to a different pace.
They’ll all roughly crash together. They’ll all roughly rebuild together and
I look for the outliers where the market took the deepest plunge and I’m gonna
buy up all of those homes. Because I’ll get the nicest and newest for the
cheapest price and then I’m gonna recycle them into the marketplace and
find a way to make them available to people again. People aren’t in a position
after that kind of loss to buy but they are to rent or do a lease option a rent
to own and so the investors help clean up the economy. And I’m getting ready for
a big massive clean-up on Aisle 23. Right now in the marketplace, we are somewhere
right here nearing the end of the red zone. Prices in our median have
come back strong. 30, 40, 50 thousand dollars. We’re still low inventory. So now
what I’m waiting for is I’m watching an inventory and I’m
waiting to watch it increase. And as it increases and there’s less people buying
homes, that’s what’s gonna put us in this zone.
Which means we’ve got some time left in the market that could represent a few
years and my guess is it probably does represent a few years before we then
head into our next big drop. And if you understand what’s happening in the
market you can go into markets with me and I’ll show you the most intelligent
places to buy. The places where you’ll insulate yourself in pricing points
where your bubble feels more like this as opposed to something really big and
dramatic and you want to be my best friend and me your
best friend to go and buy as much real estate as possible especially in this
zone right here. This is one of the sweetest times. If I were to draw
this a little bit more accurately it looks actually on a micro scale, it looks
like this. Building building building drop. Building building building drop.
This drop happens very quickly and this is where we like to be in the market
place as investors. If you’re timing the market. It’s not the only time you can
make time you can make money any time in the market but friends those are the two
factors to look for an understanding when is the market really gonna burst,
when is it coming to an end. And just look at those two things, what’s the
discrepancy between building price? You know you’ll have you’ll builders
approach you if you’re an investor that’ll say, put up the money I can build
it for 200 it’ll be worth 300. That’s a warning sign.
The second one is, uh-oh growing inventory and not enough buyers.
Get out. Well the economic collapse is coming and I hope you’re as excited as I
am. Right? The economy gets to renew itself, it gets to move forward. And
there’s always an abundance of opportunities. There’s people who need
help. There’s homes that need to be saved so they don’t dilapidated and get lost.
And you’ve got an opportunity with me to jump in on that next big major
opportunity to help a lotta people out and create some really beautiful abundance
by helping our economy restructure, rebuild, and get back online. you

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