Video Closed Captioning:
it’s a sunday morning getting ready to
speak with todd baldwin dan bird
and uh about a dozen of you
have already forwarded me meet kevin’s
discussion about the housing market
uh over the last couple of weeks we’ve
seen meet kevin talk about housing we’ve
seen him talk about rising interest
rates
reducing purchasing power
last couple of videos have talked about
the 1970s
and why maybe the 1970s art affair
comparison
so i went ahead and watched that video
this morning kind of taken my notes and
as usual i think meet kevin has a lot of
very valuable stuff however
i think he is missing
perhaps the most important variable of
the 1970s and i’m
and he’s
i’m not sure why he keeps missing it so
what i thought we would do is summarize
what i heard kevin say
give you some actual numbers
and then we will dive in and highlight
what kevin is missing
so
first and foremost this is for me
kevin’s video i think without the last
12 or 14 hours i think it’s called
housing crash or housing problem or
something like that
so what do we have so first off he’s
talking about the 1970s and he’s
basically saying the 70s
yes he’s basically saying in the 70s yes
housing went up yes interest rates went
up but it was because of the 30-year
mortgage one second
so what he’s saying is basically don’t
look at the 70s the reason the 70s
kind of make his thesis break
is because there is the introduction of
the 30-year mortgage
which
on the surface
if you don’t do your research makes
perfect sense
what have i told you
that real estate is based on it is
always based on a payment
so if you go from an environment where
maybe the traditional mortgage is 15
and
then you go to 30 your payment is
smaller so of course if kevin was saying
that the 30 mortgage launched in the 70s
and
interest rates went up housing went up
but the payment term went from 180 to
360 which are months
that would make perfect sense to me
in fact it made perfect sense to me so i
had to go research it this is what i
found
the 30-year mortgage
was actually introduced not in the 1970s
it was introduced in 1948
for new construction
and it was later introduced in 1954
for existing home sales
so the 30-year mortgage was not
introduced in the 70s it wasn’t brand
new it wasn’t suddenly a way for mom and
dad to buy a home on 360 months payments
instead of 180. it was in fact available
since the 1950s so that is
not
um
not a correct assumption
sorry this is what happens when you do
these things live and yes i’m doing this
live because i want to get ready for my
next call so
i didn’t know i didn’t know when the
30-year mortgage was introduced again
1948 for new construction
1954 for existing home sales so that
kind of argument doesn’t quite work but
again i think there is something so
vital or so flawed
that we’ll get to it in a minute so
let’s look at what the 1970s were
the 1970s 1970
the 30-year interest rate was 8.5
percent
by 1979 we’re staying in the 70s it was
11.2 percent
so this is roughly speaking a 300
percent basis it’s actually 270 points
so again
given the thesis of the day
real estate should crash 27
but it didn’t
kevin says it’s because of the 30-year
mortgage
which it isn’t
or at least not entirely housing went
from twenty four thousand in two dollars
to forty eight thousand eight hundred
and thirteen dollars
housing
doubled
this is why meet kevin is talking about
the seventies because it doesn’t match
his thesis
interest rates went up 270 basis points
real estate is supposed to crash 27
where in reality
it went up
100 percent
i keep telling you folks it’s not about
price it’s not about interest rates
there’s this third thing
that unfortunately meet kevin
either ignores
or doesn’t look at and we will get to
that in a minute
so again there’s a thesis that interest
rates go up one percent pricing should
fall 10
it’s already gone up one percent and
housing is still on fire
now in that in that video i watched this
morning that again a dozen of you sent
me
he’s talking about rates going up two
and a half percent
wow
and i think he’s right i think rates can
go up two and a half percent
i do not think house is going to crash
25
and in fairness in this latest video
he is not talking
crash 25 percent he’s talking a loss in
purchasing power
which
mathematically speaking he is absolutely
right but again
there’s this thing that meet kevin is
not talking about
that can neutralize
that 25 loss in purchasing power
so if you’ve been watching my channel
for any length of time
you should know what that third variable
is
if you think you know what it is go
ahead and leave a comment below because
we’re going to flip this white board
over and we’re going to look at it
together
kevin if you ever see this or somebody
who watches my channel sends them a note
just ask kevin to look at this because i
think it’ll be eye-opening
and then when you look at this decade
the decade we were in you can at least
ask the right question so
let’s see if sonny will stop making
noise
let’s turn this bad boy around
so
hopefully you can see that now again
make this a little bit lower
so the answer is wages it is not housing
price
right housing went from 24 grand to 48
grand it is not interest rate it went
from eight and a half to 11.2
the big thing that kevin and so many
other people are missing is wages
houses for the most part are bought on
payment
yes
interest rate and price are important
but they are two
of three
factors that make this work
so let’s look at wages in the 1970s
the wages start and this again is median
income for a family of four
can you believe this some of you make
this in a month now some of you might
even make this in a week
eight thousand seven hundred and thirty
three dollars that’s what the average
family of four was making in 1970.
can you imagine living on anyways can
you can you imagine man
by 1979
the average family of four
is making 16
hundred and sixty one dollars
that is nearly an increase of one
hundred percent i don’t know where this
sixty-six percent came from
what is that
why was that there i don’t know anyways
so again
went from 87 to 16 four so a little bit
less than a hundred percent
the average increase in wages for the
decade
for the decade was 7.3
this is how
interest rates could go up
prices could go up it’s because
everybody’s wages were going up 7.3
percent this is the average for the yi
for the decade
the range
the min
max
the minimum wage increase for the 1970s
was 3.4 percent
the maximum was 11
again we buy houses on payments
prices could go up rates can go up if
if
wages go up that’s the thing that meep
kevin is not talking about it’s not the
introduction of the 30-year mortgage
because we’ve already looked that up and
it was sourced in
1948 and 1954 if memory serves
so again
payment so i did some math
this eight thousand three hundred and
no eight eight thousand seven hundred
and thirty three dollars
produces a monthly income of seven
hundred and twenty seven dollars can you
imagine living on 727
a month
wow
again this income here converted to
monthly is 13.71
so one of the things i wanted to do is
figure out
what 25 of this gross income is because
again a lot of people spend that on rent
and mortgages
so 25
of 727 is 182
that’s a comfortable mortgage payment
obviously you wanted to be lower but
that’s what 25 is and again 25
of 13.71 is 343.
so again that’s an increase of
one dollars
it’s about payment and the third
variable that meet kevin and so many
other people miss is wages
me kevin is talking about if interest
rates go up two and a half percent
and frankly i think he’s right i think
rates can go up that much from the
bottom to the top the floor to the peak
i think he’s right but then he talks
about a loss of purchasing power of 25
percent
he’s forgetting about wage increase
if wages go up eight percent
eight to eight and a half percent
it neutralizes that loss and purchasing
power
wages go up eight and a half shoot wages
go up ten percent
there is no loss in purchasing power
because housing is bought on payment
you’re not paying cash for a house
your payment will still get approved
if interest rates go up two and a half
percent at current prices
so
he’s just not doing the math he’s
missing a third variable it’s not x and
y it’s x y and z
z wages you’ve got to look at wages if
wages go up 10
over the next two years
housing is still affordable i’m not
saying wages will go up 10 i’m just
saying kevin
let’s complete the picture
it’s about wages you’re missing wages go
look at the 1970s i’ve given you the
numbers it’s a simple google search you
can download my 50-year spreadsheet in
my free course all the sources are
listed
it’s free go get it
so again
very interesting
at the end of his video he’s talking
about how to take advantage or maybe
protect yourself
i think most of that is correct from
memory actually didn’t write these down
get rid of consumer debt obviously he
does talk about maximizing your real
estate debt
i think that was said maybe without
caution i think some of you should not
do that
certainly shouldn’t do that if you’re
going to go buy something else a boat or
a car or a second home you also need to
make sure there’s you can still cash
flow
it’s not about maximum leverage i don’t
like that it makes me feel uncomfortable
also some of you hear what kevin said
and you’re going to take equity out of
your home where you’re where you your
wife your husband your kids sleep for
some of you that is very very dangerous
this next this coming recession is going
to be interesting
we will have a fed that is raising rates
we will have inflation probably double
digits very soon
cpi in fact if you watch my channel i
did the math for you cpi is actually 11
2
before gas increases
yeah so do me a favor meet kevin go back
and look at the 70s it’s not because of
the 30-year mortgage rate i didn’t know
i did the research it was in the 40s and
50s not the answer the answer kevin is
wages wages increased
every year and every year every year in
the 70s wages averaged seven percent
increase you can afford a lot more home
if your wage goes up seven percent a
year the the min was 3.4 max was 11 so
again folks it’s not about price
it’s not about interest rates it’s about
price
interest rate and wages and oh by the
way those three factors
make up the affordability index which
you if you’ve read my book
uh one rental at a time you know that i
watched that and it saved my butt
during the great recession we got out of
the houses at the peak
bought apartments and then we got in at
the bottom so again i have done it i’ve
been doing this for a long time
uh so again it’s not about interest
rates and prices kevin please go back
and look at wages take care everyone
thank you for doing this live
sorry my puppy he’s sitting right here
was kind of a distraction hope that was
okay
bye bye