Ep 38: How The Federal Reserve Is Going To Burst Your Bubble

Your FOMO Bubble Is About To Burst"Fear-Of-Missing-Out"—Are home shoppers who think they could be left behind if they don't rush into the market. That's concerning, considering that FOMO home buying was a key ingredient in our last housing bubble.

RELAX!!We're NOT headed for a 2008-style crash!

I explain why in this episode.

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Full Transcript

Your FOMO Bubble Is About To Burst

"Fear-Of-Missing-Out"—Are home shoppers who think they could be left behind if they don't rush into the market. That's concerning, considering that FOMO home buying was a key ingredient in our last housing bubble.

U.S. home price growth accelerated to 19.2% in January 2022

The latest jump we experienced is well above the peak annual rate (14.5%) posted in the lead-up to the 2008 housing bubble.

RELAX!!

We're NOT headed for a 2008-style crash!

Because unlike the baby boomers who took out all of their home equity and spent it on Cars, Boats, Travel and their lifestyle. I think this time around we learned our lesson.

You're probably still asking yourself...

So, what does he mean FOMO Bubble?

Don't you mean the Fed is going to BURST the REAL ESTATE Bubble?

Based on today's data, we should NOT assume fallout from a housing correction will be comparable to the 2007–09 global financial crisis in terms of size or impact.

Because today's household balance sheet appears to be in better shape, excessive borrowing doesn’t appear to be fueling the housing market boom.

DEMAND is fueling today's meteoric rise in real estate prices.

FOMO Like Demand

Along with INFLATION

Because the banks are borrowing more money than ever.

While at the same time, because of COVID, the FED has pumped more money into the system than ever seen by mankind.

TRILLIONS in just a few years.

Sure, you feel like you are RICH ---> The real questions... Are YOU?

HOW WILL RISING INTEREST RATES IMPACT US MOVING FORWARD

Will rising interest rates, created by the fed, allow for this SMOKING HOT real estate market to catch its breath and allow new construction material costs to soften?

Devyn Bachman, vice president of research at John Burns Real Estate Consulting feels,
"If rates rise above 5% you will price buyers out of the market... The higher rates could also discourage investor activity, which accounts for a large portion of home sales today,"

While rates will certainly deter some would-be buyers and/or investors from entering the market, it would have little impact on homeowners. These days, around 99% of mortgages have fixed rates.

Based on that, I believe today's homeowners will hold tight to their home unless a life event forces them to move.

If this is the case.

SUPPLY will remain tight.

DEMAND will shrink... But it won't disappear.

Where is our SUPPLY of existing homes going to come from, you ask:

I believe baby boomers who are well-positioned in their homes will pay cash for their next move. Most will consider it a downsize. The reality is... The size of their home might be getting smaller... But the cost won't.

Either way, most baby boomers are sick of being told what to do... The cost of their next home or where the rates are at won't matter to wealthy Baby Boomers as they enter the second half or final quarter of their life.

What will matter is the quality of life they have from this point forward.

We can all appreciate that.

Because the next type of person who will be selling in our high-interest rate market...

Will be the ones dying.

The conservative 80, 90 or 100 year old who has lived in the same home for 40, 50, 60 years.

They never cared how much their home was worth.

They didn't need to move to Florida because of COVID or because of the experience.

All they wanted and needed was their family. Their grown children and most of all those grandchildren who always warmed their hearts and made them smile.

That's what makes them happy!

That's why they stayed put for so many years.

The wise 80, 90, and 100-year-old citizens we have today know something most of us don't.

Life isn't about FOMO (fear of missing out) because you don't have something someone else does.

Life is about being happy with what you have today. Right now!

A wise old man once told me, "When everyone around you is spending like their money supply will never end. History shows deflation is on the horizon."

My fellow Value Driven Investors.

Put a smile on your face.

Stay Positive.

And realize, the best investing opportunity anyone still alive on this earth has ever seen...

Is about to present itself before you.

Are you ready to capture your opportunity?