[0:00] The housing market is about to shift
[0:01] again and this time it's for reasons
[0:03] that you might not expect. And this next
[0:05] shift comes at an interesting time
[0:07] because housing affordability is at the
[0:09] lowest level we have seen since the
[0:11] early 1980s. And for the first sustained
[0:13] period in history, it is cheaper to buy
[0:16] a new house than it is to buy a used
[0:18] house. And between February and June
[0:20] 2026, mortgage rates kept going higher,
[0:23] closer to the 7% mark. Again, everybody
[0:25] said that lower mortgage rates would fix
[0:27] the housing market, but they never came.
[0:29] But now with the news that the United
[0:31] States and Iran war could be coming to
[0:32] an end, mortgage rates might be coming
[0:34] down. So whether you own a house or
[0:36] you're thinking about buying a house,
[0:37] this video is for you. Let me start by
[0:39] diagramming what happened to the housing
[0:41] market in 2026. That way we're all on
[0:43] the same page. In the beginning part of
[0:45] 2026, what we saw is that mortgage rates
[0:48] finally began to fall in the United
[0:50] States. And the reason why the fell was
[0:51] because there was more calm in the
[0:53] economy, which brought bond rates down.
[0:55] I'll explain what that means in just a
[0:57] minute. But all you need to understand
[0:59] is that in the beginning part of 2026,
[1:01] two things happened. We saw mortgage
[1:03] rates finally fall to below 6% a year
[1:07] for the first time in a while and
[1:09] sellers started listing their houses
[1:13] again. So we started to see more houses
[1:15] on the market as people started to feel
[1:17] more comfortable selling their houses.
[1:19] But then things changed on February
[1:21] 28th, 2026. The United States attacked
[1:24] Iran. there was more uncertainty about
[1:26] the economy and the dollar which caused
[1:28] bond yields to rise which in turn caused
[1:30] mortgage rates to rise again. So in
[1:32] March 2026 we saw mortgage rates go up
[1:36] again and now people started to get
[1:38] concerned about the economy and
[1:40] concerned about the housing market
[1:42] again. Then between April, May and June
[1:44] things continued to get worse as
[1:46] mortgage rates started to get closer to
[1:48] that 7% mark a year while inflation also
[1:52] went up. Inflation now is at about 4.2%
[1:57] while getting a mortgage rate is closer
[2:00] to that 7% mark. And this is where
[2:03] people started to get concerned that if
[2:04] the cost of living keeps going up,
[2:06] mortgage rates are going up, how are
[2:08] people going to continue buying houses
[2:10] again when President Trump is promising
[2:12] lower mortgage rates? But then things in
[2:13] the housing market changed again on June
[2:15] 14th because that was when President
[2:17] Trump announced that the United States
[2:19] and Iran have come to a deal. And
[2:21] immediately oil prices fell, which
[2:24] translates directly to the housing
[2:27] market. Now, you might be wondering,
[2:29] what do oil prices and this war in the
[2:31] Middle East have anything to do with the
[2:33] housing market? And the reason why was
[2:35] what I've been hinting at for a few
[2:37] minutes in this video, which is the bond
[2:39] market. And what the bond market is is
[2:42] [snorts] you can go and lend money to
[2:44] the United States government. And when
[2:46] you do that, you're buying what's called
[2:47] a bond. So the United States government
[2:50] works like this. The government collects
[2:53] tax dollars and then they go out and
[2:55] spend money. Where do they spend money?
[2:57] They spend things like on health care.
[2:59] They spend money on military. They spend
[3:01] money on infrastructure. Well, the
[3:03] government spends a lot more money than
[3:05] what they generate from taxes. So they
[3:08] need to go out and borrow more money.
[3:11] Now this money that they borrow is
[3:13] something that you can now lend money
[3:15] into. This is what these bonds are. is
[3:17] called a treasury bond. So you can lend
[3:19] money to the United States government so
[3:21] they can continue funding their
[3:22] spending. And you might say, well, why
[3:24] would I lend money to the United States
[3:25] government? The reason why you would
[3:28] want to lend money to the United States
[3:30] government is so that they pay you back
[3:32] with interest. It is a loan made to the
[3:35] United States government. Well, this
[3:37] loan to the United States government,
[3:39] this Treasury bond is considered the
[3:42] safest investment. is considered a
[3:43] risk-free investment by every economics
[3:46] textbook. Paying rent every single month
[3:48] is expensive. And when I was paying rent
[3:50] every single month, money was leaving my
[3:52] account, and in return, I was getting no
[3:54] rewards. But it doesn't have to be that
[3:56] way. Thanks to our sponsor, Built. Built
[3:59] is a loyalty program for renters. It
[4:01] takes the rent payment that you're
[4:02] already paying and turns it into points
[4:04] that you can redeem and use. That means,
[4:06] yes, every rent payment you make is
[4:08] going to earn you built points. There's
[4:10] no cost to join. There's no minimums and
[4:13] it works no matter where you live or who
[4:15] your landlord is. Which means you can
[4:17] now use your build points at places like
[4:19] coffee shops, gyms, flights, hotels, and
[4:23] yes, you're going to get those built
[4:24] points on top of the rewards that your
[4:26] credit card is giving you. At the time
[4:27] that we're recording this video, Built
[4:29] has offers that let you use points to
[4:31] pay your student loans, put a down
[4:33] payment on a home, or even use your
[4:35] points to put towards your next rent
[4:37] payment. So, if you want to learn more
[4:38] and start earning points for the rent
[4:40] payments you're already making. Our
[4:42] sponsor, Built, can help you with that,
[4:43] all you have to do is scan the QR code
[4:45] on the screen, and I also have the link
[4:47] for you down in the description. In the
[4:49] investing world, there's a very simple
[4:50] concept called risk versus reward. If
[4:54] something is a safe investment, like in
[4:56] this case, it is a risk-free investment,
[4:58] your reward should be lower. Meaning if
[5:02] you're going to lend money to the United
[5:04] States government, you're not going to
[5:05] get a huge rate of return because it's
[5:07] not considered a very risky investment.
[5:09] It's not a risky investment. So your
[5:11] returns are low. So that's how this
[5:13] system works. And the reason why this
[5:15] relates to the housing market is because
[5:18] when there's concerns about the economy,
[5:21] when there's concerns about oil prices,
[5:23] when there's concerns about inflation,
[5:25] do you know what happens? People get
[5:27] scared about lending money to the
[5:29] government. So what happens is these
[5:31] yields, meaning these treasury rates, go
[5:34] up. The government has to pay you a
[5:36] higher interest rate to continue lending
[5:39] money to the government because they
[5:40] know people are concerned about the
[5:42] economy. They're concerned about the
[5:44] dollar. They're concerned about
[5:46] something about the United States. And
[5:48] so when they get concerned, these
[5:49] interest rates go up. And this then
[5:52] impacts the housing market directly
[5:54] because over here in this office is your
[5:58] bank. And what your bank says is we're
[6:01] trying to decide what we want to charge
[6:04] you for your 30-year mortgage. And we're
[6:06] going to compare our different
[6:07] investment options. We can take this
[6:09] money that we have and we can lend it to
[6:11] you for a mortgage or we can take this
[6:14] money and lend it over here to the
[6:16] United States government. Well, who do
[6:18] you think is going to pay a higher rate
[6:20] of interest? The person that is a more
[6:23] risky investment. And remember what I
[6:25] said just a minute ago. The United
[6:26] States government is a riskfree
[6:29] investment.
[6:30] Meaning the United States government is
[6:32] more likely to pay back their bills than
[6:33] you are because the government can just
[6:35] raise taxes. The government can work
[6:37] with our central bank to print money.
[6:39] You can't. So the government is a less
[6:42] risky investment than you, which means
[6:44] you're going to have to pay a higher
[6:45] rate of interest. Now, here's where
[6:47] things start to get interesting. When
[6:49] there's concerns about the economy,
[6:51] people are buying less of these bonds,
[6:53] meaning the government has to raise
[6:55] interest rates. If the government is
[6:57] raising interest rates, now the bank is
[6:59] going to say, "hm, I would have charged
[7:01] you 6% for this mortgage, but now the
[7:03] government is paying a higher rate of
[7:05] interest. So, I'm going to have to
[7:06] charge you 6.75%
[7:08] in interest on your mortgage." So, as
[7:10] there's concerns about the economy, as
[7:12] there's concerns about a war, as there's
[7:14] concerns about oil prices, these bond
[7:16] yields go up, which then causes banks to
[7:18] charge you a higher rate on your
[7:21] mortgage. And this is where a lot of
[7:22] people in the real estate space are now
[7:24] watching this deal because they want to
[7:26] know what is this going to do with these
[7:29] Treasury rates? Because if these
[7:31] Treasury rates fall drastically, that
[7:33] could then cause mortgage rates to also
[7:35] fall. And it can also separately give
[7:38] the Federal Reserve Bank, our central
[7:40] bank, the ability to potentially not
[7:42] have to keep interest rates higher for
[7:44] longer because what the Federal Reserve
[7:47] Bank does is they want to manage the
[7:49] economy and inflation. And we know that
[7:51] President Trump wants lower interest
[7:53] rates. Well, he also just appointed the
[7:55] new chairman at the Federal Reserve
[7:57] Bank, which is our central bank. and the
[7:58] Federal Reserve Bank gets to make that
[8:00] decision of whether to raise or cut
[8:02] interest rates, but they have to take a
[8:03] look at inflation and the economy. Well,
[8:07] when the Federal Reserve Bank cuts
[8:08] interest rates, they're generally doing
[8:10] that to stimulate the economy, but that
[8:13] can make the inflation problem worse.
[8:14] Well, let's take a look at what happened
[8:16] here. Inflation is now at 4.2%.
[8:20] This is the highest level that we have
[8:22] seen in years. And so now when you get
[8:24] the report that inflation is higher,
[8:26] it's much harder for the Federal Reserve
[8:28] Bank to cut interest rates because that
[8:30] could make the inflation problem even
[8:32] worse. So a lot of people were thinking
[8:33] that now because of this conflict in the
[8:35] Middle East, the Federal Reserve Bank
[8:37] won't be able to cut interest rates,
[8:38] they might have to actually raise
[8:40] interest rates, which would make your
[8:41] mortgage rate more expensive. But
[8:44] [snorts] now what people are wondering
[8:45] is because this conflict in the Middle
[8:48] East might be over, oil prices might be
[8:50] falling, the inflation rate might also
[8:53] fall drastically. And if we see the
[8:55] inflation rate fall drastically, which
[8:56] is what President Trump said would
[8:58] happen, if that does actually happen,
[9:01] which we have to see now, the Federal
[9:03] Reserve Bank might be able to actually
[9:05] cut interest rates instead of raising
[9:08] interest rates. Because up until here,
[9:09] before this deal was made, most people
[9:12] in Wall Street were saying the Fed won't
[9:14] be able to cut interest rates in 2026.
[9:16] They're not even going to be able to
[9:18] keep interest rates where they are.
[9:19] They're going to be forced to raise
[9:21] interest rates as a way to cool this
[9:23] inflation problem down. Those higher
[9:26] interest rates would then translate to
[9:27] higher mortgage rates, and you can start
[9:28] to see how that would be a problem for
[9:30] the housing market. But if this
[9:32] inflation rate comes down, that means
[9:34] that the Federal Reserve Bank can also
[9:36] potentially cut interest rates depending
[9:39] on what happens in the economy. And this
[9:41] is where now people in the real estate
[9:43] space are getting very excited because
[9:44] now they're saying, okay, these bond
[9:46] yields are falling. If these bond yields
[9:48] fall and things calm down in the
[9:50] economy, inflation will also fall. We
[9:52] could also then see lower interest rates
[9:53] by the Fed, which also then translate to
[9:56] lower interest rates from your bank,
[9:58] which means it's cheaper to refinance,
[10:00] cheaper to get a mortgage. The housing
[10:02] market will boom again. That's what
[10:04] people are hoping for. We will see what
[10:06] ultimately happens. But the reason why
[10:08] this is so important that the reason why
[10:09] you really want to understand this is
[10:11] because the housing market has gone
[10:12] through a big transition over the last
[10:15] few years. Let me wipe this down and
[10:16] show you exactly what I mean. If you
[10:18] wanted to buy this median house in the
[10:19] United States in 2021, 5 years ago, it
[10:21] would have cost you $347,000.
[10:24] Then, if you put 20% down and finance
[10:26] the other 80% with a 30-year mortgage,
[10:29] your mortgage rate might have been
[10:30] something like 2.96%, which means your
[10:33] monthly mortgage payment on this house
[10:35] would be something like $1,165
[10:40] a month. Now, take a look at how things
[10:41] changed over the last 5 years. That same
[10:43] house today would be costing you
[10:45] something like $429,300
[10:48] and you're not going to get a 2.96%
[10:50] mortgage. Now, you might be paying
[10:52] something like 6.52%
[10:55] on that exact same mortgage. And if you
[10:57] put 20% down and finance the rest, that
[10:59] means your monthly mortgage payment has
[11:01] jumped up to about $2,175
[11:04] a month on that exact same house because
[11:06] not only are you borrowing more dollars,
[11:08] but you have to pay a higher interest
[11:10] rate to borrow those dollars. But we're
[11:12] still not done yet. Now, for simplicity,
[11:14] I'm just going to ignore the fact that
[11:15] as you're buying a more expensive house,
[11:17] you also have more expensive property
[11:19] taxes and housing insurance costs have
[11:21] skyrocketed faster than the prices of
[11:23] pretty much everything else in our
[11:24] economy. So, yeah, not only do you have
[11:26] a higher monthly mortgage payment, you
[11:28] have higher property taxes and higher
[11:29] insurance payments, making it a much
[11:31] more expensive thing to own this house,
[11:32] but I want to really take a look at how
[11:34] much these expenses have changed
[11:36] relative to people's incomes. Back in
[11:39] 2021, the median household income in the
[11:41] United States was around $70,000 a year.
[11:44] Which means if you bought this median
[11:45] house, it would be about 20%
[11:49] of your monthly income. Fast forward to
[11:52] 2026 and now the median household income
[11:55] has jumped up to around $80,000, which
[11:58] sounds good. People are making more
[11:59] money. But then you take a look at the
[12:00] fact that the median house payment is
[12:04] now approximately
[12:06] 33%
[12:08] of your actual income. Which means not
[12:11] only are people making more money, but
[12:12] now you have to pay more money to be
[12:14] able to afford that same house. This is
[12:16] where the real affordability problem can
[12:19] be seen. It's that yes, prices have gone
[12:21] up, but relative to incomes, prices have
[12:24] gone up, mortgage rates have gone up
[12:26] faster [snorts] than people's incomes.
[12:28] And to really compare apples to apples,
[12:29] what we can see here, if we look at just
[12:31] these numbers, is that the price to buy
[12:33] this house has gone up by around 24%.
[12:37] But your monthly mortgage payment has
[12:39] gone up by around 87%
[12:42] while incomes in the United States have
[12:44] gone up over the same 5 years by around
[12:48] 13%.
[12:49] That's the problem. incomes are not
[12:51] keeping up with the big growth in
[12:53] housing costs and cost to buy the house
[12:56] which is why housing affordability has
[12:58] fallen so much. This is where people are
[13:00] looking to the solution. Well, how do we
[13:02] fix this housing market? And you can
[13:04] either bring housing prices down which
[13:07] would then be a problem for everybody
[13:08] that bought a house in the last few
[13:10] years because people don't have a ton of
[13:12] equity in their houses and in that case
[13:14] now you're going to have a lot of people
[13:15] that are underwater in their houses. So
[13:17] yes, cheaper houses would help people
[13:19] that want to buy a house, but it would
[13:20] hurt the people that own a house that
[13:23] are relying on that equity. Number two
[13:25] is you can see these mortgage payments
[13:27] fall. And the idea is if you have a
[13:29] lower mortgage rate, that's going to
[13:31] allow you to buy this house and have a
[13:33] cheaper monthly mortgage payment, which
[13:35] is good. But it has also a double-edged
[13:38] sword problem, too. Because on the flip
[13:40] side, if mortgage rates do fall,
[13:42] hypothetically, if they go from 6.5% to
[13:45] [snorts] 4%. Yes, if you bought a house
[13:48] for $429,000, it's going to be cheaper
[13:51] because your monthly mortgage payment
[13:52] would be less. If you own a house, you
[13:55] could refinance and save money on your
[13:57] monthly mortgage payment. But there's
[13:59] one problem. What happens now if more
[14:02] buyers enter the market because they
[14:04] say, "Oh, mortgage rates are falling. I
[14:06] want to take advantage of these cheaper
[14:08] mortgage rates." Finally, I've been
[14:09] waiting to buy a house for years. So,
[14:10] let me go out and buy a house and take
[14:12] advantage of these cheaper mortgage
[14:13] rates. If that starts to happen and you
[14:15] have more buyers on the market more than
[14:17] the new number of houses hitting the
[14:18] market, well, now you have more buyers
[14:20] than sellers, which means that these
[14:22] buyers have to now fight against each
[14:24] other to buy these limited supply of
[14:25] houses. Well, how are the buyers fight
[14:27] against each other? Through bidding
[14:29] wars. And now, if we start to have more
[14:31] bidding wars, that could drive the
[14:33] prices of housing up again. So, this is
[14:36] where it gets very tricky to help save
[14:38] the housing market because if you have
[14:40] housing prices fall because a bunch of
[14:42] houses hit the market, well, now you're
[14:44] going to have a lot of people
[14:44] underwater. That has its own problems.
[14:46] If you have mortgage rates drop
[14:48] drastically, well, now people will be
[14:50] able to buy a house for a cheaper
[14:52] mortgage rate, but that could then also
[14:54] drive up housing prices, making the
[14:56] inflation problem worse. That's why it
[14:58] is a very tricky thing to do, and it's
[15:00] not a very simple process to just do one
[15:03] thing and fix the housing market. And
[15:05] you can see some of these concerns in
[15:06] the housing market through what builders
[15:08] are doing. Because in 2026, what we're
[15:10] seeing is that again, buying a new house
[15:12] is actually cheaper than buying a used
[15:15] house, which is not something we have
[15:16] seen in history for an extended period
[15:18] of time, but we're seeing it happen
[15:20] today because builders are getting
[15:22] desperate. They've built these houses
[15:23] over the last number of months or years,
[15:25] and in order to get them to want to have
[15:27] you buy the house, they need to give you
[15:29] incentives. And one of those incentives
[15:31] is cutting the price because they need
[15:33] to get these houses off their books. And
[15:34] then on the flip side, if we take a look
[15:36] at homeowners, a lot of homeowners are
[15:38] still saying, "I don't want to sell my
[15:39] house because I'd have to get rid of my
[15:41] cheap mortgage rate and then get a
[15:43] higher mortgage rate if I were to sell
[15:44] and buy a new house." 69% of mortgages
[15:47] in America have less than a 5% mortgage
[15:50] rate, and more than 50% of homeowners in
[15:52] America have a mortgage rate below 4%.
[15:55] This is making a lot of homeowners feel
[15:57] locked in and not interested in selling
[15:59] their houses because they don't want to
[16:01] have to give up their cheap mortgages.
[16:02] But that in turn also makes buying the
[16:04] house a little bit tricky because you
[16:06] still have a low supply of houses for
[16:07] sale because builders are confused if
[16:09] they should build houses depending on
[16:11] where the economy is going and sellers
[16:13] are confused as to if they should even
[16:14] sell their house. So, this is where
[16:16] again, if you want to get an idea of
[16:17] where the housing market is going,
[16:19] specifically the mortgage market, the
[16:20] thing that you can pay attention to to
[16:22] stay ahead of your bank is the 10-year
[16:25] yield. The 10-year Treasury yield is
[16:27] going to tell you whether mortgage rates
[16:29] are going to be falling or rising.
[16:30] Because as these Treasury yields go up
[16:32] or down, mortgage rates follow. And
[16:35] depending of what happens to the 10-year
[16:36] yield along with inflation, that will
[16:39] give you some guidance as to what the
[16:40] Federal Reserve Bank is going to do on
[16:42] interest rates. And that can also give
[16:44] you guidance as to where mortgage rates
[16:46] are going to go because that 10-year
[16:47] yield coupled with what the Federal
[16:50] Reserve Bank does is going to give you
[16:52] where your mortgage rate is going. And
[16:54] that will help you get an idea of where
[16:57] the housing market is going as well. So,
[16:59] if you're thinking about buying a house
[17:00] or you own a house and you've been
[17:01] thinking about refinancing, these two
[17:03] factors, the 10-year yield along with
[17:05] the Federal Reserve Bank rate are going
[17:07] to help give you that indication as to
[17:09] where the mortgage market is going. So,
[17:11] we talked about in this video is that
[17:12] the housing market is going through
[17:14] another inflection point because we have
[17:16] been seeing the lowest home
[17:17] affordability in multiple decades. At
[17:20] the same time, buying a new house has
[17:22] been cheaper than buying a used house.
[17:24] While people have been concerned about
[17:26] mortgage rates going up again, but now
[17:28] we're starting to see another shift
[17:29] happen because of the recent news that
[17:31] the war in the Middle East could be
[17:32] over. And with that news, we've seen oil
[17:34] prices fall. We've also seen bond yields
[17:36] fall. bond yields specifically to the
[17:38] United States government called
[17:40] treasuries. And the reason why that
[17:42] matters is because as treasuries fall,
[17:44] that gives banks the ability to charge
[17:46] people a lower mortgage rate. And so
[17:48] now, as people have been watching the
[17:51] mortgage market for the last number of
[17:52] years, they thought that we were going
[17:54] to see lower mortgage rates in 2026.
[17:56] Well, mortgage rates actually went up,
[17:58] not down, because of the conflict in the
[18:01] Middle East. And now people are hoping
[18:02] that if this conflict is completely
[18:04] over, mortgage rates will be able to
[18:06] fall again. And the second part of why
[18:09] this matters has to do with the Federal
[18:10] Reserve Bank because the Federal Reserve
[18:13] Bank sets what's called interest rates.
[18:15] But these are not interest rates that
[18:16] you pay on your mortgage. These are the
[18:17] interest rates that banks charge each
[18:19] other. So it's the cost that banks have
[18:21] to pay to borrow money. And as these
[18:23] interest rates by the Federal Reserve
[18:24] Bank fall, that can also make getting a
[18:26] mortgage cheaper. Well, when the Federal
[18:28] Reserve Bank sets these interest rates,
[18:30] they have to take a look at the
[18:31] inflation rate and the general economy.
[18:33] And because of the conflict in the
[18:35] Middle East, inflation has been going up
[18:37] significantly. And because inflation is
[18:40] now at a multi-year high, there's been a
[18:42] lot of talk that the Federal Reserve
[18:43] Bank might have to raise interest rates
[18:45] instead of cutting interest rates in
[18:47] 2026. Well, if the Fed starts raising
[18:50] interest rates, that would make getting
[18:51] a mortgage even more expensive. But now
[18:54] the idea is and the thought is if this
[18:57] war is over, oil prices will fall. If
[19:00] oil prices fall, the inflation rate will
[19:02] fall and the Fed might not have to raise
[19:04] interest rates. They might be able to
[19:06] actually cut interest rates. Again, a
[19:09] lot of uncertainty. But this is where
[19:10] now people are hoping in the real estate
[19:12] space, people are hoping that because
[19:14] the war in the Middle East is over, bond
[19:16] yields are falling. That can drive
[19:17] mortgage rates are lower. Because the
[19:19] war in the Middle East is over, oil
[19:20] rates will fall, which will make
[19:22] inflation rate fall, which means that
[19:24] the Fed could also cut interest rates,
[19:25] which could lead to lower mortgage
[19:26] rates. This is what people in the
[19:28] housing market space are hoping for.
[19:30] What is actually going to happen? Well,
[19:32] only time will tell. But that's where,
[19:33] again, if you want to get an indication
[19:35] as to where the housing market is going
[19:37] to go, you need to understand what moves
[19:40] mortgage rates. And the two biggest
[19:42] factors that move mortgage rates is the
[19:44] 10-year Treasury yield and the Federal
[19:46] Reserve Bank. And if you study those two
[19:48] things, you will have a better
[19:50] understanding of where the mortgage
[19:52] market is going than your mortgage
[19:54] banker. If you got value out of this
[19:56] video, the best thank you was a
[19:57] referral. If you could please share this
[19:58] video with a friend, family member,
[20:00] colleague, or fellow investor. That way,
[20:01] we can continue to spread this type of
[20:03] financial education. Thank you. The
[20:05] United States is about to borrow $2
[20:06] trillion to keep our economy running. It
[20:09] sounds great at first because it's going
[20:11] to stimulate our economy, but anytime
[20:13] the government spends money it doesn't
[20:15] have, somebody has to pay [music] the
[20:17] price. I call this a hidden tax because
[20:19] this is not a tax that you're paying to
[20:21] the IRS. It's a tax you're paying with
[20:24] more expensive growth.