The Housing Market Just Hit Its Biggest Shift Since 2020

[00:00] The housing market is about to shift

[00:01] again and this time it's for reasons

[00:03] that you might not expect. And this next

[00:05] shift comes at an interesting time

[00:07] because housing affordability is at the

[00:09] lowest level we have seen since the

[00:11] early 1980s. And for the first sustained

[00:13] period in history, it is cheaper to buy

[00:16] a new house than it is to buy a used

[00:18] house. And between February and June

[00:20] 2026, mortgage rates kept going higher,

[00:23] closer to the 7% mark. Again, everybody

[00:25] said that lower mortgage rates would fix

[00:27] the housing market, but they never came.

[00:29] But now with the news that the United

[00:31] States and Iran war could be coming to

[00:32] an end, mortgage rates might be coming

[00:34] down. So whether you own a house or

[00:36] you're thinking about buying a house,

[00:37] this video is for you. Let me start by

[00:39] diagramming what happened to the housing

[00:41] market in 2026. That way we're all on

[00:43] the same page. In the beginning part of

[00:45] 2026, what we saw is that mortgage rates

[00:48] finally began to fall in the United

[00:50] States. And the reason why the fell was

[00:51] because there was more calm in the

[00:53] economy, which brought bond rates down.

[00:55] I'll explain what that means in just a

[00:57] minute. But all you need to understand

[00:59] is that in the beginning part of 2026,

[01:01] two things happened. We saw mortgage

[01:03] rates finally fall to below 6% a year

[01:07] for the first time in a while and

[01:09] sellers started listing their houses

[01:13] again. So we started to see more houses

[01:15] on the market as people started to feel

[01:17] more comfortable selling their houses.

[01:19] But then things changed on February

[01:21] 28th, 2026. The United States attacked

[01:24] Iran. there was more uncertainty about

[01:26] the economy and the dollar which caused

[01:28] bond yields to rise which in turn caused

[01:30] mortgage rates to rise again. So in

[01:32] March 2026 we saw mortgage rates go up

[01:36] again and now people started to get

[01:38] concerned about the economy and

[01:40] concerned about the housing market

[01:42] again. Then between April, May and June

[01:44] things continued to get worse as

[01:46] mortgage rates started to get closer to

[01:48] that 7% mark a year while inflation also

[01:52] went up. Inflation now is at about 4.2%

[01:57] while getting a mortgage rate is closer

[02:00] to that 7% mark. And this is where

[02:03] people started to get concerned that if

[02:04] the cost of living keeps going up,

[02:06] mortgage rates are going up, how are

[02:08] people going to continue buying houses

[02:10] again when President Trump is promising

[02:12] lower mortgage rates? But then things in

[02:13] the housing market changed again on June

[02:15] 14th because that was when President

[02:17] Trump announced that the United States

[02:19] and Iran have come to a deal. And

[02:21] immediately oil prices fell, which

[02:24] translates directly to the housing

[02:27] market. Now, you might be wondering,

[02:29] what do oil prices and this war in the

[02:31] Middle East have anything to do with the

[02:33] housing market? And the reason why was

[02:35] what I've been hinting at for a few

[02:37] minutes in this video, which is the bond

[02:39] market. And what the bond market is is

[02:42] [snorts] you can go and lend money to

[02:44] the United States government. And when

[02:46] you do that, you're buying what's called

[02:47] a bond. So the United States government

[02:50] works like this. The government collects

[02:53] tax dollars and then they go out and

[02:55] spend money. Where do they spend money?

[02:57] They spend things like on health care.

[02:59] They spend money on military. They spend

[03:01] money on infrastructure. Well, the

[03:03] government spends a lot more money than

[03:05] what they generate from taxes. So they

[03:08] need to go out and borrow more money.

[03:11] Now this money that they borrow is

[03:13] something that you can now lend money

[03:15] into. This is what these bonds are. is

[03:17] called a treasury bond. So you can lend

[03:19] money to the United States government so

[03:21] they can continue funding their

[03:22] spending. And you might say, well, why

[03:24] would I lend money to the United States

[03:25] government? The reason why you would

[03:28] want to lend money to the United States

[03:30] government is so that they pay you back

[03:32] with interest. It is a loan made to the

[03:35] United States government. Well, this

[03:37] loan to the United States government,

[03:39] this Treasury bond is considered the

[03:42] safest investment. is considered a

[03:43] risk-free investment by every economics

[03:46] textbook. Paying rent every single month

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[03:50] every single month, money was leaving my

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[04:45] on the screen, and I also have the link

[04:47] for you down in the description. In the

[04:49] investing world, there's a very simple

[04:50] concept called risk versus reward. If

[04:54] something is a safe investment, like in

[04:56] this case, it is a risk-free investment,

[04:58] your reward should be lower. Meaning if

[05:02] you're going to lend money to the United

[05:04] States government, you're not going to

[05:05] get a huge rate of return because it's

[05:07] not considered a very risky investment.

[05:09] It's not a risky investment. So your

[05:11] returns are low. So that's how this

[05:13] system works. And the reason why this

[05:15] relates to the housing market is because

[05:18] when there's concerns about the economy,

[05:21] when there's concerns about oil prices,

[05:23] when there's concerns about inflation,

[05:25] do you know what happens? People get

[05:27] scared about lending money to the

[05:29] government. So what happens is these

[05:31] yields, meaning these treasury rates, go

[05:34] up. The government has to pay you a

[05:36] higher interest rate to continue lending

[05:39] money to the government because they

[05:40] know people are concerned about the

[05:42] economy. They're concerned about the

[05:44] dollar. They're concerned about

[05:46] something about the United States. And

[05:48] so when they get concerned, these

[05:49] interest rates go up. And this then

[05:52] impacts the housing market directly

[05:54] because over here in this office is your

[05:58] bank. And what your bank says is we're

[06:01] trying to decide what we want to charge

[06:04] you for your 30-year mortgage. And we're

[06:06] going to compare our different

[06:07] investment options. We can take this

[06:09] money that we have and we can lend it to

[06:11] you for a mortgage or we can take this

[06:14] money and lend it over here to the

[06:16] United States government. Well, who do

[06:18] you think is going to pay a higher rate

[06:20] of interest? The person that is a more

[06:23] risky investment. And remember what I

[06:25] said just a minute ago. The United

[06:26] States government is a riskfree

[06:29] investment.

[06:30] Meaning the United States government is

[06:32] more likely to pay back their bills than

[06:33] you are because the government can just

[06:35] raise taxes. The government can work

[06:37] with our central bank to print money.

[06:39] You can't. So the government is a less

[06:42] risky investment than you, which means

[06:44] you're going to have to pay a higher

[06:45] rate of interest. Now, here's where

[06:47] things start to get interesting. When

[06:49] there's concerns about the economy,

[06:51] people are buying less of these bonds,

[06:53] meaning the government has to raise

[06:55] interest rates. If the government is

[06:57] raising interest rates, now the bank is

[06:59] going to say, "hm, I would have charged

[07:01] you 6% for this mortgage, but now the

[07:03] government is paying a higher rate of

[07:05] interest. So, I'm going to have to

[07:06] charge you 6.75%

[07:08] in interest on your mortgage." So, as

[07:10] there's concerns about the economy, as

[07:12] there's concerns about a war, as there's

[07:14] concerns about oil prices, these bond

[07:16] yields go up, which then causes banks to

[07:18] charge you a higher rate on your

[07:21] mortgage. And this is where a lot of

[07:22] people in the real estate space are now

[07:24] watching this deal because they want to

[07:26] know what is this going to do with these

[07:29] Treasury rates? Because if these

[07:31] Treasury rates fall drastically, that

[07:33] could then cause mortgage rates to also

[07:35] fall. And it can also separately give

[07:38] the Federal Reserve Bank, our central

[07:40] bank, the ability to potentially not

[07:42] have to keep interest rates higher for

[07:44] longer because what the Federal Reserve

[07:47] Bank does is they want to manage the

[07:49] economy and inflation. And we know that

[07:51] President Trump wants lower interest

[07:53] rates. Well, he also just appointed the

[07:55] new chairman at the Federal Reserve

[07:57] Bank, which is our central bank. and the

[07:58] Federal Reserve Bank gets to make that

[08:00] decision of whether to raise or cut

[08:02] interest rates, but they have to take a

[08:03] look at inflation and the economy. Well,

[08:07] when the Federal Reserve Bank cuts

[08:08] interest rates, they're generally doing

[08:10] that to stimulate the economy, but that

[08:13] can make the inflation problem worse.

[08:14] Well, let's take a look at what happened

[08:16] here. Inflation is now at 4.2%.

[08:20] This is the highest level that we have

[08:22] seen in years. And so now when you get

[08:24] the report that inflation is higher,

[08:26] it's much harder for the Federal Reserve

[08:28] Bank to cut interest rates because that

[08:30] could make the inflation problem even

[08:32] worse. So a lot of people were thinking

[08:33] that now because of this conflict in the

[08:35] Middle East, the Federal Reserve Bank

[08:37] won't be able to cut interest rates,

[08:38] they might have to actually raise

[08:40] interest rates, which would make your

[08:41] mortgage rate more expensive. But

[08:44] [snorts] now what people are wondering

[08:45] is because this conflict in the Middle

[08:48] East might be over, oil prices might be

[08:50] falling, the inflation rate might also

[08:53] fall drastically. And if we see the

[08:55] inflation rate fall drastically, which

[08:56] is what President Trump said would

[08:58] happen, if that does actually happen,

[09:01] which we have to see now, the Federal

[09:03] Reserve Bank might be able to actually

[09:05] cut interest rates instead of raising

[09:08] interest rates. Because up until here,

[09:09] before this deal was made, most people

[09:12] in Wall Street were saying the Fed won't

[09:14] be able to cut interest rates in 2026.

[09:16] They're not even going to be able to

[09:18] keep interest rates where they are.

[09:19] They're going to be forced to raise

[09:21] interest rates as a way to cool this

[09:23] inflation problem down. Those higher

[09:26] interest rates would then translate to

[09:27] higher mortgage rates, and you can start

[09:28] to see how that would be a problem for

[09:30] the housing market. But if this

[09:32] inflation rate comes down, that means

[09:34] that the Federal Reserve Bank can also

[09:36] potentially cut interest rates depending

[09:39] on what happens in the economy. And this

[09:41] is where now people in the real estate

[09:43] space are getting very excited because

[09:44] now they're saying, okay, these bond

[09:46] yields are falling. If these bond yields

[09:48] fall and things calm down in the

[09:50] economy, inflation will also fall. We

[09:52] could also then see lower interest rates

[09:53] by the Fed, which also then translate to

[09:56] lower interest rates from your bank,

[09:58] 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.