Is Real Estate a Bubble in 2018? These are the most common economic red flags and how they impact real estate prices – enjoy! Add me on Snapchat/Instagram: GPStephan

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The stock market is artificially inflated by low interest rates and it will decline, bringing down real estate. The FED lowered interest rates to record lows to stimulate the economy post 2009. This creates cheap money for businesses to borrow and people to borrow from – and I don’t disagree with this, low interest rates DO artificially inflate prices beyond what would be capable under a higher interest rate. But, my only defense is that we can’t expect interest rates to rise to insane levels overnight to put the economy in a tailspin.

Growing government debt – experts predict we will be reaching 24 trillion dollars of debt by the end of 2018. BUT, about 2/3rd of the debt is owned by US citizens and corporations, half of the national debt is owned by the US, and a large part of that is in social security. Debt isn’t always bad, and in some years inflation is actually higher than the interest rate the US pays – so they’ll actually make money. But overall what matters most is debt in relation to the gross domestic product of the US, and right now we stand just above 100% which is perfectly healthy. Ultimately, taking on more debt is risky – but this has more to do with rising interest rates and how THAT will effect housing prices, than the level of debt itself, as the US would have to raise interest rates to help offset their debt.

The third thing people say is “student loan bubble.” Student loans have gone from half a billion to $1.4 TRILLION between 2007 and now. I do see us having disastrous problems for individuals graduating with debt..but this won’t have a direct correlation on housing prices, from my perspective. With a low supply of homes, there are still not enough properties to meet current demand. Student loans are not “hurting” the market – they’re just not adding to sales numbers as buyers, which is already at a record high, even accounting for current student loan debt. But I agree, student loan debt is awful – but I can’t see this leading to a decline in real estate prices.

Finally, wages…wages haven’t gone up as high as housing prices have, therefore it’s a bubble! This has truth to it, but it’s not the entire picture. It’s true that wage growth hasn’t grown much, although wages HAVE gone up dramatically for highly skilled workers in large cities, and these are the areas that are seeing the largest booms in housing prices. This is big law, tech, engineering, and executives. And because of this concentration of growth, foreign money continues to pour in, further increasing demand. So yes, for low-skilled workers – it’ll be a tough one to go up against, and housing prices are exceeding low-end wage growth.

We’re still about 14-20% away from pre-recession prices when adjusted for inflation. This leads me to think that we still have some upward growth.

Interest rates are still at historic lows. We all know interest rates are going to be going up…so locking in now has some insane long term advantages. This creates an urgency to buy like we haven’t really seen before, which should continue to bolster real estate prices.

Limited supply. People aren’t selling. The reason: they don’t want to become buyers. There’s just not enough to go around – builders can’t keep up with demand, building restrictions hinder larger cities from building more housing, and this creates a limited supply of homes to chose from. While many areas are just starting to develop more housing, it’s just not enough, and even though it’s picking up, it’s still a long way from there being an oversupply. This in itself has the power to continue keeping housing prices bolstered for real estate, and real estate investing.

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17 thoughts on “Are we in a REAL ESTATE BUBBLE?!”

  1. hey graham love this video seriously so helpful… im curious where you get information like wage increases? for example

  2. Make a video on the whether or not you should pay off your investment property mortgages, also another on how much before quitting your job like how much comfortably figuring out the math etc.

  3. It is pretty spooky because of the government raises interest rates on people who have subprime mortgages with an adjustable rate after so many years you're going to see 2008 happen again.

  4. Buying under market value, with 20% down, and cash flowing really help to ride through market downturns until the market has a chance to recover.

  5. You would be a great commentator at CNBC, exactly what they want to hear. Everything is great, and nothing to worry about about. Yup! There is no bubbles everyone, keep borrowing and keep buying when you still have the chance! Real estate prices at all time highs keep buying!

  6. Hi Graham. First of all, I want to Thank You because you've tought me a lot with the videos you upload and sorry for this long comment.
    I always wanted to invest in real estate and making it a passive income. But I've very little knowledge about it. So I've thought of becoming a real estate agent to learn and know more about real estate, market price and all those things before i start investing. I've done research online on how to get my Real Estate Agent license in my country (Malaysia). And I've found that I will need to attend the class for about 1yr 6months and the cost is around RM9,000. Which is quite big amount. But I also see there's second option which is becoming a Real Estate Negotiator. Only require two days class and cost around RM700. I'm thinking should I straight go for as an Agent or should i start with Negotiator first. Since my initial plan was to just use this job to learn more about real estate before i start investing. Just want to hear your opinion on which should I choose between this two. And what's the big difference between Agent and Negotiator.

  7. Lol attention all realtors: show this to your clients. maybe they'll actually buy a house this year and sub to Graham

  8. Hey Graham could you do a video on using a home equity line of credit to fund more projects. I purchased my first house about 5 years ago, renovated it and r rented it out. In those 5 years the value has more than doubled and I was thinking of using that to build a house on a vacant lot in silver lake.

  9. **ANYTHING**… to say on the Fractional reserve banking system that is necrotizing the current financial system or do we just ASSume it will continue? (im in the pool of the latter)

  10. I just can't get on board than most of your reasoning. Obviously you are seeing the problems, but I think you are underestimating the consequences. I'm not saying it's all going to be doom and gloom, but I do think rocky seas are ahead. You are very intelligent, but your glass half full approach may not work out in the end. Just my opinion. Wish you all the best.

  11. Hey Graham. Nice video. Got a couple more video ideas you might like!

    Do you think that if the stock market crash it would crash the housing market too?

    Would baby boomers selling homes for retirement create an over supply because melennials aren’t buying homes?

  12. Another egg of knowledge cracked on my head. Thanks Graham. I've honestly learned so much more from you than any other realtor/broker in my office. To repay you, I'm gonna move to LA in like 4-5 years and join the future real estate company Graham Stephan Realty, then take over the company as the top producing agent and then I'll make you partner (i'm a pretty cool dude). We'll rule the luxury real estate market like bauces, all the honeys will come flockin to buy homes that I've personally architected and developed. They cost 200mill for parking. You down?

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