Black Swan is coming

September 12, 2023

Real estate investor Sean Terry predicts a "Black Swan" event in the U.S. housing market within the next year due to affordability pressures.

Terry points to high-interest rates and still-elevated housing prices, posing an affordability challenge that could lead to a significant market disruption.
He believes that continued rate hikes by the Federal Reserve are pushing the market toward an unpredictable event.
While Terry suggests that the Fed wants to "crash" the market to achieve affordability, the central bank's actual goal is to navigate a "soft landing" and curb inflation without causing a severe recession.
The challenge lies in whether the Fed can achieve this without tipping the economy into recession.
Affordability remains a significant issue in the housing market, with the national affordability level at its lowest in years.
Rising interest rates and tight housing supply contribute to this challenge. Terry expects additional rate hikes in the near future, coupled with potential market disruptions in an election year.
Despite concerns, housing experts argue that a 2008-like crash is not imminent. A nationwide housing shortage has kept home prices high, and while rising interest rates have had some impact, limited housing supply remains the primary issue.
The market is expected to remain stable, with some experts predicting a mild downturn in the first half of 2024. The key factor will be whether homebuilders can increase supply to meet demand, preventing a housing crash scenario.

While median U.S. asking rents in August reached a near-record high of $2,052, landlords in certain areas are offering concessions like one to three months of free rent to attract tenants without officially lowering rents.

This strategy aims to maintain high asking rents while filling vacant units.The national rental vacancy rate hit 6.3% in the second quarter, just below the 6.4% rate observed in the first quarter, which was the highest in two years.
In response to rising vacancies and competition, landlords are resorting to concessions to entice renters, particularly for higher-end properties.
The rental market is experiencing cooling rent growth due to various factors such as slowing household formation, economic uncertainty, affordability challenges, and increased rental supply.
Over the past two years, rents have posted substantial year-over-year gains, with August 2022 seeing a 12.3% increase in median asking rent compared to the previous year.
The market is currently witnessing a blend of high asking rents and behind-the-scenes concessions, allowing landlords to attract tenants while maintaining the appearance of strong demand.
This dynamic reflects the ongoing complexity of the rental market, where affordability and competition play significant roles in shaping rental conditions.

Kiyosaki's warning comes as many worry about an impending "Airbnbust." On social media, Kiyosaki expressed his belief that Airbnb could be a catalyst for a real estate downturn.
He also suggested that a market crash might offer opportunities for those seeking new homes or rental properties.
Airbnb, an online marketplace for property rentals, has faced challenges, notably in New York City, where new regulations significantly restrict its operations.
This has led to declining prices, bookings, and a 13% drop in host revenue, contributing to concerns about the so-called "Airbnbust."
Economist Peter St Onge pointed out that factors such as an approaching recession and decreasing excess savings could further exacerbate the situation.
Additionally, several major cities, including New York, Chicago, and San Francisco, have taken steps to ban or limit Airbnb, blaming the platform for housing issues.
Kiyosaki has been warning about an impending real estate market crash for some time, comparing it to the severity of the 2008 financial crisis.
Other prominent figures, such as Elon Musk, have also voiced concerns about potential declines in commercial and residential real estate values.

Edwin Castro, the record-breaking $2 billion Powerball jackpot winner, has made another impressive purchase – a multimillion-dollar mansion in Bel Air, California.

This luxurious property boasts several unique features, including a master bedroom with an extraordinary indoor fireplace. Encased in glass and set against a marble wall, the fireplace is complemented by a mounted TV, allowing Castro to enjoy the warmth of a fire while watching TV from bed.
The modern mansion is characterized by its extensive use of glass, visible from the walls of the wine cellar to the garage doors, which are also made of glass, showcasing any cars or possessions inside. With this acquisition, Castro now owns three homes, including a $25.5 million Hollywood Hills mansion and a $4 million Altadena residence.
Despite these lavish purchases, Castro's lottery winnings leave plenty of room for indulgence. The mansion includes 11 bathrooms, one of which stands out for its symmetrical "his and hers" design, featuring sinks, mirrors, benches, and toilets on both sides of the room, with a centrally placed bathtub and a stunning view of Los Angeles through glass panels.
Additional amenities in the home include a movie theater, a bar, and an infinity pool with a fire pit and surrounding benches, creating a perfect space for social gatherings. The property, known as Palazzo di Vista, was originally listed at $87,777,777 and was designed by the Ali Rad Design Group.

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