Billionaire investor Warren Buffett is warning about a major storm that is about to strike the US real estate market. This 1.4 TRILLION dollar debt fueled tsunami has already started to hit the real estate market as we speak. However, this is just the beginning of the quote “consequences” Buffett sees of this real estate bubble. The real impact is set to start in just a few months. Here’s what Buffett had to say.
Over the last 15 years, the US real estate market has been fueled by massive amounts of cheap debt. Take a look at this chart of the US federal funds effective rate, a proxy for interest rates in the economy. We can see here that interest rates spent the better part of the last 15 years at 0%. These low interest rates incentivized the use of massive amounts of debt and pushed real estate values to sky high levels. Let me explain.
Imagine someone is buying an office building in your hometown. For a nice round number, let’s say the cost of this building is 1 million dollars. The buyer of this building likely doesn’t have an extra 1 million dollars of cash sitting in his bank account to purchase this building outright. Likely what this buyer is going to do is go to a bank to get a loan to fund the majority of the purchase price. In this example, our buyer here is contributing 350,000 dollars of the purchase in the form of what is referred to as “equity”. Think of this as just a fancy word for downpayment like when someone is purchasing a house. Our buyer then goes to a small, local bank to get a loan for the remaining $650,000. How profitable this purchase is for the buyer is dependent on many things, but one of the most important is the interest rate on the loan.
*Disclaimer: Neither this video, not any content produced on this channel should ever be considered investing advice or official financial advice. All content is made for entertainment and educational purposes.
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WARREN BUFFETT, HE IS FAKER.
Narration is awful
Your title should include Commercial!
Great content. Lot of explanations about financial insights. Good luck
The research and effort put into this video is incredible! The details at [7:49] prove it!
am at the beginning of my "investment journey", planning to put 385K into dividend stocks so that I will be making up to 30% annually in dividend returns. any good stock recommendation on great performing stocks will be appreciated
A year later
no housing crash happened!
renals still high
prices still high….
This is all like the penny stocks corruption. Pump and Dump real estate. People pull out with profits and use reserves to buy back in after they create the collapse.
I suggest you offset your real estate and get into stocks, A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time!
I don’t need an example of an office building, but my house is paid for where is that example?
I need a man to be speaking instead of that lady I can hear a man’s voice better
My house is already bought and paid for. Is that OK? What the blank is Bircher?
My house is already bought and paid for. Is that OK?
All by design
This didn't age well.
Ima not a very smart tiny little man
900 trillions of thy whole world thy entirely new world is entirely bankruptcy
Considered the entire world is bankruptcy
So, I totally understand that these guys have proved themselves, but don't you wonder whether, just maybe, they're no longer on the smart, cutting edge of finance? Or maybe, just MAYBE, they have a vested interest in seeing the market tank, so they can buy everything cheaply. I mean, with all due respect, they're dinosaurs and seem incapable of answering the question clearly at all, either due to senility or greed.
Just because you've made a shitload of money doesn't mean you're eternally the ultimate source of truth, or should be trusted as some sort of investment god.
Still here. Don’t believe a thing from Buffet or Munger. Think.
Here it's 2025 and people made it!😂
I am invested in a REIT as of 2021, Apollo and Bluerock. Initially, my principal was maintained and I received a non-taxable dividend each quarter. But over time, my principal began to decline. Now I have lost about 30K. My advisor (who sold me the investment) suggested I hold onto the investment as the dividends would eventually make up for my losses. Recently my advisor left her employer and transferred me to another advisor who is helping me sell out. Unfortunately, the current market won’t allow me to sell all at once, I can apply to sell what is allowed each quarter. It will probably take a few years to divest myself of this albatross. My only hope is to get out before the investment is worthless. Any insight you have is welcome!
Click bait
The tax payers and consumers.
There are no guarantees in investing only probabilities. There are 4 key factors I see causing rising housing prices.
1) general inflation has been 18% over the past 3 years and higher than that in housing supplies and builder wages. Expect this to be 3-5% over the next few years
2) Lack of new housing supply due to regulation and zoning
3) influx of 10+ million illegal immigrants over the past 3 years that need some form of housing is flooding housing demand
4) Corporations and investors are buying up housing and property assets driving up prices on inventory when it hits the market
The only one of these 4 major trends I see likely changing over the next few years is #3 with the new administration.
In fact with forecasted lowering interest rates, this should push the housing prices higher
Watching this a year later and still no crash
Well if commercial real estate crashes there will be a real redistribution of wealth. Those who have little or no debt will be in the best shape.I own four rental buildings. Two were bought in 2010 when prices were low. Two were bought a fair market value. Regardless, I paid them off as quickly as possible and never refinanced to take money out. Today they are all cash flowing with solid tenants. I also have a substantial stock portfolio.. Yes, I took a few risks, you have to, but they have paid off. Lastly, get a good wife and live below your means.
Warren said two years ago the stock market was going to crash and implode in a year. I'm sick of everyone crying about losing money in the stock market of all full of themselves because they got rich off the stock market. People, it's the stock market. IT'S LEGALIZED GAMBLING. And the FACT that you cannot, and should not, take financial statements as true picture (hence Trump being found guilty of tax, bank and business financial fraud) of a company. The real estate bubble popped when COVID hit and hordes of people refused to return to the office. That sent REI's plummeting. And at that time, all these financial investment bigwigs were saying commercial real estate was a great investment. Sheesh. Want to know what to invest in? What are kids buying? What are parents with no money spending money on?
I guess he was wrong!