2021-2022 Real Estate Re-Cap and Forecast Uncovers Another Billion Dollar Opportunity for Savy Investor!
Just got done to an interview with another friend of mine in regard to kind of like a forecast of what's the outlook for 2022. What do you think Sean, what's going on? What do you think with between COVID and between interest rate hikes between shadow inventory and all that stuff? You know, what do you thinks gonna happen in 2022? Where do you think that the opportunities are gonna be and where can we find a billion dollar opportunity to make some money in the market?
Welcome to billion dollar blind spots, where we help businesses and individuals recognize and capitalize on the billion dollar blind spots in life and business. Listen in as bestselling author shanty chais uncovers the not so obvious billion dollar blind spots in various businesses. Industries and markets shall is the co-founder of RI squared consulting, where he specializes in creating proprietary platform, strategies and systems to capitalize on changing markets and services. By combining more than three decades of practical tactical experience with modern day artificial behavioral intelligence, we can discover and deliver the really intelligent information to change their lives and business
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In buddy, Sean shall hosting billion dollar blind spots. Welcome back. It is December 21st, I just had a 2012, just got done to an interview with another friend of mine in regard to kind of like a forecast of what's the outlook for 2022. What do you think Sean, what's going on? What do you think with between COVID and between interest rate hikes between shadow inventory and all that stuff? You, what do you thinks gonna happen in 2022? Where do you think that the opportunities are gonna be and where can we find a billion dollar opportunity to make some money in the market? In some cases we're talking to major hedge funds, major real estate, investment trusts, private portfolio managers. We're talking to the investor that owns one or two of investment properties are talking to guy who has his personal house down the street from me or my house.
And some cases that house, maybe 300,000, in other cases, it could be three or 4 million for their personal residents. They own two or three other houses. So, you know, there is a concern. Do you want to know what the market is doing and how to play the market going forward? And the smarter investors they're looking to see if there's an opportunity about to happen or has it already happened? So in order to kind of go forward, we gotta go backwards. First. We gotta kind at what's going on out there and what's been going on. So right now we have another variation of COVID is happening and it's actually, they just shut down some of the shows in New York city, Saturday night live actually shut down. They did the whole, they did the show virtually, which I didn't even realize this week. So that's a sign that this is coming around again.
We also have the fed chairman telegraphing that they're gonna be doing anywhere between to three interest rate hikes over the next 12 months. In 2022, we have a bunch of political unrest with the Democrats and Republicans fighting over tax bills and fighting over different plans and everything else, president, Biden's talking about huge interest rate hikes for capital gains. And so what do we see and where is the opportunity gonna be and where, what is the forecast? First of all, once we look backwards and we look at the forecast, then we can actually look for the opportunity in the forecast. So let's back up for a second. I wanna just kind of back you guys up a little bit and do a history repeats itself, obviously, especially in the real estate business and the real estate business. You've heard me say this hundreds of times, the real estate business repeats itself off anywhere eight to 12 years in a row.
It goes on a cycle. And right now we're in a pretty much an up cycle. You know, the market is taking off like a rocket again, but it is starting to stabilize. We are starting to see prices come back in line with the market. We're starting to see properties that are expiring on sold, which means that they were overpriced or that just didn't sell. For some reason, we're seeing people negotiate again on home sales, on and on home properties. They go to purchase 'em and they do a home inspection and there's things wrong with it. Instead of buying the house on the blind, as they say, without even seeing it, where we were having people from New York city, actually buying houses without doing a home inspection and closing without even seeing the property, they just wanted to get out of the city that bad. But now we're actually seeing people going back to normal.
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We're going back into a pseudo normal market. If you will, we'll see how long that lasts with the new COVID variant. I'm gonna back you up a little bit. I want to go back to 2008. So in 2008, when we worked in that market and you know, I'm not a genius, but I've been in the real estate business since 1996, I started in 1988. I actually got involved in the real estate business in the construction side. I ended up going in the south side in 1996, after developing a patent on a bicycle walk, my buddy said, you know, everybody in town, you guys, you should sell real estate. He goes, you can make a lot of money. My mom does it and she stinks that and she makes a ton. I did get involved in real estate. Thank God for my friend, Matt, and found my, you know, my calling.
So 2008 comes around, you know, the market is flying up into that point. I open a real estate office and literally about a month after I opened a real estate office, bam, you know, the financial debacle of 2008 and nine happens. We have a bit, a bunch of what I I'm gonna call commercial mortgage back securities. We find out that there really was no security in it. The properties that they had told them that there was a value in were really not, they were overvalued over appraised. People were getting loan homes of like for a million dollars on an income of a hundred thousand dollars. You know? And I still remember telling a friend of mine, who's a brilliant guy, has a quantitative analytics degree from MIT. And when we were selling his house 2007, he said, Sean, you sure this is the top of the market.
And I said, Paul, I see guys getting loans for 1.5 million with 3% down and no job, no income and no assets. And I mean, honest to God, they're getting a loan for that. And it's Phantom money. It's just ridiculous that this can't keep going ironically enough, a year later, the market imploded. And I, you know, I thought to myself like Christ, you have a quantitative analytic degree from one of the best schools in the country and you work on wall street and you're missing this blind spot. Like, is this that much of a hole in the market? And you know what it really was because unless you're pulse on the market, you really don't see the storm coming across the beach. But if you're a local in New Jersey and you're sitting on the beach and you're watching the rain come in, you could see it coming across the ocean miles away.
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But if you're a tourist, you're really not looking for it. And you really don't know you don't, you didn't notice that, Hey, well, wait a minute. You know that the temperature changed a little bit. They got a little moisture in the air what's going on. And then you look up across the ocean. You could see the storm coming. So in 2008 we saw the storm coming. We just ignored it. Interest rates were, you know, at that time they were at about a 6.2, 6.5% unemployment after 2008 is when up 10%. So from a norm 4%, it went up to 10%. That's almost double what it normally is. Sales in the real estate market went from 7.2 million down to 3.8 million, literally overnight. Literally I can remember opening my office. And literally the first day I got the sheets for the multiple listing service. And it said, okay, you know, Sean, out of 180 companies, your number 92.
And I was like, I was so excited to get that report. It was like a nine page report. And they sent to you by fax. So the following month I knew that it came out on the 15th of the month. I run to my office. I get there. It's like six o'clock in the morning. I'm standing at the fax machine, like a little kid waiting for the candy to come through the machine and come page nine, 10. I'm waiting for page 11 and 12, 11 and 12 don't come. I look at the report, thank God. My small company of like seven people went from 90 to number like 40 or something like that of 180 companies. And then I went to go look and it really wasn't 180 companies anymore. It was 140. It really, what happened was I called the multiple listing services, said that a woman over there I go, Hey bill.
You know, I didn't get the last two pay ages with the other companies on there. She goes, Sean, those companies went out of business last month. Are, are you paying attention or what's going on out there? I was like, holy crap. So literally it decimated 40 companies out of 180 companies, literally in 30 days, just as a result of the market. You know, the sales went from 7.2 million to 3.8 million. The sale prices also went it almost in half exponentially. And at that point, the government said, oh my God, we need to do something. And they threw out what I'm gonna call a life preserver. They threw out the life jacket was called memorandums. And what the memorandums were designed to do was to actually stop banks and financial institutions from foreclosing on people that were in distress situations, where they hadn't made a mortgage payment for 30, 60, 90 days ex that, that, you know, normally we would know about that because after 60 days the bank would file Liz penance with a court would file a would a judge and or a, you know, a attorney firm.
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They would file a letter called the Liz penance, which actually notifies both the owner of the property, but also notifies the investor of the instrument, which is, you know, the commercial mortgage back security for lack of a better word. Or I AIG at that time who owned a lot of the insurance. And a lot of our primary mortgage insurance was backed by a company called AIG who also almost went bankrupt during 2008 and nine. So these companies actually thought that they had a fairly solid investment. It turns out though that there was more than 800,000 to a million properties. I'm gonna say that again, 800,000 to a million properties and bear in mind at that time, there was only 4 million properties being sold. So that was 25% of the market was either distressed or in what they called the shadow inventory. And the challenge was the financial institutions, unless they really went digging.
The general public had no idea that these properties were out there and they were distressed. And ultimately what happened was once we started to go back to norm more like 2009, 2010, they actually, the government pulled back their memorandums and allowed the banks to now go into a foreclosure process. They did warn them and they tried to say, oh, Hey, you should give these people some kind of vehicle out other than just foreclosing on them. So a lot of them were restructured loans. They took the payments, they put 'em on the back of a 30 year loan and turned it into a, a 35 year loan or something like that. But at the end of the day, there was a tremendous amount of properties that were sold that came into the market as distressed properties over the next six months. How much did that affect the market?
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10%. So the market actually went dipped another additional 10% from 3.8, nine to three point like 5 million of properties in the market. So, you know, and that's just a function of supply and demand. All of a sudden, you go into a market where you had 15 properties for every one buyer to now having 20 to 25 properties for every one buyer. Of course the market is gonna take a no dive during the, you know, bear in mind during the same period of time, the government took interest rates from six and a quarter percent, 2008, they out to about four and a quarter. So they dropped it almost 2% over a two year period, almost three years. And then ultimately when they pulled it back again and the shadow inventory came into the market, they went from four and a quarter down to three and a half and three and a quarter at some of the lowest points.
We even saw rates as low as 3% in 2014, 2013. So, you know, now it's fast forward a little bit and let's look at to a seasonal or, or what I'm gonna call a cyclical trend, which is in the real estate business. It's an eight to 10 year cycle. That real real estate typically will cycle from what they call peak to peak or from top to bottom. So you're gonna go from 2008 to 2010 years later, 2018, what's gonna normally happen. You know what? In 2018, the market started us soften up, but interest rates were at for were in a quarter and the federal government came out and said, oh, wait a minute. You know, let's see, let's see what we can do. So all of a sudden they went, they actually started raising interest rates and they started raising 'em pretty rapidly in between 2018 and 2019.
They actually raised rates almost three quarters or percent in less than a year. So what happens when you're raise rates that quickly in a market where you're still just hovering, just getting back on your feet. I mean, literally it imploded the market. And on top of that, we were in a time when, remember I said market cycles every 10 years or so, 2008 plus 10 years is 2018, right on the money. We were actually anticipating the market to soften up, which it was doing now, all of a sudden the fed actually pushes on their interest rates and raises them up to quarters of percent. Literally every quarter, they raised at another quarter of a percent over three quarter period, say what you will about Donald Trump. But the one thing he does know is real estate and, and real estate housing and residential housing. He was actually out on the front lawn, screaming and hollering at the federal chairman saying, what are you doing?
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You're gonna implode the market. The reality is they did. They really did implode the market. It went to a standstill. It actually stole the market, but went to a standstill in, in 2019, they woke up and they said, oh, wait a second. You know, we made a mistake, let's start pulling rates back down again, between late 2018 to 2019, they bring the rates back down from about a 5% at the peak of it all, just over 5% back down to about a four and eighth, four and a quarter was about the rate that you ended up seeing. So now all of a sudden, we're starting to go back into a normal market. It's 2000 thousand 19, we're cruising along. And then bam, we have COVID COVID sets in the market, goes upside down. People are really scared to help. They're scared to death. They really don't know what to do.
They don't know what's going on in the first quarter of 2021, unemployment went from 3.8 to 15.5%. I'm gonna say that again in literally in a quarter, in less than three months, our actual unemployment rate went from 3.8 to 15.5%. Now, I don't know if you remember what I said, but in 2008 we saw unemployment go down. We saw unemployment raise and it raised quite a bit, but it wasn't really 300% now, you know, to go from 4%, which is normal to about a 10%, that's a pretty big swing. It actually went up a hundred percent, a little more than a hundred percent, probably 125%. This time around, we went up 300%. So what do you think happens when not many people are outta work? Of course they're having problems with not having jobs, not gonna be able to pay their bills. A government steps in, again, throws out the life preserver this time.
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Not only did they throw out the life preserver to stop the federal banks and the financial institutions from actually foreclosing on, on these people. But they also threw the money. They threw a lot of money at them. And really what was happening was people were getting paid more money to stay home than they were when they were working. So they really had no interest in going back to work. And when they did had say, they can finally go back to work. A lot of 'em said, screw, we're not going back to work. And right now, if you go into, like, we went into a restaurants in lake George over the summer, do you know that we were in a restaurant that normally would hold 300 people for dinner on a Thursday night? The funny thing was, there was probably 30 people out front and a line.
There was 15 people inside at tables. And I walked up to a woman in ice said, you know, let me ask you a question. Like, can you get us a table for 12? And she said, oh my God, no way. You know, there, there's no way we can do that. And I said, well, what about three tables of four? And she goes, sir, look around here. And I go, yeah, she goes, I'm the hostess. I have two people in my kitchen and I have two people that are servicing this entire restaurant, including me when I'm not at this table, helping you, she goes, there is no way in hell we, it can accommodate your party. I really apologize for that. So that was the theme. There was restaurants that should have been open that, that were closed because they just couldn't find the people to actually Mann the tables to work.
There was no labor force out there to work. So all of a sudden we start to see unemployment. We start to see COVID kind of be heat, get their arms around it a little bit. We start to see people going back to work a little bit late in 2020, 2021. Just before that, though, what happens to the real estate market? People are afraid to sell their house, cuz they don't know where they're going. People that are living in a house are afraid to leave their house. People that wanna sell their house, don't wanna sell that don't wanna let somebody in their house to show it. So ultimately what happens and now you have people that are in high density areas like in the tri-state area, in New York, where we have ridiculous amount of people per square foot. And then you go into New York city where people are living on top of each other and you have the scare of probably one of the, the largest pandemics since the black plague, if I'm not mistaken.
And so you have people that are trying to get outta New York city and trying to buy a place out in the country, away from people. The challenge is there's no inventory. So remember when I said 2008, there was one buyer that was qualified to buy a home for every 15 homes that were in the market. Reverse that in 2021, 2019,
