Changing times

The housing crash is coming, Dave Ramsey responds, and the Fed moves again

Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security.
- John Allen Paulos

What’s up guys, it’s Graham here.

Talk of recession is in the air. But in a poll that I recently did, the outlook doesn’t seem as negative as I expected:

Things aren’t as bad as they seem. Folks still have their jobs and confidence is reasonably high, but that nagging feeling that something’s wrong is because of… the uncertainty. Even massive rate hikes by the Fed are being taken in stride by the market because it’s already priced in, but the slightest bit of uncertainty can shake things up in the short term.

In such times, there is only one thing we can do - try to take a step back, study the problems, and understand the factors at play. Understanding is the only antidote we have to deal with uncertainty.

Let’s start by understanding how things went down last week.

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The housing market on the edge

“Mortgage demand drops to a 22-year low”
“Inflation crushes home buyers”
“Foreclosures rise by 700%” (???)

With a flood of such headlines in the news lately, I just had to get to the bottom of things. Are things really as bad as they seem? To understand that, we need to look at why home prices are still going up in spite of rising interest rates and what is the difference between real and nominal values. There’s also the impact of increasing rents on home prices, which nobody seems to be talking about! If that’s a lot to take in, just keep calm, watch this video, and by the end, you’ll know how to process the housing market situation.

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The Fed’s latest move

Money is no longer free. By raising the interest rates by 75 basis points, we are officially seeing the highest interest rates since 2018 - and we are potentially entering an era of investing that most people have never seen in their lifetime! So let’s dive into what this change means and how it affects different investments. And of course, we’ll figure out which strategy you need to follow in the short and long term to make the most money!

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My two cents on Dave Ramsey’s two cents

At a time when a lot of people are forecasting blood on the streets when it comes to real estate, Dave Ramsey, someone who’s been in the market for a long time and seen it all has come forward with a contrarian opinion. He put out a 1 hour long breakdown of the housing market’s current situation, and why “it’s different this time.” Of course, watching the full video, researching it, comparing facts… it’s going to take a whole lot of time. Here’s the solution: Check out this short video which goes through all of Dave Ramsey’s points, and my thoughts on top of that!

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So that’s it for my Sunday round-up. For the new folks here, in this newsletter, I give a quick recap of whatever you may have missed over the week on Sunday, and on Wednesday, I will be doing my deep-dive article on one of these topics.

See you next week with another bunch of exciting videos!

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