Why Owning a House is MAKING YOU POOR

A lot of people think that if they buy a house, that that will be the smartest financial decision that they ever make in their lives. The problem is that only ends up being true for some people and not true for others. Because here's the deal, Americans right now have an estimated $35 trillion in housing wealth, which sounds great, right? That's the number one reason why you want to become a homeowner, to be a part of that club. They have a part of that home equity wealth, right? Well, guess what? That home equity wealth comes at a very steep cost that a lot of people don't consider before jumping into this game and only find out the hard way once it's too late. Because the reality is, owning a home is driving a lot of people to the poor house right now. I'll give you a local example right here. They talked to this woman who bought a house in Miami Shores, which is an area I walk through all the time in my videos, guys. They bought a house in 2021 for $875,000. And now the house is worth an estimated $1.35 million. Okay, that's a nice appreciation they got right there. About a $400,000 increase in home value in the span of four years. That's not bad. But here's the thing, along with that $400,000 rise in equity, their property taxes have also increased more than 50% since they first purchased the house and are now about $21,000 a year just for property taxes. And they're at the point now where even if they pay off their house and have no mortgage, they're still going to be paying rent to live in their own house. They're going to be having a $2,000 a month rent payment just to the city of Miami Shores and the county of Miami-Dade. And for the first time ever, even though housing wealth has reached an all-time record high, people are feeling less well-off and less optimistic than ever before because of all the downsides that come along with it. And you can see just how much the home equity values have risen over time. Right before we had the last big real estate crash in 2008, it was close to $15 trillion and today it's $36 trillion, which is incredible. But guess what? Rising home values translates into rising costs. And a lot of people will say, well, isn't it great, Michael, when you have all that home equity because now you can take a home equity loan or a home equity line of credit against your house and borrow against it. Yeah, that's great if you want to end up losing the house and have even more debt. That sounds wonderful. And also let's not forget that interest rates are still on the high side right now. So even if you did do that, you are going to be paying dearly for borrowing that money. It's not free. And so what's happening is a lot of people who were sold the American lie, not the American dream of buy a home, and that's going to be the best financial decision you ever made, are finding out that that's not all that it's cracked up to be due to all the ongoing costs. And in fact, a lot of homeowners right now are reporting that they're feeling financially insecure. And the reason for that is because of the sheer amount of money it costs just to stay in that house, regardless of the mortgage payment. Even if you have no mortgage, it is expensive to maintain a house, to pay those taxes, to pay the insurance, to pay the gardener. Look at this yard right here. You think this is free to maintain this nice little garden area they have here? How much do you think they pay in the gardener each month, $500, $600 a month, maybe more. And listen, I get it. People who are stuck in the trenches and are still renting but wish they could be a homeowner are sitting here wishing they were this person having these problems. Oh, that's rich people's problems. Not really, because it can quickly turn you from being rich into being poor because of the amount of money it actually costs to maintain a house. They talked to another guy who owns a two bedroom condo in Daytona Beach, Florida, who rents the place out in order to basically keep it because he can't afford to keep it unless he rents it out. Obviously, his cost for his insurance and the cost for his HOA fees have grown substantially, just like everybody else's has. So now this guy's living in a 40 foot motor home when he's on the road and he lives on a boat in the Florida Keys while he rents out this condo. He says he's able to get around $6,000 a month in the high season to offset his expenses, but that's for only a few months out of the year. And whether or not he's renting it the whole time is not reported here. So even if you're getting $6,000 a month for three or four months, but then it sits empty for three or four months, it kind of offsets that extra money that you were getting. And this guy with the condo says that he applied to a credit union and a bank for a home equity line of credit. And even though he has a credit score of 833, he was denied. The lender said that they don't offer credit lines for rental properties. And he says, it's incredible that I can't borrow, you know, $500,000 in equity I have in this condo. Well, the reality is he could if he went to an alternative lender. But the thing is, they would be charging him a very handsome interest rate to do so. And here's something else to consider. Even though a lot of homeowners today are sitting on record amounts of equity, a lot of people are watching that home equity evaporate right before their eyes due to declines in their markets. In fact, if you paid over asking price for a home two or three years ago, and you're in a market where the home values have been declining ever since, there is a high probability that you now owe more on your house than it's actually worth. Millions of people are in this situation now. Property taxes on homes across the United States have increased on average about 14% from 2019 to 2025. And that's just the average. A lot of places has been a lot more like the first example where it went up 50% for this woman. Let's take a look at this chart here, which is sourced from Adam data, and you can see how property tax payments are on the steady rise here in the United States. And also a lot of people are prisoners because of their increased home equity. Like for example, there's a lot of people who would sell right now, but they don't because they don't want to pay the capital gains taxes on the increased amount of equity that they have. Like for example, they talked to a guy in California who bought his house in 1986 for $235,000, which I'm sure back then seemed like a lot of money. But if he sells the house today, he will owe about $300,000 in federal and state taxes for capital gains guys, 300 K more than he originally even paid for the house. Think about how wild that is. So what is he doing instead? He's hanging onto the house for the foreseeable future. And in California, they actually have ways where you can pass down the property from one generation to the next, and the next generation gets to inherit the old tax basis on the property, which is another reason why California home prices have gone up so much over the years, besides the higher incomes. But some people inevitably turn to borrowing against the house, right? They go for the HELOC or they go for the home equity loan. And guess what? A lot of lenders will allow you to borrow up to 85% of your home's value. So if you have a house that's worth $400,000 and you have a mortgage of $250,000, a HELOC, they might let you borrow up to $90,000 for that house. But here's the problem a lot of people are facing who have been doing this is they are seeing the value of their home decline after they take that HELOC. Oops, what happens now? Well, that kind of depends. It depends on how far your home equity goes down and the value of your home goes down if your lender might step in or not. Well, let's say your home equity is going down and the value of your home is decreasing. Well, your lender might do a few things and none of them are going to be good for you. One thing is they might reduce your credit limit. If they gave you $90,000, well, now they might lower it to 70. They may also even freeze your HELOC. If your lender determines that your home no longer provides sufficient collateral, they could freeze your line of credit, preventing you from drawing additional funds. Well, say goodbye to that extra source of money. They may also request a new appraisal. Lenders can periodically review property values and request updated appraisals or use automated valuation models to reassess your home's worth. Another thing they might do is increase your rate. Maybe they won't change the amount of money you're allowed to borrow, but they'll increase your interest rate so they can get a higher return for putting out the higher risk. Not great for you either because that also means higher monthly payments. And probably the reason why you have a HELOC to begin with is because you're already struggling with money. So now you've got to pay more. Not exactly going to be helping you out financially. And the worst case scenario that can happen to somebody who borrows against their home is they can call in your loan. If your home value drops substantially, lenders can invoke a clause that allows them to demand repayment of the entire outstanding balance. And even though this is rare, it can cause serious financial problems, especially if you don't have the money to pay. And that's where they give you the slip and say, hey, we're going to be foreclosing on your property because you can't pay. Which is where this all ends up in the end, guys, is that people who borrow against their home, if they're doing it because they're falling on hard financial times, the end game is you go into foreclosure. That lender is going to repossess your home at some point down the road if you can't pay. So a lot of people like to think that owning a home is superior to being a renter because, you know, you got more stability and you own your home and you can do whatever you want with the place. But in the end, if you can't pay, you are treated just like a renter that gets evicted, guys. You are kicked out of your home and all that money, all that equity you had evaporates. Because a lot of places, a lot of states, if they sell your home in foreclosure, even if you had a lot of equity, it doesn't matter. They just end up keeping and pocketing the money, which isn't right, but it happens all the time. You know, I was just talking about California and this old man that doesn't want to sell his house because he doesn't want to pay the 300K in capital gains taxes. But trust me, more and more people are deciding to sell their homes in California, regardless of whether or not there's going to be a tax hit. Because California is facing a situation right now where the home sales in the state are below where they were during the 2008 recession. At the same time, the supply of listings is going through the roof right now. In fact, if things keep going like this, California is looking like it's going to be the next Florida in terms of the housing crisis. The number of active listings in California was about 65,000 in April, which is a post-pandemic high. And it also beat the levels that we saw back in April of 2020, according to Realtor.com. So this means that inventory in California is up 50% from where it was just one year ago, guys. That ring a bell? That sound like another familiar place? Yeah. Well, that's exactly what we saw happen here in Florida about a year ago now. And the problem just continues to amplify. And part of the reason inventory is so high in California is because nobody is buying homes. In fact, California is the number one state that people leave every single year for like five years in a row now. So you have more people leaving than are coming in. At the same time, buying a home in California is prohibitively expensive for basically everyone. Take a look at this chart here going all the way back to 2006. That shows you the amount of annual home sales in California. And you can see during the lowest time period during the 2008 recession, it was 331,000 homes annualized sold. Today it's 322,000. That's even lower than it was then. And that's not even accounting for all the extra people that live in California between 2008 and now. And as of the March data, if you think this is bad, okay, right now, if the March data for home sales in California was annualized, it would only be about 277,000 homes sold for this year, guys. And the most recent reading is 322,000. So this is just awful. Nothing is selling. And I know there's gonna be people from Orange County and San Diego and other places writing in the comments, whoa, things are still on fire over here. Like, okay, guys, well, it doesn't matter because statewide things are changing. So regardless of maybe if it's not changing that drastically in your local market, you can't deny or ignore the overall trend. And it's no wonder why nobody's buying because the median home price in California is $767,000. However, that's virtually unchanged from one year ago, meaning that home prices are essentially flat throughout the state as of right now. It's not going up anymore. And this is what I've been telling people on the channel. This is the trend that we're gonna see in more and more housing markets throughout the country as nobody continues to buy homes, but inventory continues to come online. All of those homes are not getting sold along with all the homes that were not sold from three or four months ago or six months ago. And they all just continue to gather dust and sit on the market and inventory increases and buyers don't come out and buy. So eventually, if those sellers want to sell, which many of them actually need to sell, they will need to lower the price. That's the reality of where we're at right now. Also, the most recent data from Adam reported California as one of the most vulnerable areas for housing market declines based on gaps in affordability, underwater mortgages, foreclosures and unemployment. In fact, California has 14 of the 50 most at-risk counties in the nation for a housing market downturn. So it's not like it's gonna happen everywhere in California, but a lot of places are in trouble. So we'll have to keep an eye on the situation. But the reality is, if more people continue to leave, if major employers continue to exit the state and a lot of those big, high-paying jobs continue to leave California, it's gonna be a hard case to prove that California's just gonna continue seeing home prices going up and see housing values remain strong in the state. It'll be something interesting to keep an eye on over the summer once I'm actually there and have some boots on the ground. We already know the situation with Florida, so while I'm gone over the summer, I'll still be tracking what's going on here, too. But the reality is, it's just gonna continue to get worse for Florida, not better. And this is why so many homebuilders right now are offering record discounts on houses and record incentives to buy at a time of the year when usually they are pulling back on discounts and incentives, because this is supposedly the busy time of year for real estate. Take a look at this, guys. Homebuilders typically make about 40% of their sales during the spring market. But demand has been so low, they're having to cut prices and increase incentives at a very unusual time of year. D.R. Horton, they reported its revenue declined 15% in the last quarter compared to a year ago. Pulte Group said its revenue fell 2%, and that's before the tariffs. And right now, builders are estimating that new house prices will need to increase between $5,000 and $15,000 due to tariffs. But some building suppliers are still holding prices steady for now. So what are the builders doing? They're offering design upgrades. They're offering mortgage rate buydowns. They're offering price cuts, because the number of brand new homes that are going unsold has also reached the highest level since 2009, when we were in the middle of the Great Recession. Right now, just the incentives alone, just the incentives, we're not even talking about the decline in home prices to get these houses sold, is equal to about 7.25% of a brand new home purchase price right now, which is up from 6.1% where it was in January of this year. So the discounts are just getting bigger and bigger. This is the time of year when home builders typically increase their prices due to higher demand. That's how backwards things are right now, guys. That's how broken this economy is, that they are now lowering prices at a time when it's usually busier than ever. And home builders are saying that they expect this to continue throughout the rest of 2025 unless mortgage rates magically decline, making homes more affordable. Well, we know that's probably not going to happen, according to Fannie Mae estimates, and the Fed has zero reasons to drop interest rates right now. And even if interest rates did go down, people are not going to be pouring back in because the prices are still too high. There's only a small percentage of the population that can actually afford home prices where they are today, and a lot of those people have already bought, which is yet another reason why demand is so low. So good luck getting people off the sidelines with these prices, even if rates do come down. So the moral of the story today is do not borrow against your home unless it is an absolute emergency last case scenario. This is the only thing left to do, and you have to do it. And the other moral of the story is that being a homeowner is not all that it's cracked up to be. Yes, it works out for some people, but it's usually people who buy in the right area at the right time and have their finances in order before they do it. So if you enjoyed this video, make sure you subscribe to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.