💼 Invest smarter — Weekly news and analysis to help real estate entrepreneurs be better. No images? Click here 💼 Double, Double, Toil and Bubblebriefcase | invest smarter | issue #20 | by brad cartier Reuters recently announced a new paywall for readers. Meanwhile, briefcase remains free 😁. We can only do this with support from you! 📩 Forward this email and help us grow 🌱 🔵 Bubble trouble?Real estate commentators be like...
I, like many of my colleagues, am bored 🥱 by recent media commentary around the housing market. 🔥 CNBC: ‘When is the housing market going to crash?’ is a red-hot search on Google – here’s why 🧯 🔥 Forbes: America’s Housing Market Is Officially Over-Heating Everywhere 🧯 🔥 Realty Biz: Will the Current Boom Housing Market Crash Dive or Crash Land? 🧯 🔥 WOLF STREET: The Most Splendid Housing Bubbles in America🧯 And of course... 🔥 Mirror: Woman begs for help after fake tan blunder leaves hotel bed looking like 'crime scene' 🔪🩸 So, are we in a bubble or not? This week we explore some macro-economic explanations on each side of the housing bubble debate. We feel like we pop 💦 it, at least for now. Bubble Trouble ✅ Bubble: Fed Chairman Powell said recently that he does not plan on raising the rate until 2023, which means that mortgage rates are going to stay at historical lows in all likelihood. This will continue to push prices up as debt is cheap, and therefore increase the risk of a bubble. The opposite can also be argued with the interest rate argument, but for now, we'll give it to the bubblers. ✅ Bubble: A climate-driven bubble is upon us with the effects of flooding, wildfires, and hurricanes. According to TIME:
Climate factors may cause folks to flee certain markets causing downward pressure on already elevated housing prices. ✅ Bubble: Government spending is at all-time highs. This means we have an oversupply of liquidity looking for places to store value. Enter housing, and record investments of this liquidity into assets like multifamily and SFHs, all of which are putting us in bubble territory. Bad Bubble, Baaaad Bubble...NO ❎ Bubble: Housing supply can't, and won't for a while, keep up with surging demand for housing across North America. By way of illustration, in 2015 there were 1.25 million homes for sale according to the NYT. That number sat at 468,000 in 2021. High demand, low inventory, talk about a bubble whammy. And, taking into consideration the extreem lumber, this supply crunch isn't going anywhere any time soon. ❎Bubble: Traditional bubbles require two things, speculation and overvaluation. Although we may have seen the latter, the former doesn't hold water. According to Calculated Risk, "House price appear elevated relative to incomes, but still well below the levels of the housing bubble." Now, some may argue speculation is rampant in their markets...which is true for some, but not a blanket truth for the majority of the real estate world. ❎ Bubble: Lenders are following much stricter guidelines and therefore the creditworthiness of borrowers these days is solid, according to Federal National Mortgage Association (FNMA) chief economist Doug Duncan. Just look at those credit scores 🤩 ❎ Bubble: At least in the short-term, regulators and governments have put a moratorium on evictions and foreclosures. This means the likelihood of mass evictions and foreclosures—a major factor in bubble talk—aren't likely. ❎ Bubble: According to reports, household income compared to housing prices is still well below the highs of the 2005 craziness. Look...A Bubble Rainbow! So what? Keep focusing on income-producing assets that are priced based on fundamentals and not frenzied buyer demand. This may mean holding off a bit. Bidding wars are almost always going to strain your margins, and as vaccines roll out, we will see more people willing to open up and sell their homes, therefore increasing supply. As materials and supply chains ease, we will see an increase in supply. All of this points to a flattening of the current rising tide of home prices. Not the bursting of a bubble. 🙋♂️ Ask a Question TLDR😱 Luxury home sales rose 41.6% year-over-year, outpacing growth in every other housing segment — Redfin 🚘 A commercial investment that 🌟 throughout the pandemic? Car washes — CO 📉 Interest rates are falling again, driving up demand 8% — CNBC 👴 39% of Americans say they'd prefer multigeneration homes — NAR 👵🏽 The New AGU (Accessory Grandma Unit) 📉 They will back down: Mortgage rates back below 3% — WaPo 🙋♀️ Submit a Story Data Point: 33% ...Is how much housing prices fell during the credit crisis on 2008, per WaPo. Up next, on briefcase... ...We run out of things to watch on Netflix during our third lockdown.Read the most-shared newsletters:
Written By Brad Cartier |