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There have been several sound bites lately about the prognosticator who called the last bubble – and at first glance, the headlines want you to think that she is calling the top again.  But she’s not – all she said was that housing production is going full steam – an excerpt:

“The perception that housing is drastically undersupplied and that a strong demographic picture lies ahead is creating a false sense of security,’’ according to a report by Zelman’s firm entitled “Cradle to Grave.’’ “By our math, both single-family and multi-family production are already ahead of normalized demand and estimates of a housing deficit are grossly exaggerated.’’

“No, we don’t have a deficit,” Zelman, who founded Zelman & Associates, said in an interview with The Real Deal. “We have a pipeline of activity that actually would put us in an overbuilt situation relative to normalized demand.”

Granted, 2021’s housing landscape differs in some significant ways from 15 years ago. Mortgage underwriting is solid, making it unlikely that a mortgage-backed securities implosion is coming. Yet the oversupply of homes, combined with an aging population and rising mortgage rates, could cause prices to drop in certain markets, leaving home builders stuck with unsold inventory.

Zelman’s bearish take has new legs in the wake of Zillow’s decision to exit iBuying after incurring significant losses. The company is seeking almost $2.8 billion from the 7,000 homes it bought and is firing a quarter of its workers, saying it’s just too hard to predict home prices. To Zelman, Zillow’s struggles are a harbinger of future woes, especially in places where investors — rather than 2.4-child families — have driven demand such as Phoenix and Boise.

“All this price war and bidding, how much is it being inflated by iBuyers basically bidding against the teacher, the fireman, the policeman?” said Zelman, who is promoting her new book, “Gimme Shelter: Hard Calls + Soft Skills From A Wall Street Trailblazer.’’ Phoenix is among the riskiest markets, particularly for builders, because of all the buying by investors, she said, also citing Austin, Dallas and Houston.

Zelman’s thesis bears some similarities to her commentary in 2006. Mainly, homebuilders aren’t realistic on forecasting supply and demand. Too many developments coming down the pipeline peddling homes at unaffordable prices.

Her firm’s report makes the case that U.S. population and household growth will ultimately determine housing demand. “Population growth — the crucial underpinning of future housing demand — is on a troubled trajectory,” the report said.

Zelman said she recently spoke to a homebuilder in Boise, Idaho who is producing 2,000 homes a year. The builder said home prices are reaching unsustainable levels.

“They said it was like a light switch, like the market just literally turned off,” said Zelman.

Combine this with the near-certainty of rising mortgage rates and homeownership becomes even more unaffordable. Most homeowners are locked in at a rate below 4 percent because of record low interest rates by the Federal Reserve and billions of dollars in purchases of mortgage backed securities.

“Rates matter,” said Zelman. “We think the market has been juiced.”

Only certain markets are at serious risk, Phoenix among them. Many of the city’s new home starts are being constructed by build-for-rent builders. It’s also a place loaded with “non primary buyers” such as private investors or tech companies.

We know that North San Diego County is mostly built out, so any homebuilder woes aren’t going to change the resale market around here.

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