To all the agents in the house,
So, I just finished reading Michael Lewis's "The Big Short," a book I probably should have read years ago, but nevertheless.
Lewis, as you may recall from the book (or movie), tracks several investors who correctly forecasted that the mid-2000s housing market would crash.
They also forecast that the insurance products three or four degrees removed from the actual mortgage loan — credit-default swaps, collateral debt obligations -— would also collapse, and that investors holding the insurance on subprime mortgage bonds must pay out astronomical amounts.
It's a very good book, though somewhat repetitious: So many scenes of the protagonists unable to convince even their own investors of the impending meltdown.
Fast forward to today and the real estate market is the hottest it has been since 2006, according to National Association of Realtors sales figures.
Glenn Sanford, CEO of eXp, a business whose stock increased 900% in the last 12 months, mentioned during the company's earnings call Thursday that national applications for real estate licenses are at their highest in 15 years. Meanwhile, agents from Delaware to Iowa to Idaho say their inventory is at an all-time low.
The question, then, I have for agents: Is there something unsustainable or unhealthy about the housing market now that could bode, if not a 2008-esque meltdown, a major setback?
On the mortgage side, HW is monitoring the can-they-stay-this-low-? interest rates, and lenders' fear of declining profit margins.
For real estate, there are at least a couple of potential problems.
One is a crisis of supply that spirals into homeowners too afraid to put their home on the market. Agents who get listings are able to move homes in days. But agents are getting few listings.
Another is what happens when the pandemic ends. If real estate demand is high partly because people are stuck and need more space, what happens when people can freely move about? Could post-pandemic attitudes, combined with the federal government decreasing help in the form of stimulus and interest rates, lead to a demand free fall?
Please let me know your thoughts about whether this extraordinary time could produce extraordinary problems for real estate, or if I'm on the hunt for a crisis that's (hopefully) not there. Email mblake@ahousingwire.com. As always, you can reply anonymously.
Until next week,
Matthew Blake
Senior Real Estate Reporter
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