Ivy Zelman called the top of the 2000s housing market and the start of its post-crisis recovery.
While home prices are climbing today, she says they’ll fall sooner than many experts think.
Zelman told Insider why a flood of Wall Street money leaves the housing market vulnerable.
For someone just starting to think about selling their home, this must seem like the perfect market: the combination…….
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- Ivy Zelman called the top of the 2000s housing market and the start of its post-crisis recovery.
- While home prices are climbing today, she says they’ll fall sooner than many experts think.
- Zelman told Insider why a flood of Wall Street money leaves the housing market vulnerable.
For someone just starting to think about selling their home, this must seem like the perfect market: the combination of enormous demand stirred up by the pandemic, low mortgage rates, and little new construction is hard to resist.
Of course none of that is good if you’re a buyer, but at least someone is happy. Regardless, Wall Street thinks it sees a recipe for a long-lasting rally in home prices, which is contributing to its newfound interest in buying houses.
One person disagreeing with all that wouldn’t be a big deal — if that person weren’t Ivy Zelman.
In a business where one perfectly-timed market call can make a career and two can make a legend, Zelman sits squarely in the second category. She called the top of the housing market in the mid-2000s, some two years before a historic bubble burst, and famously grilled the CEO of Toll Brothers about an overly optimistic forecast in 2006 when she worked at Credit Suisse.
Then, at own her housing research, advisory and data analytics firm Zelman & Associates, she identified the moment in early 2012 when the market finally started to recover after years in the doldrums.
Today, she says the current seller’s market is living on borrowed time. One reason is that people are underestimating the enormous amount of construction that’s being planned. Right now, Zelman estimates that national demand for single-family homes sits at about 900,000 units a year, but 1.1 million units are planned.
That’s already 20% more than what the market needs, she says. Meanwhile, institutional investors have already announced they plan to spend $75 billion in build-to-rent homes — and if that happens, it will only add to the amount of construction that is already going on.
“If we actually build all of the production that’s coming, and the land grab that’s at inflated prices that we’re seeing, we could have a pretty sizeable correction, because we don’t think there’s enough bodies to fill up all these incremental production units,” she told Insider in an exclusive interview.
Roughly 50% of the new homes under construction today are being built “on spec,” meaning there is no buyer lined up, she says, explaining that there is far more speculation today than there was before the COVID-19 pandemic.
That’s a vulnerability, and Zelman says that a lot of building and buying is being driven by “non-primary” buyers, meaning Wall Street investors and people who are buying homes to renovate and re-sell them, as opposed to people who want to buy a house and live in it.
Zillow’s iBuying disaster didn’t …….