In a previous blog back in 2023, I shared economist Fred Harrison’s prediction that 2026 would be a housing market top. As usual, I was a bit early and nobody cared. Welp, how do you like me now? Click here for that absolute masterpiece.
Here’s where we are in March of 2025. Big money firms took easy money from 2016 to 2021 and bought homes so they could rent them back to you. That made supply lower and prices higher. Soon after, money printing led to inflation, which led to rate hikes, which let to the 10 year treasury yield soared and mortgage rates tracked alongside them. Today homes are not affordable because of mortgage rates, taxes and the spike in home owners insurance. Here's some depressing pics from the linked article:
The problem with housing bubbles is that they don’t burst quickly. Banks and the FHA like to slow walk foreclosures and extend and pretend. That’s their job. So price discovery (like in Florida in 2007) is not transparent. Sellers want a profit, but buyer’s can’t afford these sky high prices. In fact, seller’s are realizing that the days of selling your house to a hedge fund or wealthy foreigner site unseen are long gone. As such, seller’s are putting their houses on the market and then pulling them back off aghast in decade high numbers. So if you here supply of houses to buy is low, that could be one reason.
One way to discover a fair price is to look at companies that buy homes. There stock should be a reflection of the implied value of all the homes they own. If you take a look at Invitation Homes and American Homes for Rent, it seems that Stock Market things the housing market is overpriced by about 35%. I'm not great at math but that's a lot.
The way out of this is lower mortgage rates. To get that we need a lower 10 year treasury yield, Recently, Scott Bessent announced he doesn’t worry to much about the Federal Reserve’s machinations. He’s focused on the 10 year yields.
Now you know why.
If you’d like someone to cheer you up and tell you that your home is worth $10 Billion dollars, call your mom. If you’d like to discuss how real estate impacts your retirement, call me.
And before I go, here's a pic of Don Ho singing "Tiny Bubbles" in front of an overvalued home. You're welcome.
