Charlie Gasparino tonight on Tucker predicted home prices are going to fall. He says it is the same as crypto and meme stocks. He also said the current home situation is something like the 2008-9 subprime crisis.
He is full of crap.
A. Crypto bears no resemblance to US home prices. Crypto has no use. Not only can homes be used, they can be used by YOU for one of your greatest necessities: shelter.
B. Meme stocks were run up in price by a bunch of overaged children on Reddit whose objective was to hurt short sellers whom they seem to believe are real life Gordon Geckos. No such thing in home prices.
C. The sub prime crisis was caused by outrageously awful mortgage underwriting with exaggerated appraisals, false bond ratings, loans to people with lousy credit, 110% of the value of the house, buyers buying homes in states they had never been to. Not only is there none of that now, recent conditions have been the opposite of that: appraisers chosen at random rather than by lenders, the tightest ever credit standards for borrowers, many all-cash buyers, many buyers putting down more than 20%, corporate investors buying homes.
And home prices did not go down compared to the prior trendline in the Subprime crisis. What happened is they temporarily jumped way up above the trendline then went back down to the trendline they had been on for many decades. The trendline never dropped.
D. Throughout my 55 years of adult life in real estate, I have seen a number of regional home price down downturns caused by regional overbuilding of new homes or apartments. There is NO such overbuilding of new homes anywhere in the US now nor is there any prospect of such overbuilding. After traumatic events like the S&L Debacle in TX, OK, and AK of the 1980s, builders and construction lenders are far quicker to stop building than they were then.
E. There have only been two times in modern US history (since around 1900) where home prices fell nationwide: the Great Depression and the Sub-Prime Crisis in 2008-9. The Great Depression was caused by overly tight Fed policies. Recent Fed policies have been the polar opposite of that. They did not print enough money in the Depression. Now they are printing way too much than ever in history. That is inflationary. Homes are not denominated in dollars so they are hedges against inflation. Gasparino and Carlson were both lamenting inflation in this same segment where they said home prices were going to fall. WTF!?
You’re saying the prices of a hedge against inflation—real estate—are going to deflate during the greatest excess “printing” of USD in history?
As I said above, the policies that caused the SubPrime crisis are the polar opposite of recent mortgage underwriting and buyer down payments.
I have never thought Gasparino did not know what he is talking about when he discusses securities, which is where his journalist, not financier, career has been. I see no experience in real estate in his Wikipedia write up. So say “I do not know” when you are asked to comment on home prices.
In this discussion above, I offer logic and 122 years of history, about half of which I lived through, the other half I studied. Gasparino’s analysis was basically that anything that rose rapidly in price is like cyrpto and meme stocks. That is total BS.
Another angle is thoroughly explained in chapter two of my 2021 book An American Principal Residence is the Most Advantaged Investment on Earth: Maximize Yours! It lists two dozen federal, state, and local laws that politicians have enacted to protect the values and equities of the 2/3 of Americans who own their own principal residences. No other investment, not even rental houses, have so much protection. It is almost illegal for home prices to go down in the US.
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