Ivy Zelman is cautioning clients that overheated areas with heavy concentrations of investors are likely to face “corrections.”
After a historic run-up in values during the pandemic, housing in the U.S. is at — or near — the peak, she says. She’s cautioning clients that overheated areas with heavy concentrations of investors, including Phoenix, are likely to face “corrections.” A modest rise in 30-year mortgage rates, even to 4%, would bring demand to a halt, according to Zelman.
Cracks are already appearing: The pace of price growth nationwide has started to slow, and in Covid boomtowns such as Boise, Idaho, and Salt Lake City, bidding wars are suddenly giving way to discounts.
Zelman, 55, isn’t forecasting a nationwide crash on the scale of the last bubble, which was magnified by risky subprime mortgage lending. But the signs of trouble look familiar, she says: Investors are distorting the market by driving up prices beyond the reach of primary buyers, and builders with growing construction pipelines are bidding up land values.
The risk is that investors — from iBuyers to private equity firms acquiring and building single-family homes for rent — get spooked and start selling, overloading the market with supply. By the time builders finish homes they’ve now just started, demand may no longer be there, she says.
“If I’m a homebuyer right now,” Zelman says, “I want to wait because I think we’ve gotten to a level that’s not sustainable.”