So I watched the interview. And, she says essentially the same thing everything else about US national housing stock:
"I think that certain things could happen where [prices could come down] faster, and certain things could happen where [prices could come down] slower."
Agreed. I find it hard to believe that prices won't come down across the country in 2024 vs 2023. I'm more in camp "steady" because I can't see the catalyst that will put the market into a panic.
When asked specifically about the Florida market, she says:
"Call me a doomer, but I'm expecting a Category 5, this is worse than the GFC"
I also agree with this, specific to the Florida market in particular.
I do have some issues with how she gets there:
Central to Melody's argument is the idea that the data is not good in the housing industry. Her argument is specifically predicated on the idea that the entire industry, or a large enough percentage of the industry, is fudging numbers, playing games, or otherwise trying to extend things to pretend that housing prices haven't crashed. That there are tons of unpermitted units that aren't showing up on the housing starts/completions, tons of properties for sale that are not hitting MLS platforms, etc.
For example, she argues that in one 55+ community, 16 properties were listed for sale on MLS, but 100+ were listed non-publicly on an internal community site.
Here's my problem with this argument:
I am an investor. I own 5 properties (13 units) here in Denver with a partner. None of these are listed on the MLS, but all are theoretically for sale, if I get a great offer. Am I part of this phantom inventory? Similarly, my parent's house is not listed. I am sure if they got a slightly above market offer, they would be interested. Is that phantom inventory?
I think you can zoom out 2 layers, and get to a much simpler argument:
- There's a lot of property (both single family and multifmaily) currently under construction
- Rising rates increase both borrowing costs, and put downward pressure on employers
- Property expenses, including taxes, insurance, and labor for CapEx and maintenance, are rising.
- Thus, we should expect housing prices to fall.
With Regards to Florida Specifically:
- Florida is potentially the worst positioned state in the union heading into 2024 - All the macro forces are concentrated in Florida in a more negative way than almost anywhere else.
- It ranks 3rd (behind Utah and Idaho) in homes under construction per 1,000 residents.
- Insurance costs are skyrocketing - if you can even get insurance
- Florida has fewer births than deaths. Recent population growth has all been net inbound migration, which is slowing. Migration is great. But, does it outpace supply? And is it sticky? I think Florida investors may be overconfident in this.
Summary:
I agree with her - I am slightly bearish on housing prices into 2024. I am deeply bearish on some markets, including much of Florida. Time will tell if either of our opinions are worth anything.
What to do about it? Same old stuff:
- Spend less than you earn
- Capitalize conservatively
- Build up a large cash position
- Buy consistently but not aggressively, with a long-term outlook in a market you believe in over a long period of time.
- Know that cyclicality is a feature, not a bug, of real estate and other capital markets.
- Invest not just in real estate but stocks, small businesses, and other assets.
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