The real estate industry says the housing market is stronger than ever.
An economic research director for Realtor.com told CNBC Tuesday that housing starts can’t keep up with demand. Zillow reports for-sale inventory is at an all time low. RE/MAX says the December housing market broke records.
But Aaron Layman, a major real estate broker in Denton County, Texas, warns the housing market could easily implode. Last week the Mortgage Bankers Association posted a press release touting a more significant recovery in housing:
The housing market is seeing signs of a more significant recovery in new residential construction, which is a promising sign for prospective homebuyers.
Layman balked. He says the Fed is propping up housing prices:
Aaron Layman Properties has hundreds upon hundreds of houses listed for sale. Why would a major Texas real estate owner/broker suggest housing prices are inflated by a monetary bubble? These are some of the scariest tweets on the Internet.
In the tweet above, Layman links to a recent MarketWatch report on “jumbo mortgages.” It details housing finance practices that seem like utter madness this side of 2008:
Mortgage underwriting standards have eased considerably in the past couple of years… One smaller lender is now offering home buyers a loan as high as $2 million with a FICO score as low as 640. This score was considered sub-prime during the bubble years in the early 2000s.
So Layman’s thesis is that housing prices are only rising because of artificial demand. People who can’t really afford them are buying homes with the feckless finance of a low interest rate environment. The kind that got us into great trouble with the subprime mortgage crisis. But this time with more zeroes on it.
Yahoo Finance confirms that FHA loan limits and “conforming loan limits” are higher in 2020. That means this time around the loose lending standards are on the most expensive houses. The MarketWatch report calls it “a ticking time bomb.”
Layman says if interest rates change, the housing market will implode. He says the U.S. economy is now pinned between falling interest rates and a housing collapse:
In a recent Bloomberg television interview, Dallas Fed President Robert Kaplan admitted he’s worried that Fed policy has given investors a green light to venture into risky assets.
If the economy shows any cracks, in wage growth and real estate prices, home owners and banks may find they have bitten off far more than they can chew. The entire edifice could come toppling down. You heard it from a real estate broker.
Disclaimer: The opinions in this article do not represent investment or trading advice from CCN.com.
Last modified: January 22, 2020 11:38 PM UTC