A real estate investor who made a fortune under subprime mortgages more than a decade ago told CNBC on Friday he believes the current housing market is in a bubble.
“Absolutely. I think we’re in an omni-bubble. How long does it last? It depends. How long do you keep the tap open and turn this money around?” Billionaire Jeff Greene said on “Power Lunch.”
“There’s just so much money in corporate balance sheets and people’s balance sheets and their bank accounts that it just drives prices of everything higher, but at some point it has to stop,” Greene said.
The housing market was one of the strongest parts of the U.S. economy during the coronavirus pandemic, which also put millions of people out of work and caused a recession.
Mortgage rates have historically been low, and the rise in distance labor has given Americans greater flexibility in their place of residence. House prices soared as strong demand collided with low supply.
Greene is not the first person to suggest that the market is overheating, although his previous bet against the home market in the mid-2000s made his remarks noticeable on Friday. Recently, Google searched for “When will the housing market collapse?” dramatically stitched.
“If you see prices rising as they have risen, you have to ask yourself: why did this happen?” Greene said the fight against the robust response to monetary and fiscal policy on the pandemic played a key role.
“My opinion is that it happened 80% because of the extraordinary amount of liquidity in the economy, 20% because of fundamental factors,” he said. The investor also pointed to rising costs for timber, suggesting that significant inflation will appear in different parts of the economy as he recovers from the crisis.
“I think we will have inflation that no one is predicting, and that will have to lead to much higher interest rates, and that will slow down all these markets,” Greene said.
Jeff Greene
Cameron Costa | CNBC
Not everyone shares Greene’s view that the housing market is in a bubble, even though they believe that fixed value can get a short correction. An important reason why some people say that this boom is different is because the standards for mortgage insurance improvement have improved as a result of the previous accident.
Others have a different view than Greene on what causes the question. “I know there is a lot of concern about potential speculation, but that’s really not what’s happening in the market today,” Coldwell Banker CEO Ryan Gorman told CNBC on Tuesday.
Gorman’s company – which is owned by Realogy – recently conducted a survey of people considering selling a home.
“About 40% is big, the most classic reason people want to move. About 30% see an increase in value in their home, which is why they say, ‘Maybe I want to earn the value. Maybe go ahead with my retirement plans,'” ‘explains Gorman during’ Power Lunch ‘.
‘You still have about 30% who say,’ If I could work remotely at least part of the time, maybe all the time, then maybe I should live somewhere other than where I live today, maybe even somewhere a little more affordable, ” Gorman said. “So while house prices are rising, affordability is a relative term, and we are seeing some people take advantage of it.”