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Morning Brief: Single-family housing market is under pressure

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Yahoo Finance’s Myles Udland breaks down whether or not the single-family housing market is the next market to crack.

Video Transcript

JULIE HYMAN: You know, Myles, you were just talking about cryptocurrencies. Of course, we have had a lot of different, what one could term, manias this year, right? You had meme stocks, you've had cryptocurrencies, you've had SPACs and IPOs. I would kind of lump those together to some degree. A lot of different hot areas that people-- either they were getting stimulus checks or they just had some cash to put to work, and they were putting it to work. We saw a lot of run ups. And a lot of those, we've seen the air come out to some extent.

But as you point out in the "Morning Brief," there's one area where we have not seen the air come out. Some of the recent data has been a little bit more choppy, but price wise doesn't seem to have happened. We're talking about housing. A more old-fashioned area, perhaps, to talk about when we're talking about these kinds of manias. And so you sort of explore in the brief what would happen in order for that market to cool off a little bit.

MYLES UDLAND: Yeah. I mean, I think, you know, the housing market is a fascinating place. It's always interesting because housing, on the one hand, it's a very liquid and very deep market. But on the other hand, everybody who's participating in the market only needs one home, so it becomes a very much-- it becomes very user centric if we want to think about it. That way the housing market seems the way it is when I tried to buy my own home.

But the single family housing market, no doubt, in the US for the last nine months has been very hot when it comes to price appreciation of homes and the competition for homes that are on the market. Inventories are down. And Redfin had a great set of statistics on its earnings call earlier this month where they have inventories falling to a record low at a record pace while the price of homes is appreciating at a record pace and the number of bids above ask are at a record level. So, we have all of these things coming together.

And you can see, anybody who's watching this program knows that if they are living in a suburban market, there has been some kind of crazy dynamic with respect to how many people are coming through open houses, what you're hearing from your neighbors on what they-- you know, someone asked if they could buy their house when it's not even listed, or you're seeing people list for a number that, in their mind, was just a fantasy, and then the home goes for above that and all of a sudden they've got to move out because they just threw their house on the market and someone hit the bid. So we know that this is happening.

But, Ian Shepherdson over at Pantheon Macroeconomics, he points out the fundamentals here of the housing market are kind of breaking down. You look at the number of homes that are being-- housing starts. Those are starting to cool off. Pending mortgage applications, those are starting to cool off. And I think this all leads to a story-- and Bill McBride, who many viewers will know. He writes the "Calculated Risk" blog. Bill McBride thinks that inventory is probably bottoming and that means that more homes are going to come to market and we'll see the fever break a little bit when it comes to single family home price appreciation.

But I still think that that's looking at it from a macro perspective of, oh, housing isn't that healthy. Oh, housing inventory is probably going to right size. I don't think that's wrong. I mean, the data say that's going to happen. But again, for individual homeowners who went to the house around the corner from me on Sunday where 18 people went through the house in two hours and four bids came in that night, I don't think they really care that inventory is bottoming. Those people are scrambling for a house that's probably selling at a level it'll sell out in 15 years from now. And so, that market is still, to me, in a manic-type phase and I'm not exactly sure when we're going to see things break because there are so many demographic tailwinds for the single family home trade.

BRIAN SOZZI: Well, Myles, you do get the sense what we're seeing now is a little healthier-- a little healthier than what we saw in 2007 to 2008.

MYLES UDLAND: I mean, it's healthier--

JULIE HYMAN: Healthier? I don't know what healthy-- what does healthy mean, though, in this context?

BRIAN SOZZI: Well, people are not taking-- they're not buying too much home. They can actually afford whatever monthly payment they are signing up for.

MYLES UDLAND: I mean, Sozzi, I agree.

JULIE HYMAN: Maybe. MYLES UDLAND: I mean, I agree that it's kind of like-- I guess it's the exact opposite of the housing bubble, but that doesn't mean it's not a heated market, right? If the housing bubble was, there's too many homes being sold to people who can't afford it, now there's too few homes being sold to too few people who can afford it. But you do wonder, have people stretched themselves to a point where, you know, you're now looking at a home that is at the high end of a 10 year, 15 year range.

And I'll just say this, because, again, housing is an interesting conversation because everyone has their own view. You know, Sozz, as to your question of, like, is it the next housing bubble? All I know is I've talked to a lot of people who seem to be very keyed into the financial value of their home, but homes are for a living in. So, ultimately, that's the main consideration. And when you have a lot of people saying, oh, I could get this, that, the other for the house, the psychology is a little-- I would agree, the psychology is a little out of step, even if all the details are, again, kind of a weird, reverse mirror image of what happened in 2005.