I recently read about celebrity real estate agent Mauricio Umansky, who raised concerns about the "perfect storm of total unaffordability" brewing in the housing market.
Umansky, founder and CEO of The Agency, shared his thoughts on the state of the housing market following the rise in the 30-year fixed mortgage rate to its highest level since early December.
"We're seeing super high interest rates above 7%. Mortgage applications are at their lowest since 1995. And then, there's a severe lack of supply," he remarked.
Umansky noted that we shouldn't anticipate prices dropping until we witness some pain due to high interest rates and see an increase in housing supply.
"Until we start experiencing this pain and prices begin to drop, I don't foresee the government lowering interest rates. Thus, we need to allow the markets to function naturally and for affordability to improve so that the government can consider reducing interest rates once more," he explained.
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| Mauricio Umansky |
Regarding the shortage of inventory in housing, Umansky pointed to a decrease in home construction, as well as reluctance from buyers and sellers to move due to their existing home mortgages, and the activity of hedge funds purchasing single-family homes.
In December, Democrats introduced the End Hedge Fund Control of American Homes Act. This bill proposes an excise tax on hedge fund taxpayers who own a certain number of single-family residences exceeding a specified threshold. Additionally, it establishes the Housing Down Payment Trust Fund to provide grants for down payment assistance to taxpayers purchasing single-family residences, funded by the tax revenues generated.
Despite his advocacy for free capitalism, Umansky suggested that government intervention might be necessary as Wall Street investors persist in their buying spree of single-family homes.
"The government may need to intervene to some extent and find ways to limit how hedge funds can operate in this sphere because currently, in Middle America, they are consuming a significant portion of available properties, leaving little supply for the market," he emphasized.
