A ‘Big Short’ investor fears an often-overlooked climate risk could see history repeating itself in the housing market.
Dave Burt, CEO of investment research firm DeltaTerra Capital, was one of the few skeptics who recognized the real estate sector was teetering on the brink of collapse in 2007.
He helped two of the protagonists of Michael Lewis’ bestselling book “The Big Short” bet against the mortgage market in the lead-up to the 2008 economic collapse. As it turned out, they were right and made millions.
Now, Burt believes the mortgage market is underestimating another systemic issue: flood risk. If realized, he warns the fallout could resemble the massive correction seen during the global financial crisis.
“Ultimately, until people have good information about what these climate-related costs are going to look like, we’re creating new problems every day. I think that’s really the crux of the matter,” Burt told CNBC.
So, why does the U.S. housing market seem to be underestimating the cost of flooding? What does this mean for homeowners and homebuyers in the U.K. and around the world? And what can be done to mitigate this risk?
Watch the video above to find out.
#CNBC #Property #HousingMarket #Floods #ClimateChange #Sustainability
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A ‘Big Short’ Investor Sees Financial Disaster Brewing in Housing Markets — Again
In the world of finance, there are those who can foresee disaster before it strikes. They are the ‘Big Short’ investors, individuals who predicted and profited immensely from the collapse of the housing market in 2008. Now, one of these prescient investors is sounding the alarm bells once again, warning of an impending financial disaster in housing markets around the world.
Michael Burry, the investor made famous by his portrayal in the movie ‘The Big Short,’ recently expressed his concerns about the current state of the housing market. Burry believes that we are on the precipice of another bubble burst, where housing prices could plummet, leading to widespread financial turmoil.
Burry’s concerns are centered on the rapid rise in real estate prices and the speculative nature of the market. He points to similarities between the conditions leading up to the 2008 crisis and the present state of the global housing market. According to him, there is a dangerous combination of loose lending practices, excessive borrowing, and a housing market fueled by speculative investments.
One issue that worries Burry is the increasing number of risky mortgages being offered to homebuyers. Just as in the years leading up to the financial crisis, he believes that lending standards have become relaxed, allowing people with questionable creditworthiness to secure loans. Burry warns that these subprime mortgages could become the catalyst for a catastrophic collapse in the housing market.
Another similarity Burry sees with the pre-2008 era is the heavy reliance on speculative investments. He claims that too many investors are throwing their money into real estate without fully understanding the risks involved. This speculative behavior drives prices up artificially, creating a housing bubble that, at some point, is destined to burst.
Furthermore, Burry fears that government intervention and monetary policies designed to support the market could exacerbate the problem. By artificially lowering interest rates and implementing financial stimulus programs, governments are further inflating the housing bubble. While these policies may provide temporary relief, in the long run, they can contribute to the instability of the market and leave investors exposed to significant losses.
Burry’s warnings have garnered attention from both supporters and skeptics. Some argue that the current housing market is fundamentally different from 2008, with stricter lending regulations and a healthier financial system. They believe that the lessons learned from the previous crisis have helped to prevent a similar catastrophe.
On the other hand, many find Burry’s concerns to be valid, citing the increasing debt levels, low affordability for homebuyers, and the growing wealth gap as signs of an underlying problem. They assert that the soaring housing prices are unsustainable, and the market is overdue for a correction.
Regardless of differing opinions, it is essential to take these warnings seriously. The ‘Big Short’ investors have a proven track record of identifying systemic risks and potential financial disasters. While it may be challenging to predict the exact timing or magnitude of a housing market crash, it is crucial to maintain a cautious outlook and closely monitor the factors driving the market.
Ultimately, whether Michael Burry’s predictions come true or not, his concerns underscore the importance of responsible lending practices, regulatory oversight, and an understanding of the risks within the housing market. By learning from past mistakes and taking proactive measures, governments, investors, and individuals can better prepare for potential financial crises and mitigate their impact.
Ah yes…
The longer we wait, the more expensive they get. This is insane. There are no right answers. Western Sydney got smashed by massive floods and prices still went up. It's insane to live in a rural area, earn 6 figures and still be poor. Our country (Australia) is in serious trouble.
The fact that there is already an excessive amount of demand awaiting its absorption, despite how everyone is frightened and calling the crash, is another reason why it is less likely to occur that way. 2008 saw no one, at least not the broad public, making this forecast, as I'll explain below. The ownership rate was noted to have peaked in 2004 in the other comment. Having previously peaked in the second quarter of 2020, we are currently at the median level. Between 2008 and 2012, it dropped by 3%, and by the second quarter of 2020, it had dropped from 68 to 65.
Oh, so LITERAL flooding, I thought maybe they were talking about the flooding of supply because where I live, everywhere I look, there's a new apartment/condo building going up.
Climate change freaks
What’s his point? With more homes flooding and fewer homes available, the non-flooding real estate becomes more valuable!
Investors salivating waiting for the next buying opportunity.
But I am a Republican! and climate change is a hoax!!!
I live in Florida and the house market is crazy down here, everyone is moving down here. Waiting for this house market crash so I can jump to be a homeowner. Just waiting lol
My hometown Bakersfield CA was famous in the last housing bubble when a gang of realtors, mortgage brokers, and straw buyer friends n families colluded to buy and sell properties to each other in ponzi like fashion. They bought and sold dozens of properties, made ridiculous capital gains, and manipulated market prices in an entire zip code. They eventually got caught and went to Federal prison. So I've got to ask…. What happens when private capital funds, hedges, high net worth individuals, and shell LLC's do the exact same thing, except it involves hundreds of thousands of properties, billions of dollars, and the national housing market? Nothing?
Im a builder so ill do my own work if my house floods. I suggest everyone learn basic skills in carpentry to save you money.
Clickbate Detected. Nuclear fallout is more real than global flooding, by the way, both disasters only reduce housing numbers and drive prices even higher.
Do I just keep waiting for a housing crash with my $2 million in liquid assets or shift my attention to the equity market? Mortgage rates are currently at an all-time high since 2000 (23 years), and based on statistics on inflation, we might see that number skyrocket even further.
When I was a kid in the 1970's I was told that Cape Cod would not be existence when I was a grown adult, which made me really sad & ruined my childhood vacation. I wonder if that person is still alive to tell me whether Cape Cod is still there.
ALL WRONG: would you buy property in an undeveloped plot of land with no access to plumbing, infrastructure, or electricity??? Of course NOT. So this means that the govt only choice is to bar citizens from building on floodlands. The govt can't be responsible for everything. The first settlers never expected help from any "government" funding. They can not help. Won't help. can't be expected to save your ass. You can only calculate your risk and buy insurance. If not, don't buy near wetlands. No duh. If you do, then your property value should be estimated at only a few dollars. Like equivalent to the cost of your furniture
So the solution is check flood maps and fortify your property? Lolol. Who can afford to do that. This is all gonna turn out great
Please tell me this is satire.
The big short is climate change 😉 nice con!
Нет слов, просто потрясающе
Or use flood prone areas as green belts natural reserves and parks. The states of Washington Idaho and Oregon do this and rarely does it flood bad enough to reach private property
What's new. Extreme value statistics experts like myself who have literally studied terabytes of data, saw this coming years ago. Now that guy comes and sells what scientists said long before him as new. If someone was interested, I have actually calculated the risk and true cost for the US East Coast.
so environmentalist, climate activists and researchers have been talking about this for at least a decade but you choose to interview this guy?
Hasn't this guy been predicting another crisis about every 3 months since the last one ended? Why are we still listening to this guy because he was right one time?
Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market