The Big Short is Back

April 06, 2023

THE BIG SPLASH

The Big Short is Back

Dave Burt, the CEO of investment research firm DeltaTerra Capital, has warned that the US housing market could face a financial disaster similar to that of the 2008 global financial crash due to climate risk. 

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  • Burt, who helped two of the protagonists of Michael Lewis’ “The Big Short” bet against the mortgage market in the lead-up to the 2008 crisis, has said that 20% of US homes have “meaningful exposure” to a mispricing issue due to flood risk. 

  • He warned that the fallout could resemble the extraordinary correction seen during the global financial crisis. This comes as the housing market experiences a major shift because of higher mortgage rates and as global central banks fight inflation by hiking interest rates. 

  • Additionally, a recent study has warned that the US housing market could be overvalued by around $200 billion due to unpriced flood risks. At present, the study said nearly 15 million US properties face a 1% annual likelihood of flooding, with expected annual damages to residential properties forecast to exceed $32 billion.

A SCOOP OF HAPPINESS

The America's Top Neighborhood

For the fourth year running, Chesterbrook, a small town just outside of Philadelphia, has been named the best place to live in America. Niche, a ranking site, determined the town’s high ranking based on several factors, including affordability, walkability, area public schools, neighborhood diversity, and the local housing market. 

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  • Chesterbrook boasts a low 1.5% poverty rate, a 2.4% unemployment rate, and highly rated public schools, with a median home value of $350,200. 

  • The town offers a dense suburban feel, with residents who tend to have moderate political views and a variety of dining options. 

  • However, Chesterbrook lost points for being low in affordability and having dreary East Coast weather. 

  • In second place was Colonial Village in Arlington, Virginia, and in third was Ardmore, another suburb in Pennsylvania. Surprisingly, not a single New York City borough or neighborhood made it into the top 25 slots on the list.

A SCOOP OF MORTGAGE

Homebuyers Struggle to Find Listings

Americans are facing difficulties finding homes for sale, leading to a decline in mortgage demand. The Mortgage Bankers Association’s index of mortgage applications fell by 4.1% last week as potential buyers struggled to find listings on the market amid a lack of supply. 

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  • Demand is 35% lower than the same time last year. This comes despite the arrival of spring, which is usually accompanied by a surge in listings and purchases. 

  • According to Realtor .com, new listings are down 20% in March compared with last year, and total inventory is around half of what it was in March 2019, before the pandemic. 

  • Rising interest rates are dampening consumer demand and bringing down home prices. However, as rates have slowly fallen from a peak of 7%, the housing market has shown early signs of stirring back to life.

A SCOOP OF IDEAS

Philadelphia's Squatter Epidemic

Philadelphia property owners and managers are struggling with the problem of squatters, who are making life miserable for them. According to a report by Fox News, squatters are becoming increasingly difficult to remove despite city laws in place. 

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  • Homeowners have to spend a considerable amount of money and time on legal battles to evict squatters, which can cost upwards of $3,500 to begin the court process and $1,600 to move out the suspects and store their belongings for a month. 

  • Walter Lapidus, the owner of Anchor Realty NE, claims that city officials and the police refuse to escalate conflicts when squatters refuse to leave, leaving the property owners helpless. 

  • Although an ordinance was passed in 2018 that imposed fines of up to $300 per day for trespassing and authorized police to investigate squatting accusations, it has not been enforced, according to Lapidus. 

  • The subsequent changes in the law have made it unusable, making it impossible for property owners to get relief. The lack of action from the city and the police is frustrating for the residents and property owners who are forced to deal with squatters, Spangler said.

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