Why One Prominent Market Analyst Sees No Sign of Housing Shortage

After accurately timing the 2005 market before its crash, Ivy Zelman is once again raising concerns about the 2021 market, but for reasons which seem to contradict the sentiments and frustrations of other analysts, The Real Deal reports.

Though home builders, the NAR, and Freddie Mac are blaming rising prices on strong demand for a limited supply of homes, Zelman argues that the U.S. is actually on the verge of overbuilding. According to her assessment, housing prices could drop in some markets, leaving home builders with unsold inventory.

The problem is on the other side of the equation, says Zelman — it’s impossible to determine real demand because of all the new players. Private-equity firms are acquiring, and sometimes building, properties as rental homes. iBuyers like Zillow and Opendoor use algorithm-driven purchases to quickly buy homes, although Zillow’s flawed methodology led it to overpay in Phoenix by as much as $65,000.

“No, we don’t have a deficit,” Zelman, who founded Zelman & Associates, said in an interview with The Real Deal. “We have a pipeline of activity that actually would put us in an overbuilt situation relative to normalized demand.”

Zelman’s bearish take has new legs in the wake of Zillow’s decision to exit iBuying after incurring significant losses. The company is seeking almost $2.8 billion from the 7,000 homes it bought and is firing a quarter of its workers, saying it’s just too hard to predict home prices. To Zelman, Zillow’s struggles are a harbinger of future woes, especially in places where investors — rather than 2.4-child families — have driven demand such as Phoenix and Boise.

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