Investor Peter Boockvar is raising the alarm over a housing price bubble triggered by the Federal Reserve’s Covid pandemic policy.
He warns that first-time home buyers are the most vulnerable to dramatic losses.
“I feel bad for the people who bought houses last year because they are the ones who paid the very high prices,” the chief investment officer of the Bleakley Advisory Group told CNBC’s “Trading Nation” on Thursday .
He highlights those who put down 5% amid historically low mortgage rates. When house prices are corrected by 10%, Boockvar sees a world of pain.
“Your equity is basically destroyed”
“Your equity is basically wiped out,” he said. “For those who have owned and built equity for some time, they will be much better insulated.”
His warning comes as Fed policy makers virtually meet for the annual Jackson Hole Symposium.
Boockvar, who went on to monitor inflation in mid-2020, was critical of Fed policies during the pandemic. He notes that by maintaining unprecedented quantitative easing measures during the economic recovery, the central bank caused demand for housing to spike that overwhelmed supply. The result is skyrocketing prices.
“The problem is, demand has been so stimulated that the supply side has been unable to keep up – whether it was builders who couldn’t find materials, workers, or enough land,” said Boockvar, a CNBC employee .
With housing being the most interest-rate sensitive part of the US economy, Boockvar fears the impact will be far-reaching.
“It’s very harmful to the buyer – especially the first-time buyer who wants to own a home that is now being priced and then rented out again,” said Boockvar. “But rental prices are also rising dramatically.”
He suggests that there is evidence that air is leaking from the bladder.
“People are now seeing a sticker shock on house prices and pulling back,” added Boockvar. “Buyers are asking for time off. They said, ‘I can’t afford this’ or ‘I want to wait for home prices to go down.'”
Wall Street could get more clarity on the housing market next week with the upcoming home sales, the FHFA House Price Index and S&P CoreLogic Case-Shiller results. He anticipates the data reflecting trends from the beginning of this summer will be strong.
“We’re still going to see those double-digit house price increases,” said Boockvar. “There is still a shortage of inventory.”
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