Housing Market in Crisis: Nick Gerli Warns the Worst Is Yet to Come

Lennar

Across the shows: 1 speaker in other episodes, 0 bullish and 1 bearish calls, past 30 days

• Nick Gerli · Reventure Consulting / Reventure AppBearish

  Lennar still faces more pain over the next year or two despite cutting prices about 30%.

  Lennar has cut prices roughly 30% from its 2022 peak. Its typical net price after incentives and mortgage rate buydowns fell from about $510,000 to about $360,000, and it has done a better job driving orders than other builders. Berkshire Hathaway's large Lennar position may reflect a view that builders have already cut enough, which surprised Nick. He still thinks more pain is coming over the next year or two.

  “I just personally still think there's like more pain coming over the next year or two.”at 35:42

US housing

• Nick Gerli · Reventure Consulting / Reventure App

  US housing is in a multiyear recession, with buyer demand near GFC-era lows.

  Existing home sales annualized fell below 4 million in August 2026, roughly 2009 levels, so buyer demand is at Great Financial Crisis levels. Adjusted for the size of the housing stock, demand is the lowest in forty years. Prices are still high and mortgage rates are back above 7%, so very few people are buying, which also makes it a tough market for real estate professionals.

  “Housing is now in a multiyear recession. ... demand today is the lowest it's been in forty years.”at 1:26

• Nick Gerli · Reventure Consulting / Reventure App

  Sunbelt markets have surplus supply and falling prices, while Northeast and Midwest still have shortages and rising prices.

  Northern and southern New Jersey suburbs still see prices rising 5-8% year over year because inventory is short and permits are hard to get. Nashville has a conveyor belt of new building and record inventory. Florida, Texas, Las Vegas and other Sunbelt markets have supply at ten- to fifteen-year highs, with sellers taking losses. Las Vegas home sales are down 40% over four to five years.

  “Generally, the Northeast and the Midwest are in more of a shortage. Prices are still going up. The South and the West Coast Of The US, there's a surplus of supply. Prices are starting to drop.”at 5:56

• Nick Gerli · Reventure Consulting / Reventure App

  Sunbelt migration boom has reversed; Northeast and Midwest legacy housing markets will gain over the next couple of years.

  The 2010s and early-pandemic exodus from New Jersey, New York, Connecticut and Chicago has faded, and a reverse migration into Northeast and Midwest cities is starting. Sunbelt migration runs in cycles of roughly 10-12 years; net migration to these markets has dropped 60-80%, as in the mid-2000s bust. He is not a doomsayer on the Sunbelt long term, but expects overpriced Sunbelt markets to reset.

  “over the next couple of years, more and more people will start to realize that the so called legacy housing markets in the Northeast and Midwest are starting to gain.”at 8:03

• Nick Gerli · Reventure Consulting / Reventure App

  Aging boomers will add structural housing supply in Sunbelt vacation markets over the next decade.

  Boomers are resilient now because many own their homes mortgage-free and have financial assets, so they are unlikely to panic-sell. The real issue is demographics: boomers who bought in the mid-2000s to late 2000s will age out of their homes over the next decade (the oldest are now 80). That will produce a structural increase in supply in Sunbelt vacation markets.

  “I think the real story with baby boomers is less that they're gonna panic and offload their second home now and more that we're just gonna see a structural increase in supply in these, baby boomer vacation Sunbelt markets over the next ten years due to simple aging demographics.”at 11:53

• Nick Gerli · Reventure Consulting / Reventure App

  Mortgage payments near 40% of median income push buyers out; buying no longer beats renting.

  With current prices and mortgage rates around 7-7.5%, the typical monthly payment including taxes and insurance is roughly 40% of median US household income, so many buyers cannot qualify. Lennar has said about half the people visiting its sites don't qualify. Among those who qualify, renting the same house is often 30-40% cheaper than buying, so buyers stay out, and even those who can afford it balk at prices well above what homes sold for five years ago.

  “If you're buying with a mortgage in today's market, which still 70 to 80% of people do, The math just doesn't make sense.”at 13:11

• Nick Gerli · Reventure Consulting / Reventure App

  Builders' aggressive rate buydowns and price cuts are not reviving housing demand.

  Builders account for about 15% of home sales and are offering aggressive mortgage rate buydowns, often for the full loan term and about 2% below market. D.R. Horton's backlog sits at a 4.9% mortgage rate. Even with those rates and price cuts, demand for new homes remains weak, showing that builder incentives alone are not enough.

  “even at like those rates and even with cutting prices, the demand still isn't great.”at 18:10

• Nick Gerli · Reventure Consulting / Reventure App

  Home prices, not mortgage rates, are the core problem; 7% rates are historically normal.

  Mortgage rates have bounced between roughly 5.8-5.9% and 7.5-7.6% over the last four years with no discernible change in demand. Over 130 years, rates of 6.5-7.5% are normal, but inflation-adjusted home prices are higher than in the 2006 bubble, so prices are the problem. Rate cuts alone won't revive demand; a big rebound would need mortgage rates near 5% and prices down about 20%.

  “I totally agree with the assertion that prices matter way more than rates... Inflation adjusted home prices on that graph... It's even higher than the [2006] bubble.”at 19:00

• Nick Gerli · Reventure Consulting / Reventure App

  Condos and townhomes are down 40-50% from peak in some places, worst in Florida with high HOA fees.

  The housing decline is concentrated more in condos and townhomes than in single-family homes. Some condo and townhome prices are down 40-50% from peak, especially in Florida, where high HOA fees weigh on values. Single-family prices are also falling in the Sunbelt, which offers the best deals for buyers.

  “Condos and townhomes, there's some that are going down like 40, 50% in price from peak pricing, especially if you go to Florida, especially with some of those high HOA fees.”at 24:30

• Nick Gerli · Reventure Consulting / Reventure App

  Housing is K-shaped: lower-income and investor-heavy areas are falling while high-income neighborhoods hold up.

  In Atlanta, half the metro's home price map is down 15-25% over four years while the other half is up 5-10%. Higher-income and higher-priced neighborhoods are more resilient; lower-income areas with more investor ownership have already dropped more. Demand has fallen by a similar amount across income levels, but supply has grown more slowly in high-income areas, where owners are more likely to hold cheap refinanced mortgages (around 3%) and feel less pressure to sell.

  “there is this almost K shaped housing market occurring where, similar to the K shaped economy, people who are lower to middle income are starting to take losses and having to liquidate houses.”at 25:28

• Nick Gerli · Reventure Consulting / Reventure App

  Multifamily landlords face a $2 trillion refinancing wall as cheap debt reprices and rents fall.

  Many apartment landlords borrowed cheaply in the late 2010s and pandemic years at 3-4%. Multifamily loans typically run five to ten years, so that debt is now rolling into 6-6.5% rates, which in some cases doubles interest burdens and leaves landlords unable to cover debt service. Rents are falling (Austin down about 20%, Nashville about 10%), against forecasts of 4-5% annual growth. Investors report REOs and foreclosures ramping up, with discounts of 20-30% that could grow.

  “And these apartment landlords are flipping from a three and a half percent rate to a 6% rate or six and a half percent rate. And that's causing their interest burdens to double in some cases.”at 29:00

• Nick Gerli · Reventure Consulting / Reventure App

  Single-family rentals yield less than Treasuries, so smaller investors are being priced out of the market.

  The 10-year Treasury is above 5%, while the cap rate on a single-family rental is about 4.8%, so an investor earns more by buying a government bond than an investment property with the hassle of evictions and repairs. Large corporate investors stopped buying in 2023 and will be barred from buying more existing homes from January 2027 under the Road to Housing Act. He sees the first real opportunity in 15-plus years in the distress that is emerging.

  “Ten year treasury is now above 5%. Cap rate to buy a single family rental is 4.8, meaning that you can make more money just by sitting on your couch and buying a US government bond than buying an investment property.”at 30:36

• Nick Gerli · Reventure Consulting / Reventure App

  Unlike 2008, single-family housing has far fewer bad mortgages, so foreclosures should not reach crisis levels.

  Overvaluation and falling demand look similar to 2008, but single-family mortgages are much higher quality. Foreclosures peaked near 4.85% of mortgages and delinquency near 9% in 2010-2011, and he does not expect levels near that this time. Values can still fall sharply without that: in Florida, some sellers who bought at around $450,000 are selling in short sales at about $300,000.

  “we don't in the single family market, we don't have nearly as many bad mortgages as we did in the mid 2000s.”at 32:20

Credit markets

• Nick Gerli · Reventure Consulting / Reventure App

  Multifamily and CMBS delinquencies are at or near 2009 levels, even with 4% unemployment.

  Fannie and Freddie multifamily delinquency rates are already matching or exceeding 2009 levels, which is worse than the mid-to-late 2000s. CMBS commercial mortgage delinquency rates are approaching those levels. This is striking because US unemployment is still only 4%, so a modest rise in unemployment could push delinquencies much higher.

  “The multifamily side is worse than it was in the mid to late 2000s. ... the Fannie and Freddie multifamily delinquency rates are already matching or exceeding [2009] levels.”at 33:27

Banks

• Nick Gerli · Reventure Consulting / Reventure App

  A housing downturn is unlikely to trigger a banking crisis; mortgage quality is better and banks less exposed.

  Single-family mortgage quality is far better than before the mid-2000s, banks are less exposed to housing, and homeowners have more equity to absorb losses before things turn severe. Together these make a large offshoot banking crisis from the housing downturn unlikely, though he flags distress in multifamily and commercial lending as a separate issue.

  “I don't think we're going to have some huge offshoot banking crisis that comes out of a housing downturn this time around, right? Like the mortgage quality is better, banks aren't as exposed.”at 34:10