The Craziest Housing Market Ever (EP.245)

Episode Summary

Executive Summary: The episode centers on a broad market reset, arguing that while the S&P 500’s drawdown looks modest, many high-flying growth stocks, crypto-related names, and speculative businesses are in a deeper bear market. The hosts also dig into housing shortages, rising mortgage rates, wealth inequality, and several “bad quarter” earnings reports that show strong businesses colliding with collapsing valuations and fading pandemic-era expectations.

Main Topics: Growth-stock unwind and the real depth of the selloff (Priority: 5/5): The hosts compare the current decline in tech/growth to the dot-com era and conclude this correction is severe for speculative names even if the index-level damage looks limited. Selective market pain vs. headline index resilience (Priority: 5/5): They stress that the S&P and other major indices hide huge dispersion: many stocks are down 50%-70% while large-cap defensives and mega-caps hold up better. Housing shortage, affordability, and inequality (Priority: 5/5): A long discussion covers low inventory, soaring prices, fast sales, and how homeownership increasingly benefits those who already own assets, widening the gap between rich and poor. Earnings season: strong fundamentals, collapsing stocks (Priority: 4/5): Airbnb, Shopify, Roblox, Roku, DraftKings and others are used to show that businesses can still grow rapidly while share prices crater because valuations were excessive. Rates, banks, and delayed passthroughs (Priority: 4/5): They discuss rising two-year Treasury yields, mortgage rates, and why savings rates lag, highlighting how financial institutions adjust much faster when rates rise than when they fall. Crypto, metaverse hype, and risk sentiment (Priority: 3/5): Crypto is framed as a pure risk-on/risk-off asset, and a JPMorgan metaverse call plus a misleading Buffett/crypto headline are used to critique overblown narratives. Media, life, and movie recommendations (Priority: 2/5): The episode closes with a lighter segment on films and rom-coms, including The Father, I Want You Back, Midnight in Paris, and the Before trilogy.

Key Arguments: The current selloff is not just an index correction; for growth investors it is effectively a bear market or worse because many leading names are down 50%-70%. The market looks healthier than it feels because mega-cap and defensive stocks are masking broad devastation in speculative equities. The dot-com analogy is useful but incomplete: today’s companies often have real businesses and strong revenue growth, unlike many 1999-era firms. Valuations, not just fundamentals, are driving the pain; many companies still report great results but are repricing sharply as expectations normalize. Housing shortages are structural and persistent; rising prices and rates make affordability worse and may increase wealth inequality. Rising rates hit consumers and borrowers immediately, but banks and savings products adjust slowly on the way down and quickly on the way up. The pandemic accelerated durable changes like remote work and longer Airbnb stays, but it also created unrealistic comps for some businesses. Speculative investor behavior can become self-defeating; the hosts suggest many listeners learned too much from the 2020-2021 run-up and then got punished.

Data Points: NASDAQ annualized return, 1995-1999: 41% per year - Used as a benchmark for the dot-com era comparison NASDAQ annualized return, 2017-2021: 25% per year - Shows the recent tech run-up was huge but less extreme than dot-com Market cap destroyed by six growth names: More than $1 trillion - Facebook, Netflix, Shopify, PayPal, Zoom and Square from peak levels Zoom vs. Hilton performance: Both up about 40% total since pre-pandemic; Zoom had been up 450% at one point - Illustrates path dependence and valuation reversal NASDAQ composite drawdown: Down 15% - At the time of discussion, used to argue broad weakness behind the scenes Stocks in the Nasdaq composite down 60% or worse: 28% - Shows breadth of pain inside the index Stocks in the Nasdaq composite down 50% or worse: 35% - More than one-third of names were in severe drawdowns S&P 500 decline: About 9% to 10% - Used to contrast index-level resilience with stock-level carnage Redfin stock decline: Down 76% - Example of housing-related equities getting hit despite strong housing fundamentals Homes sold within two weeks of listing: 57% - Record pace in the housing market for the four weeks ending Feb. 13 Homes accepted within one week: 44% - Shows intense bidding and scarcity Median days on market for homes sold: 29 days - Indicates extremely fast turnover in housing Housing inventory vs. 2020: Down 65% - Bill McBride inventory measure highlighting severe shortage Median home sales price year over year: Up 15% - Reflects the rapid rise in home prices Median home sales price since 2020: Up 30% - Shows cumulative surge in home values Median asking monthly mortgage payment: Around $2,000, up 27% year over year - Rates and prices are pushing monthly payments sharply higher U.S. cities with $1 million+ homes as norm: 481 cities - Bloomberg figure showing how widespread high home prices have become Average tenure in a home, 1985-2007: About 5 years - Used by Logan Mohtashami to explain mobility and supply Average tenure in a home, 2008-2022: About 10 years - People are moving less often, reducing supply Airbnb revenue growth: Up 78% year over year - Strong post-pandemic demand and travel recovery Shopify annual revenue: $4.6 billion - Harley Finkelstein cited 2021 revenue tripling from pre-pandemic levels Shopify growth rate guidance for 2022: Revenue growth expected to slow below 57% - Company warned of easier comps after pandemic e-commerce surge Roblox revenue: $568 million - Quarterly revenue lower than expected Roblox daily active users: 50 million, up 33% - Shows the user base is still expanding rapidly Roblox hours engaged: 28 billion - Signals strong engagement despite stock weakness DraftKings expected loss for year: $600 million to $800 million - Illustrates the capital intensity of customer acquisition in sports betting Two-year Treasury yield: Spiking higher - Used as the benchmark for fast-moving rate expectations and savings-rate passthrough Bottom 50% household asset allocation: 55% real estate, 4% equities - Goldman chart used to discuss wealth inequality Top 1% household asset allocation: 60% equities, 11% real estate - Highlights the different asset mix of wealthy households U.S. personal life satisfaction: 85% satisfied - Survey used to show people are positive about their own lives Satisfaction with the direction of the U.S.: 17% satisfied - Shows deep pessimism about the country relative to personal life

Pivotal Quotes: "It wasn't in the ballpark, but it was in the parking lot." — Michael Batnick: Describing how the recent growth-stock boom resembled, but did not fully match, the dot-com bubble "Correction only looks healthy in other people's stocks." — Michael Batnick: Summarizing why broad market shakeouts feel painful to speculators but constructive for long-term market health "You know what fixes this? Crypto." — Ben Carlson: A sarcastic response to rising rates and mortgage costs during the discussion of financial conditions

Implications: The episode suggests investors should expect continued volatility, higher rates, and more valuation compression in speculative assets, while housing scarcity and asset ownership keep widening wealth gaps. Long-term winners may still be strong, but the era of easy momentum is over.