Inventory Vanishing and Bidding Wars Exploding in Crazy U.S. Housing Market

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:18)

So Tracy, it's a new year, well, already a bit into the year, but it's a new year, and yet many of the big stories from last year remain the same, if not even more so. I feel like many of the things we were talking about last year have only gotten more intense.

Tracy Alloway (0:33)

Yeah, I think you're right. I mean, we spent a lot of last year talking about supply chain issues, the possibility of shortages, the idea of the bullwhip effect, where you sort of get a small disruption in one supply chain that then ends up cascading through the entire chain and also causing very, very big swings in supply and demand. And that feels like it's definitely getting more attention. And then, of course, the secondary effect from all of that is this question of inflation and price increases, and how is that feeding through to the broader economy? So we talked about it last year, but we're talking about it even more in 2022

Joe Weisenthal (1:17)

Right. And of course, one way that people experience inflation or feel inflation, whether it's captured in official statistics accurately, or regardless of how it's captured in statistics, is everything related to housing and shelter. And by all accounts, it appears that everything that you just mentioned is getting more extreme with housing. I saw one survey that said like 100% of home builders are experiencing supply disruptions, which is up from like 98% in December.

Apparently it takes three weeks at a minimum to get a garage door. I think we might have an episode coming up on garage doors, by the way. The housing just seems to be completely nuts this year, already, and we're just a couple of weeks in.

Tracy Alloway (2:00)

Yeah, so I remember we did do an episode last year with Allie Wolf, and when we did that, I sort of declared my complete lack of knowledge when it comes to US housing, because I'm based in Hong Kong, and I've never bought a house in the States. But now I have to declare, I guess, like the opposite personal interest. I'm trying to close on a house right now in the US. And let me tell you, going through the market for the past three months has been absolutely insane.

And we've had like three instances where we've made an offer and gotten gazumped by other buyers and not by like a small margin, but by an absolute massive margin compared to the listing price. It's just been really difficult to get anything at the moment.

Joe Weisenthal (2:49)

I just looked up the word gazump, which is British English, which is why I'm not that familiar with that.

According to dictionary.com, raise the contracted price of a property after having informally accepted a lower offer, so you have indeed been gazumped. And in fact, it's perfect because we are going to speak with someone who has been tracking the gazumping phenomenon that is widespread in the US housing market, or more specifically, bidding wars have been breaking out across the market. So Tracy, I think this episode is going to be very good for you. Maybe you'll even get like a little like a home buying strategy out of it.

Tracy Alloway (3:26)

Yeah, I need answers why none of these offers are attractive to people, even though it seems like a lot of money to me, obviously, yes, I want to know why.

Joe Weisenthal (3:35)

All right, I can't wait. Let's do it. We are going to be speaking with Mike Simonsen. He is the CEO of Altos Research, which puts out and gathers tons of data on the housing market. He's been putting out lots of videos on exactly this phenomenon, the boom in bidding wars, rising prices, declining inventory of homes available in the United States. What's going on? Mike, thank you so much for coming on Odd Lots.

Mike Simonsen (3:59)

Joe and Tracy, it's nice to be here.

Joe Weisenthal (4:01)

So Tracy's experience of getting gazumped left and left and right on like everyone's experiencing that these days, huh?

Mike Simonsen (4:07)

Everyone across all price points, basically the whole all geographies across the country. It's been a pretty consistent phenomenon.

Tracy Alloway (4:16)

So remind us what exactly is going on? Like what is driving this? Because obviously you have some of the pandemic trends where people want to move out of cities and they want more space and things like that. But you would have thought that almost two years on in the pandemic, that some of that trend would be fading away. And yet it seems like demand for housing is still incredibly strong.