The 2008 Crash vs. Today: What You Need to Know

Michael Zuber (0:01)

All righty, folks, we are starting to have more and more people talk about a potential GFC 2 global financial crisis on repeat. So I thought I would step back in the time machine and give you a list of things that I remember from the GFC. If you were investing during the GFC, go ahead and leave comments below on one or two things that you remember. I think this list will be interesting. Again, it is my list. I'd love to see what you guys have to say. So here we go. This is what I remember from the run up to the GFC and ultimately the catastrophe that was the GFC. Number one, I remember routinely, so it probably happened five, six, seven times, where I declined a tenant to rent one of my apartments or one of my houses. And lo and behold, they went out and bought a home. I want you to think about how ridiculous that is when a landlord takes your credit profile, your income, your history, declines you, doesn't ask for double deposit, doesn't ask for a co-signer, just flat out rejects you. And then you go buy a home. This happened time and time again. So, the first thing is we had a lot of bad borrowers during the run up to the GFC. Number two, everyone seemingly got an adjustable rate mortgage. The saying back then was, re-fi till you die. I believe 2006 was the highest percentage of adjustable rate mortgages in origination at 51%.

Lots of those loans were the disaster 2 in 28 teaser loans, where the first two years, you are at 1%, and then year 3 to year 30, you're at like 9%.

And of course, lending back then, they only approved you on the 1%. They did not approve you on the 9%. Why would they? You were supposed to re-fi till you die. So again, lots of very bad lending. Frankly, lending standards were a joke, right? You have seen plenty of shows or discussions about dogs buying homes, and blank applications, and liar loans, and just making up numbers.

The next thing that I remember was actually watching CNBC and seeing Bear Stearns collapse, and seeing all of these Wall Streeters walking out in the street with their cardboard boxes. I remember that pretty vividly. I remember that after the crisis really got going, probably by 2009, every Monday, in my market, in my buy box, they would load what they called a tape, and it was time to go hunting for deals. I learned very quickly, probably a couple of months in, that the banks would accept 19 percent discounts, but not 20, so guess what? Every offer was 19 percent, because it was just, they didn't care, they didn't know about these houses, they didn't see these houses. They had some formula, I'm sure, that they were running to, and 19 percent off was enough.

Also, remember the day that Wall Street showed up, and changed my life forever. I want to say it was at least 12, it might have been 18 months, that we were running this same play every Monday. And then one day, it was gone, it was over. Wall Street figured out what I had figured out years before, except they had deeper pockets, and they bought the entire tape. Not only did they buy the entire tape, but they bought it at list price. Just think, they could have gotten a 19 percent discount, but hey, I digress. And then I remember this, but you guys tell me, there was a money market account that broke the buck. If you guys don't know what that mean, that means when you put a dollar in the money market account, it's not supposed to go below zero. And I want to say, there was a money market account that broke the buck. I could be remembering that incorrectly, but I want to say there was a big, big account that busted the dollar amount. So I could be wrong on that one, but I seemingly remember that. So again, folks, I think there's a lot of things that happen in the GFC that frankly won't happen today. The 2 in 28 loans, we have, yes, 10%, maybe even 11% arms, but it's not 50%, 51%.

Lending, whether you like it or not, is much better. You're not lying about income or assets or anything of that nature. So again, we will see. Again, a lot of people want this epic crash. It just doesn't seem to be in the cards, given what happened last time. All right, folks, we got pending home sales, and they were bad, but not as bad as I expected. I do expect October to be ugly. But September came in below the 4 million threshold, came in at 399 I thought it might actually come in as low as 3.8. So we did better than my worst-case scenario, even better than my base case of 3.9. So again, below 4 million, that is an annualized number, which again, I don't know the factors that they adjust by. What I do know is September on an absolute basis, which is what I was tracking, lowest number since April of 2020 Do you guys remember what happened in April of 2020? Let me refresh your memory. We shut the country down. It was illegal for realtors to show houses in some states. That is the last time we had pending home sales this low. Pending home sales exactly came in at 316,652.