Ivy Zelman was “Poison Ivy” long before she called the 2008 housing crash. She didn’t like the nickname much in middle school, but things have changed, and the executive vice president of Zelman & Associates now considers it a badge of honor. She was an analyst at Credit Suisse who followed homebuilders in the years before the subprime mortgage crisis. Housing was unaffordable, lending was bonkers, and builders were buying land and scaling frivolously, she explained. “There was no money down and liar loans,” Zelman said.
“People used to joke, ‘Oh, someday she’ll be right,’” Zelman recalled, and in the summer of 2005, her team released a report called “Investors Gone Wild.” In the second half of the year, the market started to turn for the worse, and she doubled down. Then during a 2006 earnings call with Bob Toll, then-chief executive of McMansion builder Toll Brothers, Toll said things were getting better, and maybe the housing market had bottomed. Zelman famously responded: “Which Kool-Aid are you drinking, because I want some.”
Yet, stocks rallied that year, the housing market was thought to be recovering, but she wasn’t convinced; Zelman kept her bearish tune. “That was hard,” she said. “There were many nights where I could tell you that it wasn’t fun.” But she was vindicated months after that call, when mortgage lender New Century, which issued $51.6 billion in subprime loans in 2006, filed for chapter 11 bankruptcy. “That was the beginning of the end,” Zelman said. The housing market crashed, and it was a catalyst to the Great Financial Crisis.
A new predicament
Less than two decades later, and the housing world is in another predicament. Its most dire problem, as Zelman sees it, is a lack of affordability. Lower than ever mortgage rates and a pandemic fueled a housing boom; home prices skyrocketed, and eventually, mortgage rates did, too, once the Federal Reserve raised interest rates to tame…
