Real Estate Turning Bearish According to Top MREIT CEOs

The CEO of $NLY and $RITM have some choice words about the housing market in the current rate environment particularly single family homes.

Holders of $NLY (Annaly Capital Management) were recently greeted on the Q2 earnings call with president and CEO David Finkelstein talking about a strong Q1 job market and rising fed rates are effecting single home mortgage demand and “historically tight underwriting standards and the majority of mortgage borrowers locked into a low fixed rate mortgage, suggest a moderation and slight decline in home prices is more likely than a protracted decline.” Indicating the remaining four months of the year would offer some contrast to the increasing heights of the first five months of the year where a supply crunch caused heat in the market particularly in the Sun Belt.

Yesterday $RITM (Rithm Capital Corporation) formerly $NRZ (New Residential) had their Q2 earnings call where president and CEO Michael Nierenberg opened the call stating the current challenges of interest rates rising dramatically, credit spreads widening and liquidity in the market becoming challenged. He further explained the rebrand as a move to “diversify away from more on the single-family residential side” mortgages. He later expounded on his thinking with the quote of the call:

As we look at the housing market, mortgage rates anywhere from 5.25% to give or take 5.75% right now. We do think we’re going to continue to see the slowdown in the housing market. I think I am and I’ll talk personally, I’m a little bit more bearish than I think some of the analysts out there. I think when you look at housing, everybody is banking on supply, the lack of supply to keep housing at kind of what I would call these elevated levels or pricing at these elevated levels. Could be wrong, but I do think higher interest rates will lead to lower home prices.

Michael Nierenberg August 2nd, 2022

The amount of data NewRez had on home prices is staggering, so having a high conviction call that despite the Fed doing exactly what would increase $RITM book value according to Michael of 2021 means the environment has changed and we are about to see some lower prices.

Lest I end up like who has been calling for a housing bubble crash since 2007 (and every slight market hiccup thereafter), I will present the opposing view on a long enough timeline line only go up.

If you enjoyed this article I encourage you to take a look at my article on the real market in march of this year: Shout out to Michael Nierenberg for having the world’s hardest hair to image edit around.

Have a nice day everyone and make prudent decisions.

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