Bill Ackman: The Real Estate Market is 'Falling Off a Cliff'

Billionaire investor Bill Ackman just issued a dire warning message on the future of the real estate market and economy. Ackman is the Founder and CEO of Pershing Square, one of the most well respected firms on Wall Street. That is why it got my attention hearing Ackman warn about how it is highly likely that there is a tsunami of real estate bankruptcies on the horizon that is just about to make landfall. These bankruptcies have the potential to account for hundreds of billions of dollars and send massive ripples through the economy. Let’s hear what Ackman had to say.

Unlike most residential mortgages, interest rates on commercial real estate loans do not remain the same for the entire length of the loan. Here in the United States, when an individual or family purchases a house, the vast majority of the time that purchase is financed with the standard 30 year, fixed rate mortgage. With a fixed rate mortgage, the interest rate on the loan is “fixed”, aka doesn’t change, for the entire time that loan is outstanding. This concept is incredibly important to understand and helps put Ackman's warning into context. Since the interest rate never changes, the home owner knows that their mortgage payment is going to remain exactly the same for as long as they own the house. Or, of course, until they pay off the loan in full. Homeowners with fixed rate mortgages don’t have to worry about their mortgage payment doubling or even tripling due to interest rates spiking.

This is a big reason why foreclosures on mortgages have been so rare. In 2021, only one-tenth of one percent of homes in the US were in foreclosure. Even during the worst period of the great recession, that number was still only 2%. Just a fraction of the default rate of other loans such as credit cards and auto loans. US homeowners are truly fortunate that fixed rate mortgages exist.

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[Evelyn]

U.S. stock futures rose Tuesday as equities were buoyed by a sharp decline in bond yields, while earnings from some of the largest technology companies loomed in economic data. renewed buying strength in markets in September and October. I want to invest more than $300k, but I'm not sure on how to mitigate risk.

[jessicasam]

I'm under pressure to grow my reserve that currently holds about $500k. I'm down by 20% already following the crash and I fear I could lose more.

[larrygerry]

Bill Ackman - enter the world is 2 years later, I have made a massive real estate bet

[mikefeir]

Bill ackman has a track history of saying one thing then doing another. Need to read between the lines here.

[ronmyers]

Always enjoy your videos. Clear and concise script, well narrated with simple examples. Thank you! 👏

[scramjet]

You should include the date of the Ackman interview. When was he talking about this? A week ago, a month ago, a year ago, 4 years ago?

[BryanWilliams-jign]

I really appreciate the dedication in each video you post. To be successful in markets, traders should understand the crossover between asset classes & liquidity flow. Michelle Stewart focuses on Multi-asset trading, a single strategy to manage risk, profit, and the code or the actual decision-making across multi-asset classes. Her skills set is top notch.

[De-Centralized]

I'm very curious to see how this impacts owners of short-term rental properties listed on VRBO and Airbnb.

[luxurylife]

Peter lynch has said in the past “no one can predict interest rates.” Everyone can speculate but let time run its course and then play your cards.

[miamiman]

I don't know about the rest of the country but here in Miami, prices have not stopped increasing. We have millionaires and billionaires from all over the world buying whatever is available and paying ridiculous prices. I don't know what's going to happen to the middle and lower class but a city can't function with only wealthy people living there.

[PrimeAxis]

It's definitely a complex situation. While there might be some cooling off,  I wouldn't say it's a cliff dive just yet. It's important to consider local trends and specific property types. What are your thoughts on how the market might evolve in the coming months?

[patbrumph]

What is not mentioned here is that the building owner can raise the rent. If the interest rate goes up for him, it will go up for most of his competitors, so the people who rent probably won't move when he raises the rent because the rent will also be going up in all the other buildings. Another thing not mentioned is that when rates go down, the rents stay the same. The renter pays the penalty in both cases. The moral of the story is "Don't be poor. Be an owner, not a renter."

[joefuentes]

This guy is known for saying the opposite of what he actually does to help himself

[__Dave__]

The only time this guy says anything publicly is to stir up liquidity for his trades lol

[christareyes]

I do agree with everything you say in this video, but I would like to add many companies in the commercial real estate didn’t have 100% of their buildings rented out due to Covid and at home work. So most of the office buildings were at 50% capacity, not bringing in as much revenue as they previously were and I think it has picked up maybe 10 to 15% with people back in office. With that circumstance alone and the loans having to be refinanced by 2025 I think the foreclosures are inevitable.

[re]

The home builders ie Pulte / DR Horton etc have missed their targeted numbers again. They are laying off supers ie field personnel. This is in central Texas. They can not sell homes.

[StuffOffYouStuff]

everything that comes out of this guy's mouth on the platforms that give him airtime is designed for one thing - benefiting his positions.

[terrik]

Would you say with interest rates remaining high it is one reason goods (i.e. Coca-Cola) has increased prices to consumers? The long term debt payment increases and that is also passed onto consumers. Corp profits have been high, so it would seem they would be prepared for the increase in debt payment. But then I hear CEO and higher ups bonuses are at record highs? Why would they not hold onto those higher profits? Thanks. I'm really new to all this at the age of 60!

[wincrasher]

this scenario assumes that landlords won't increase the rent to cover the increase in interest expense. As we all know, they have been quite aggressively the last few years. Office rental market is more precarious, as there is a glut of office space and rent increases are quite limited, if not impossible in most markets.

[OKTown]

the mortgage monthly payment isn't as much of an issue as the increasing taxes, HOA and homeowner insurance rates that will kill off a LOT of owners.