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Ivy Zelman and Dennis McGill Zelman & Associates

Walker Webcast: Zelman & Associates Co-founders Take a More Bearish View of Single-Family

In her fourth appearance on the Walker Webcast series, Zelman & Associates CEO Ivy Zelman took a more bearish view of the single-family market than she did 14 months ago. As with the contrarian position she and co-founder Dennis McGill took before the housing bubble that helped give rise to the Great Recession, this view is based on what Zelman called “constant interaction with the industry” and the data her firm has compiled. 

Zelman and McGill, who serves as Zelman & Associates’ director of research, took viewers of this week’s webcast through the fundamentals of their 2005 thesis that the exuberant housing market was headed for a correction. It wasn’t a view widely held at the time, and Zelman recalled that she earned the nickname “Poison Ivy” for her downbeat views of homebuilders’ stocks. 

With factors that ranged from concern about the impact on homebuilders’ bottom lines to worries that she was jeopardizing her own future as an analyst, Zelman faced pressures to change some of those circa-2006 “sell” ratings, she recalled Wednesday in discussing her newly released memoir, Gimme Shelter: Hard Calls + Soft Skills from a Wall Street Trailblazer. Yet, she didn’t cave in. “It never crossed my mind that I would do anything other than what I believed in,” she recalled. 

Eventually, the tumultuous events of 2008 proved Zelman and McGill correct. However, McGill said on Wednesday’s webcast, being vindicated per se wasn’t the real satisfaction. “It was the whys” behind that prophetic call: “being right for the right reasons.” 

Fourteen months after Zelman saw multifamily facing headwinds while single-family was in ascendancy—an assessment that has been borne out by the string of record-setting annual pricing gains reported by S&P Dow Jones Indices this year—she and McGill raised questions about the long-term viability of the housing market’s current run. 

Walker & Dunlop CEO Willy Walker quoted McGill’s observation from a newly published Zelman & Associates report: “Housing is defenseless against slowing demographics.” McGill added on this week’s webcast, “It’s not unique to the U.S. It’s happening globally.” 

He pointed out that the most recent U.S. Census showed 50% of counties losing population—often to the suburbs and cities. A trend toward urbanization generally portends declining birth rates. 

McGill cautioned that “seeds of oversupply” are present in the current homebuilding market. Current deliveries of about 1.4 million single-family homes per year are in line with demand growth. However, housing starts are running ahead of this growth range, especially in Sunbelt states. 

“That’s what we’re seeing—concentration risk,” said Zelman. 

In the currently hot build-to-rent market as well as in other single-family sectors, Zelman advised against playing in the markets where everybody else is, such as Phoenix and Austin. 

“It’s the sheep mentality,” Zelman said. “Go against the grain.” 

On-demand replays of the Oct. 20 webcast are available by clicking here and through Walker & Dunlop’s Driven by Insight podcast series.


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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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