By John Gittelsohn | Bloomberg
Bond manager Mark Kiesel sold his California home in 2006 when he foresightedly predicted the housing bubble would burst. He bought back in 2012, after US prices fell more than 30% and found a bottom.
Now, after a record price spike, Kiesel says the time to sell is near again.
According to Kiesel, chief investment officer for global credit at Pacific Investment Management Co.
Kiesel plans to put his Orange County home on the market and become a renter rather than a landlord.
“I can look at my 25-year long-term charts and they’re telling me when to buy and sell and they’re flashing orange right now,” Kiesel, 52, said in an interview at Pimco headquarters. “I think we’re in the last leg.”
According to the S&P CoreLogic Case-Shiller index, house prices soared nearly 20% in the 12 months to February as the pandemic shifts, low borrowing costs and inventory shortages have stimulated fierce competition for housing. But the market now faces the fastest mortgage rate hike in decades as the Federal Reserve scrambles to bring inflation down. The 30-year average rate is now 5.1%, near a 12-year high, according to data from Freddie Mac.
Home sales contracts, a leading indicator, fell for the fifth straight month in March as rising borrowing costs added pressures on affordability, the National Association of Realtors reported Wednesday.
The possible sale of Kiesel is a personal decision and not a forecast of a crash by Pimco, which issued a note in March predicting “No break after the boom” after years of housing shortages. “Estimates of this age-old shortage range from two to five million homes,” according to the authors.
But Kiesel’s past personal decisions have proven prophetic.
He sold his Newport Beach home in May 2006, calling housing “the next Nasdaq bubble.” House prices peaked that year before plunging, triggering the global financial crisis.
“It’s not just houses that will be for sale,” Kiesel said in a June 2006 interview. “You’re going to see financial assets for sale over time, and eventually corporate bonds.”
Then, in May 2012, Kiesel decided it was time to become a homeowner again, buying a house adjacent to a golf course.
“For those of you who are renting or on the sidelines, I recommend that you at least consider ‘come back’ and buy a home,” he wrote in a note to Credit Market. . “The future is hard to predict, but US housing is healing and likely nearing a bottom.”
‘Max 2% return’
US housing prices have more than doubled in the past decade, and the home Kiesel bought for $2.9 million in 2012 is now worth an estimated $5.5 million, according to Redfin Corp.
Buying a home in today’s market would likely return around 2%, Kiesel said. He views his home as an investment, refusing to attach himself emotionally to his property.
“It’s only a good investment if you buy it at the right time,” he said. “If I were to buy a house today, I would probably get a maximum return of 2% on it. And I can find other things I can make money on than a house.