Capital Club Contrarian Theory on the Cause of the Housing Boom and Bust with Kevin Erdmann
In this episode, I brought in Kevin Erdmann to talk about contrarian theory on the cause of the housing boom and bust. Kevin was a small business owner for 17 years and in 2010 he sold his business and earned his Master’s Degree in Finance from the University of Arizona which allowed him to get grounded in real-world experience in investing within the rigor of the Academy.
Since 2013, he has blogged about his contrary observations on investment strategies and research. He is a visiting fellow at the Mercatus Center at George Mason University, where he and I connected through a mutual connection. He is currently engaged in two book projects with Mercatus on Housing Finance, land use restrictions, and monetary policy. His first book, Shut Out (Rowman & Littlefield, 2019), offers a contrarian theory on the cause of the housing boom and bust.
[00:01 – 04:03] Opening Segment
- I welcome our guest for the episode, Kevin Erdmann
- Kevin Erdmann talks about his background
- His business and how he eventually found his way back to school
[04:04 – 21:23] The Mercatus Center
- How Kevin found his way to The Mercatus Center
- His work and focus
- Kevin talks about his research
- Referencing to the film The Big Short
- Various sections of the country affected by The recession
- Calculating residential investments
- The regulatory bodies responsible for encouraging/allowing developers
- The real difference between coastal cities and the rest of the country
[21:24 – 51:16] The eventual cause of The Great Recession
- Extreme difference between various types of cities in the country
- Rise of rent rates just about everywhere across the country
- Relative pricing differential in different types of neighborhoods
- The most effective way to increase the price to rent ratio on a house
- Cause of a structural failure in the housing market in The Great Recession
- Factors of migration in each city
- The rate of Homeownership pre and post-crisis
- Rates of each age group of homeowners
- Predatory lending and unequal access to credit
[51:17 – 1:01:35] Closing Segment
- A fix for The Housing Shortage/Problem
- What the housing market has created
- Connect with Kevin. See Links Below.
- Final words
Tweetable Quotes:
“There’s a real difference between coastal cities and the rest of the country. It’s almost like you have to go to those cities and experience it to really get a sort of feeling for it, how difficult it is to get from an idea to building something around half the size you wanted.” - Kevin Erdmann
“I think across the country, we need to make sure we turn a corner and find ways to make it easier for multi-unit to be a building choice.” - Kevin Erdmann
“Quantitatively, the most effective way to increase the price to rent ratio on a house, paradoxically is to increase its rent.” - Kevin Erdmann
Resources Mentioned:
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Connect with Kevin, follow him on LinkedIn. Check out his content/articles and guestings at https://www.mercatus.org/scholars/kevin-erdmann
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