Don’t Blow the Levee

In 1927 the southern Mississippi delta experienced a catastrophic flood, displacing thousands of sharecroppers and bringing a devastating blow to the plantations, economic stability, and workforce that had built the South. ⁠
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As the river-waters rose, the residents of New Orleans feared a total collapse of the city. But the businessmen and politicians of New Orleans had a solution to lower the rising tide and curb the swelling fear in the city—blow the levee. By blasting the levee open, the increased flow of water into the gulf of Mexico would lower the crest of the river, thus saving the city. There was only one problem—New Orleans was never going to flood. ⁠

Engineers assured the people of leaders of New Orleans that the levees to the north would either break hundreds of miles upstream (which would ultimately happen) and lower the crest of the river, or the reservoirs and outlets would capture the water and halt the rising tide headed to New Orleans. But it didn't matter. Public fear was rising with every inch of rising tide near the city, and a run on the banks of New Orleans was imminent.
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So it was that under the ⁠fear of economic collapse the levee was blasted with dynamite sending a devastating amount of water to the two parishes south and east of the city, saving New Orleans from (the fear of) flood by destroying thousands of upon thousands of acres of crops, and creating a new problem in the aftermath—thousands of starving refugees from the devastated parishes who absorbed the flood waters of the Mississippi.

The rising tide of the Mississippi River is much like the rising mortgage rates of today, creating a sense of fear and flight mentality needlessly evacuating qualified buyers from the first opportunistic housing market since the start of the pandemic. The US housing market is much like New Orleans, carrying a fear of collapse amidst rising tides, despite no real threat to its economy of housing. Now, like then, there is a real threat that exists, but not where people are looking. It is not down-stream (at housing) but upstream at inflation. Rates rise; rates fall. Sometimes in longer seasons than others. The US housing economy is short millions of homes nationwide, the millennial have reached peak buying age, and inflation is causing rents to rise with steady vigor as would-be homebuyers are opting to wait-out the rising tide of rates, while being blind to the most imminent present danger—missing the best buying opportunity in years.

By waiting for the levee to burst and for rising rates to recede, sideline buyers are inviting a new flood of problems for their future with the hope of lower rates—a surge of more buyers entering the market. Housing isn't complicated; it is simple supply and demand. Buyers should be capitalizing on this brief moment where demand has weakened and not be fearful of a rising tide of rates, but a rising tide of buyers. Rates might rise higher, but home values will assuredly rise even higher. Hoping for the levee to burst is the same as hoping for your real estate goals and housing dreams to crack and be swept away by the surging crest of increased competition.

Don't blow the levee.

Rising rates are not the flood that drowns you, it is letting fear of temporary rate increases suffocate the single most important word from your mind this real estate season.

OPPORTUNITY.