- “Big Short” investor Dave Burt said people don’t see how the climate crisis will hurt home values.
- He told CNBC that that mortgage lenders aren’t taking into account climate risk, like flooding.
- He warned that the housing market is in for a 2008-level price correction if the pattern continues.
“Big Short” investor Dave Burt warned of the subprime mortgage crisis that launched the US into the worst recession since the 1930s. Now he’s sounding the alarm once again.
Mortgage lenders are overestimating the value of many homes because they’ve failed to take into account how much of a threat flooding poses, said Burt, now the CEO of investment research company DeltaTerra Capital.
“Ultimately, until people have good information about what these climate-related costs are going to look like, we’re creating new problems every day,” Burt told CNBC.
If this does not change, he warned, the housing market is in for another crash: a 2008-level price correction.
Burt’s economic hypothesis is that climate crisis-related events such as increase in disastrous flooding, could reduce the cost of the homes by a lot, which puts mortgage borrowers at risk of not being able to pay back the loan — funds that could be ultimately lost.
It’s not Burt’s first warning. He said in April that about 20% of all houses in the US were overvalued in mortgage underwriting, which means the housing market could be worth up to $200 billion less than current estimates.
In the wake of Hurricane Ian, which hit the Gulf Coast of Florida in September 2022, Burt’s company released an analysis that found that Florida home values could drop as much as 50%in some areas more prone to flooding.
Indeed, the risk of flooding — and home-price declines — will only get worse as the effects of the climate crisis become more pronounced, Insider reported in October. Insurance companies are raising prices for homeowners in these areas, with some policyholders paying thousands of dollars more than in prior years.