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Nick Gerli

@nickgerli1

Dec 11

For all the people who think Reserve Management Purchases are "QE" - look at this graph.

In an ample reserves system, Fed needs a certain amount of excess reserve assets as a % of bank deposits.

If they don't, a banking crisis could happen. And we're now at the point where reserves could be crossing the threshold from "ample" to "scarce".

Through November, excess reserves fell to 15% of bank deposits, now well below the 15-year average, indicating a tightening of conditions.

Which is why they are now ushering in incremental T-Bill purchases to keep bank reserve growth aligned with bank deposit growth.

In its current form, this it not QE.

However - if they were to expand the amount purchased, and/or buy longer dated securities, it would be QE.

1) There are several metrics you can use to gauge how much reserve liquidity the Fed needs in the system for their "ample reserves" regime - one is GDP, another is M2, but my personal favorite to gauge this is bank deposits.

During the pandemic, Excess Reserves (Bank Reserve + Reverse Repos) surged to 32% of all commercial bank deposits.

This was the "free money" era with massive QE that created the 2021-22 inflation.

Since then, with operation of QT, and general growth in the economy, the excess reserve ratio deleveraged down from 32% to 15%, indicating a tightening of conditions.

2) Of course - current conditions aren't noticeably "tight" - banks are still lending, the economy is still growing.

But there were some hiccups in overnight lending markets in recent months which suggested reserves were running low.

The Fed's Standing Repo Facility, after lying dormant for four years, had usage in November and December.

Indicating some funding stress in the market, that reserves were starting to run below "ample", at least for some market players.

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Nick Gerli

@nickgerli1

Dec 6

Why has the housing market been frozen since 2022?

Because the cost to buy a house with a mortgage (green) vaulted way above the a) cost to rent and b) the mortgage cost for existing owners.

The net result is that few people have a financial incentive to move. Cheaper to stay renting, cheaper to stay in current house/mortgage.

But - one interesting trend we are beginning to notice is the mortgage payment for existing owners (orange) is now growing faster than rent.

This is reversed from the post-pandemic period. Where sub-3% mortgages and still cheap taxes/insurance made for a very low cost to own for existing mortgage holders.

Now - taxes and insurance are up, and more of the mortgaged population is holding a 6%+ rate. So the costs for existing mortgage holders are rising.

This likely means we'll see more existing owners elect to sell in 2026, as it becomes less profitable for the average homeowner to rent out their house. And more profitable to cash out on your equity, sell, and rent for a bit until market corrects.

Translation: expect more for sale inventory, and more downward price pressure in the for sale market.

1) The other obvious conclusion from the graph above is that finding a way to drive down the cost to buy a house would help unlock the housing market.

e.g., the closer the Mortgage Payment to Buy goes to Monthly Rent and Mortgage Cost for Current Owners, the more home sale transactions will take place.

As the financial incentive to move increases.

2) But that's proving harder to do to than anticipated.

The Fed has cut rates by 1.50% over the last year+, and there has been no meaningful decline in Mortgage Rates.

Meanwhile - national prices are still at near a record high, even if values are dropping in some markets.

Read 13 tweets

Nick Gerli

@nickgerli1

Dec 6

Markets with the biggest rent deflation over the last 3 years:

Austin: -21%
Fort Myers: -19%
CoSprings: -15%
Phoenix: -14%
Raleigh: -13%
San Antonio: -12%
Atlanta: -11%
Denver: -11%

Expect apartments rents in these markets to continue declining in 2026, as vacancy rates remain elevated.

Good news for renters, bad news for investors who bought near the peak.

1) The deflationary rental environment, particularly in the Sun Belt area of America, is one reason why I believe we'll continue to see more inventory hit the market next year.

Simply put, many investors and landlords over-extended themselves during the pandemic boom, bought near peak values and low cap rates, and can't afford to hold properties through a declining rental environment.

2) And it's likely we continue to see waves of homes hit the market for rent next year as well.

For instance, take a look at this property north of Nashville.

It was bought for $370k in 2021 and the owner has now listed it for rent at $2,300/month.

That's a poor gross rent yield, and the underlying cap rate is probably only around 4-5%.

But the reason the owner is doing it is because they have a 2.9% mortgage rate, and a low $1,450/month mortgage P&I payment as a result.

Read 10 tweets

Nick Gerli

@nickgerli1

Dec 2

San Francisco is the strongest housing market in America right now.

Home sales are 12% above the long-term average.

While inventory is -28% below the long-term average.

The AI boom has flipped SF on its head, and Reventure is now forecasting rising prices over the next 12 months.

(note: where you don't want to be on the graph above is in the top left. That's very low demand, and very high supply).

1) Of course - let's not forget that San Francisco was one of the weakest housing markets in America since the pandemic.

With values dropping 14.7% since the middle of 2022, one of the stiffest corrections in the U.S.

The typical price of a condo/house in SF county is now $1.25 million, one of the highest in the U.S., but much cheaper than it was several years ago.

2) Due to this price correction, and continuously rising median income, Reventure now has San Francisco County tabbed as 17% undervalued compared to its fair value.

This means that San Francisco is a buy from a value standpoint, and that it's likely the correction is over, and that values will rise from here.

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Nick Gerli

@nickgerli1

Nov 26

Pending home sales in October 2025 came in -1.2% below last year, and -27% below the long-term average.

Today's contract signings are at the lowest level in 30+ years - even worse than the GFC - and showing no noticeable signs of improvement (even after 6 Fed rate cuts and a big spike in inventory)

Suggesting there's major structural inertia in housing right now. The market is unaffordable, overpriced, and cheaper to rent - and as a result homebuyers are fundamentally disinterested.

On top of that - many households are now delaying family formation and electing not to have kids, which further reduces the urgency to buy.

Sellers who are delisting their houses right now, in hopes of an improved market in 2026, could be making a big mistake.

Access Reventure's Price Forecast for your city and ZIP at reventure.app.

1) I can't stress enough how crazy it is that NAR's Pending Sales figures just came in -1.2% below last year.

Remember - last year at this time, we only had one double rate cut.

Since then, we've had another 4 quarter point rate cuts

And demand went down!

2) On top of that, inventory has gone up over 15% since last year, and we now have the most homes for sale since pre-pandemic in South/West.

Plus prices dropping in half the U.S.

And demand is still going down.

Read 15 tweets

Nick Gerli

@nickgerli1

Nov 23

The U.S. Housing Market is about to get hit by a big demographic shift.

By 2032, there will be more deaths than births in the U.S.

This crossover point will be the continuation of a long-term trend over the last four decades, and ultimately will have the following impacts:

a) structurally lower homebuyer demand, as declining births and family formation lowers the need and urgency for young people to buy houses

b) more inventory, as incrementally more deaths and the aging out of the Baby Boomer generation increases listings (Freddie Mac estimates 9 million homes by 2035).

This will likely have a disinflationary and/or deflationary impact on home prices over the long-term.

Reventure just added Birth/Death Ratio data for every county in the U.S., going back 30 years, under 'Demographic Data'. Sign up to see the demographic trends in your area at reventure.app.

1) Many participants in the housing market are ignoring this issue, as if it does not provide a positive outlook for home prices, and it's also still another 6-7 years off.

However, serious homebuyers and investors should dig in and understand how the demographic decline will impact their area.

2) You can see there is already a dramatic divergence in Births and Deaths by state.

An area like California still has strong organic growth (1.38x, meaning 38% more births than deaths in 2024).

However, an area like Florida is already in organic contraction (0.96x Birth/Death, meaning 4% fewer births).

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