The Housing Puzzle: To Sell or Not to Sell... And Checking In on the SPAC Unwind

This originally appeared at Empire Financial Research.

? Talk to friends in almost any part of the country – certainly here in California – and the conversation goes something like this...?

"You won't believe what the house down the block sold for – and it needs to be totally gutted."?

"Yeah, can't believe it. We should sell."

"We've thought the same thing, but there's nowhere to go."

If you've owned a house for even just a few years, there is no way you haven't given this at least a moment's thought. We all know that a house is a home, with underpinnings (if all goes well) as an appreciating investment... over time.

? But thanks to low rates, regardless of the location or what you originally thought you might have overpaid, housing is having its crypto (or worse, meme) moment...

As a result, it's hard not to go through the exercise of whether it would be foolish to not sell.

?As much as I love my house and where I live, I had that very discussion via Twitter last week in a back-and-forth with Dominic Chu, my old desk-mate at CNBC, after he tweeted this...

Another old CNBC friend Sandy Cannold responded...

That prompted Dom to shoot back...

To which I responded...

Dom then closed the loop, saying...

? For perspective, here in San Diego the average price of housing recently topped $800,000...

If you knew the housing stock here – and the nature of the housing stock – you would realize just how out of touch that is with reality. But it's not just here. As CNBC's Diana Olick reported last week...

Anyone out there searching for a new place to live knows there is not much to buy. Total supply and new listings are at record lows, and that means that what is on the market now is selling fast. Really fast.?

The average home spent just 61 days on the market, according to a January reading from Realtor.com. That is the fastest pace Realtor.com has recorded since it began tracking the metric in 2016. It's 10 fewer days than at the rate recorded in January 2021 and 29 fewer than the 2017-20 pace.

Therein lies the puzzle... sell or stay? And if you sell, where do you go? As rates rise, does inventory go higher? Or do things tighten even more??

What I do know is that nobody knows, but everybody has an opinion. If you do, feel free to send your thoughts my way (you can send me an e-mail by clicking here)... It might make a good follow up.?

? Meanwhile, there are differences of opinion about whether the stock market is currently a bubble, but there's one thing with little disagreement about...

We're seeing a big unwind in special purpose acquisition companies ("SPACs").

My colleague Enrique Abeyta is fond of saying that SPACs are not an asset class. And they aren't, but they will go down as a poster child of this era's excesses... and the unwind is one for the books.

As a refresher, SPACs (which are also known as "blank-check companies") are entities that are created to find a merger partner – it's an alternative to the traditional initial public offering ("IPO") route. If they don't find one in an allotted amount of time – usually two years – they have to return the money to investors.?

? Right now, more than 500 companies are searching for mergers...

But as this story in Bloomberg details, even after they head to the altar, SPAC partners are increasingly getting cold feet...?

At least six mergers with special-purpose acquisition companies have been canceled this year, on pace for a record number of nixed deals in a single quarter. At least 22 have been spiked since the middle of 2021, according to data compiled by Chicago-based SPAC Research, which tracks the industry. That compares with 26 tie-ups that were called off in the more than five years prior, the data show.?

One reason, as I said in the December 10 Empire Financial Daily, is that another quirk of SPACs is that if investors don't like the deal, they can ask for their money back. And as Bloomberg reports, they're doing that in record numbers...

The average redemption rate has steadily climbed to top 90% for deals in February, SPAC Research data show, compared with less than 10% a year ago.

?It's a classic example of investors beating Wall Street at its own game.