What our Peloton obsession has in common with the US housing boom

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As the facts roll in, it is clear that the housing boom of the last two years had parallels to the Peloton craze during the pandemic.

The Covid bounce. 

Signing up for the pricey at-home fitness program was the thing to do when you were locked down in your home.

In the past two years, homebuyers also reacted to the pandemic, scattering themselves around the U.S. looking for safe and affordable housing. The market boomed.

Redfin estimates that half of housing demand during the pandemic was a result of people moving to new places, disrupting old patterns of buying a home around the corner in the same zip code.

In August 2020 during a Zillow earnings call, CEO Rich Barton waxed about changes to the housing market.

“New habits and norms are forming rapidly. Working from home, we have found better, more efficient, and more healthy ways to live and work. We’re not going to just go back to the way things were. This is a tectonic shift that we expect to play out for years to come.”

It turned out to be temporary, not tectonic. Now for the consequences.

Peloton is struggling to stay afloat. Beginning late last year, hardware sales crashed as the pandemic came to an end.

After announcing another 500 job cuts this week, Peloton CEO Barry McCarthy said the company’s fate is still uncertain, giving himself six months to turn it around or else.

The housing market is on firmer footing. But the great geographic reshuffling has abruptly ended with high interest rates further squelching demand.  

With year-over-year price appreciation of 20 percent for two straight years, the housing bubble is bursting. Choosing not to be caught flat footed again, like it was during the sub-prime crisis a dozen years ago, the Fed is deliberately stalling the house price run up. Interest rates have doubled.

So what’s next? 

Prices will fall, following the downward trajectory of transactions. A full blown recession will compound problems for many homeowners who will quickly lower their prices when forced to sell.

The housing market will return to simpler times, less hysterical. 

Humbled, the industry will act more adult-like, less like a reality TV show. Fewer Realtors will be cruising around in the latest Porsche Cayenne model, and empty real estate offices will be leased to dog food stores or skin care shops.

With tougher mortgage requirements and higher interest rates, a house sale will be harder to close, making the value of a serious and qualified realtor go up.

A pandemic will no longer spawn house moves, but crime rates, taxes and schools will again be the main drivers in where people choose to live.

Eventually, many families who traded Denver for Snowmass, or Brooklyn for West Palm Beach or San Francisco for Lake Tahoe will move back home.

With a global economic and political mess unfolding, dangers and opportunities are more difficult to sort out. But now is the time to get serious about the changes and to assess exactly where you stand. You cannot control Putin, but you can choose which personal frontier you want to invade.

Do not go to the dark side. These down cycles always end, the biggest mistake is a loss of hope and a failure of imagination.

Most importantly, stay informed.

Email Brad Inman