This interview took place May 23, 2013. All prices and yields reflect then.NEW YORK ( TheStreet) -- DoubleLine Capital's Jeffrey Gundlach is renowned for his investing acumen, thoughts on monetary policy and slightly different take on investing money, which has captured the attention of both Wall Street and Main Street alike.
Ciaccia: Certain markets, San Francisco, LA, you're starting to see a little bit of a froth. Do those markets worry you and is there anything that can be done, or does that froth just have to play out? Gundlach: Well, the market must go higher because there's lack of supply. It's the fundamental reason. Buyers are being influenced mightily by zero-interest rate policy and quantitative easing. Those things together create a market that is much higher, therefore there is confidence in it. Without supply, there is only one way to really go. The only thing that could stop the housing market in the near-term is higher interest rates, and that's not going to happen. Housing has to go higher, so that there's more of a balance of supply and demand. You're right though. Take Orange County for example. In Orange County, now one-third of the residents can afford a home. It's probably going to go down to 20%. It's not so much, as everyone knows, that people want to live in a house. It's money that's fleeing zero-interest rates that have gone into investment funds that are indiscriminately buying properties at the low end. That's what's propped up the low-end. At the high-end, it's people who've grown weary of zero-percent cash balances. So why not invest in something that is tangible, has some sort of psychic value, and there's confidence in it? Real estate is the new gold. Gold went up because it went up, and real estate went up because it's going up, and there's kind of a panic. Doubtless, it will lead to affordability problems, which will lead to headwinds for the housing market down the line. But first, it has to move higher.