Key Takeaways


Housing analyst Melody Wright delivers a devastating ground-level assessment of the US housing market, revealing a picture far worse than official data suggests. Existing home sales hit their worst levels since 1995 despite 20% population growth, while median listing prices have gone negative year-over-year for two consecutive months. The private credit shadow market is now 2.5 times larger than during the last crisis, and the Fed's own FOMC minutes flagged it as a concern. Government loss mitigation programs that kept delinquent borrowers afloat are running out, with one borrower going back six times over two years without facing foreclosure. Institutional investors like Blackstone are underwater on single-family rentals, and Trump's ban on institutional homebuying is characterized as a disguised bailout. Meanwhile, cities from Dallas to Nashville to Phoenix are filled with empty luxury builds nobody can afford, and municipalities face potential bankruptcy from the fallout.

Best Quotes

"Existing home sales last year were the worst since 1995, and we've increased population by over 20%."

"That's the highest percent of workers holding two part-time jobs ever right now. Ever. In the series since I think it goes back to the 60s."

"You don't even have to ask for their financials. I mean, this is crazy, Marty. Like, you don't even want to know if they can pay."

"The shadow market is about two and a half times bigger than it was during the last crisis."

"This is a dumpster fire and a lot of the people that are at these firms know how much trouble they're in, but they're not telling anybody."

"The Fed reported over 43% mortgage refi rejections. It's the highest in their series."

"Oh, it's a total bailout. Yeah. That's a bailout for them."

"They revised five years of history and shaved $30,000 off the new home price high. And they didn't tell us why."

"If you walk in downtown Dallas, like it's just a ghost town. It's a ghost town. And it's creepy because you're walking around it, you're seeing what looks like homeless camps in downtown Dallas."

"By year 11 of that loan, you would have paid $270,000 in interest. That is what a median home should be."

"$13 million spec house, $25 million spec house, meaning they didn't have a buyer."

Conclusion

Wright's field-level reporting reveals a housing market held together by extend-and-pretend policies that are rapidly expiring. The combination of inflated credit scores now deflating, private credit exposure the Fed itself is worried about, institutional investors chasing losses, and municipalities running out of money to fund programs points to a gradually-then-suddenly moment. The data revisions, hidden inventory, and off-MLS transactions mean the official picture is far murkier than anyone realizes, and the true price discovery hasn't even begun.

Timestamps

0:00 - Intro

0:39 - The Market Is Not Well

5:23 - Liquidity Alarm Bell

11:30 - Payroll Revisions And The Jobs Mirage

14:25 - Private Credit Is A Dumpster Fire

16:11 - Subprime Delinquency

22:18 - Institutional Bailouts And Price Discovery

29:24 - Rotten Supply

34:35 - Creepy Downtowns

39:34 - Kayfabe And Ignorance

44:49 - Century Long Loans

46:52 - Data Centers & AI

1:00:28 - Seller Advice & AirBNB

Transcript

(00:00) You don't even have to ask for their financials. I mean, this is crazy. Like, you don't even want to know if they can pay. The shadow market is about two and a half times bigger than it was during the last crisis. Existing home sales last year were the worst since 1995, and we've increased population by over 20%.

(00:21) What's up, freaks? Before we get into the show, I just want to send a heartfelt thank you. Thank you for joining us and ask for one quick thing. Could you like this episode? Subscribe to the channel and if you like the conversation, join us in the comment section. All right, take two. Melody, welcome back to the show.

(00:35) >> Thank you so much. Thank you for having me. It's my pleasure to be here. >> Well, like I said, it's timely talking to you as somebody who's settling on a house next week. May not be the best market to do it, but I got to get my forever house. Um, and for anybody who didn't catch the first interview with Melody, uh, in Q3, beginning of Q4 last year, just a little background, Melody's a housing market analyst and independent researcher.

(01:01) Uh, she's based in Tennessee. She runs the M3 Melody Substack, which is great. Uh, I highly recommend subscribing to it if you want to stay up to date on this. She's doing deep dive analysis on housing data, labor markets, and the intersection of government policy with real estate. former mortgage industry professional who now does investigative field reporting, literally visiting homeless camps, detention centers, and distressed neighborhoods to ground truth the data she studies um collaborating with other researchers and getting uh data from

(01:32) Fred and AR census and county level records and uh like I said, I think your most recent newsletter that you dropped last week talking about uh home sales in December uh the retail sort of credit situation and the stress the consumer is under is something that uh many people are not aware of because we're being told that the uh the economy is running hot. It's the best economy ever.

(02:00) But if you look under the hood, things are not all well from your perspective. So, what are you seeing out there, Melody? >> Yeah. No, I think you summed it up nicely. I mean, you know, we've been seeing this um this this under the covers trouble for some time, especially in what I'll call government subprime FHA.

(02:20) Um you know, when those student loans started reporting to credit again, it really uh impacted a lot of the people who should be forming households. And so you had people going from 750 credit scores to 550. And so very quickly, you know, credit got cut off. At the same time, you know, um in the mortgage market specifically, guardrails went on the FHA program which were being taken advantage of.

(02:47) Um a lot of fraudsters were taking advantage of it, but essentially you could just keep not paying over and over and you would go get another workout and another workout and so Guardwells went on that program. So um you could when we look at stuff in the aggregate Marty I think this is where everybody you know can have that false sense of calm because it looks okay like oh you know home equity that looks like that's great unlike the last time people will often say but there's so much going on that's new that people don't understand like today for instance

(03:20) CLA reported right and um they had a loss and they are very much some of the people that use CLA buy now pay later are the exact people that would be um that we would hope would be out there buying homes but unfortunately they have to you know basically finance their burritos. Um and so you know you look at the youth unemployment rate.

(03:46) I mean so I I guess in there are so many things so much weakness under the surface that almost no one is paying attention to. And so in all p pockets of the market, be it in mortgage where you're you're starting to see delinquency rise and we're going to see that from here. Um you're actually starting to see the prime books get impacted and they always come after the subprime.

(04:10) um you know when the layoffs happened. And the and the issue now is a lot of this lending was made on inflated credit scores um and that did not include you know the student loans and things like that or you know those eviction moratoriums um and now those inflated credit scores are coming down with student loans reporting. So it's just a much uh murkier picture than what people and I don't know how anyone can um say uh anything positive.

(04:38) I mean, existing home sales last year were the worst since 1995, and we've increased population by over 20%. I mean, so, you know, this market is completely frozen. Um, you had a lot of raged e-listers last year, um, that couldn't get the price they wanted and so they just took it off the market.

(04:56) But what you've seen since the recent Bitcoin route, kind of what happened there and the wobbliness in the stock market is inventory is uh, flying to the markets. I had had been coming off, but now it's flying on non-seasonally. This isn't the time of year you would typically typically your inventory bottoms in February. So, >> well, I thought it was interesting that you covered uh the Bitcoin price drop in gold and silver in this newsletter because I'm not sure if you caught on to this meme, but I think Bitcoin is a leading indicator of liquidity, right?

(05:29) Like it trades 24/7, 365. uh it's very easy to sell and get cash. And so if a liquidity crisis is pending, it's one of the first assets to go. And so that's what um we've been talking about in the Bitcoin space with this this price drop of 36% 48% since the highs of uh late October, early November last year is that something's got to be wonky in the back of the system from a liquidity perspective.

(06:00) And >> I think a lot of the data that you highlighted in your newsletter last week points to this. I mean, looking at um credit card spending in December alone, uh looks like people were tapped out of cash and really >> pulling out the plastic to to do their spending around Christmas time. And then I I think it would also be important to really dive into the um the new home listings and and home sales in December because those are some pretty historic lows in terms of what's coming to market, what's actually being sold.

(06:31) >> Mhm. >> Yeah. So, uh specifically, uh on the new home side, we're going