Buyer Beware: The Housing Market Is Cracking | Melody Wright
Summary
Market Outlook: The guest sees a prolonged, frozen US housing market with slow deceleration rather than a sharp correction in 2026.
Inventory and Prices: Seasonal inventory is rising alongside rage delistings; more major markets show YoY price declines and new-home prices are notably lower.
Foreclosures: Post-FHA policy changes and growing delinquencies point to a coming foreclosure wave into Q4/Q1, with forced selling set to increase.
Rents and Multifamily: Rents are falling, vacancies rising, and multifamily is overbuilt, pressuring investors who can’t cash flow and pushing some Airbnb owners to sell.
Regional Dynamics: The South and Midwest lead activity but are showing cracks; the Midwest is starting to decline, while the Northeast faces severe demographic headwinds.
Rates and Bond Market: Mortgage rates near 6.6% are driven by the bond market, not the Fed; cuts may not lower mortgage rates as the 10-year resists sustained declines.
Data Centers: Construction strength stems from data centers (e.g., large Ohio projects), masking housing weakness and contributing to higher electricity costs and labor absorption.
Strategy: The guest advises rent vs buy favoring rent and liquidity (e.g., T-bills), using affordability rules (≈3x income) and avoiding overextension amid insurance/tax surges.
Transcript
Do I expect a massive correction this year? No. Um, in fact, we could just unfortunately just keep decelerating slower. Uh, but the housing market is the backbone of the economy anywhere in the world, but especially so in the US. And we have to take a close look at the housing market today. How is 2026 shaping up? Is it a good year for for being maybe a housing market in or real estate in not a housing market investor, real estate investor? And what should we be making of the new fetcher coming in? The mortgage rate, the 30-year mortgage rate is at 6.6%. What will potentially higher rates do to the mortgage rate? What will it do to the housing market? I've invited back Melody Wright of M3 Melody, and she writes a fantastic substake on the real estate market. She's a resident real estate expert here on Soore Financially, and I'm going to ask her those questions. Is it a good time to buy right now? Should we be waiting? And where can we go bargain hunting? How can we get a good deal on on real estate? Lot lots of good questions here to ask her. But before I switch over, hit that like and subscribe button. It helps us out tremendously with the algorithm and we truly appreciate it. Thank you so much for doing that. Now, Melody, it's a great pleasure to have you back on the program. Thanks so much for taking the time. >> Thank you for having me. It's my pleasure. Thank you. >> Yeah, really looking forward to an update on on the US housing market in particular right now. Um maybe we'll start with a bit of a recap to figure out like where are we at right now in in in the cycle. Um because we've been talking about a housing crash for a little while now. I'm curious like where are we in that cycle? How far down the road are we melody? Um maybe catch us up like where are we? It's mid June. Um what's happening? >> Yeah. So I was a I wanted to be a little excited at the beginning of the year when those mortgage rates came down briefly touched below six for a few seconds. Um, I thought that because what you're seeing and what we've seen is that where there are transactions, we're actually seeing price discovery. We're seeing price corrections. And I always say correction, not crash. Um, but you know, because this could be a very slow process, but where we are is where we have been. And that's deeply um depressed in the housing market. It's completely frozen. Um, you know, there are areas where you're seeing transactions like I was saying, but like sales are up slightly in the south and west and that's where you're seeing the price corrections. Um, but in the Northeast they're down 7% year-over-year. They're down over 2% in the Midwest. And so, you know, what we're starting to see in those areas is uh inventory pile up. And once that inventory gets to a certain level, we're going to see price corrections there as well. But this is turning out to be just a repeat of 23 24 25. So this is year four of a frozen housing market. And the builders, by the way, are a terrible month last month. Um they keep kind of doing this thing where they lower prices, they get some sales. Um they don't lower prices, they don't get any sales. And you might have seen that builder confidence came out yesterday and went down again. It's at 35, which is uh very low to begin with. Um and we just saw uh the announcement this morning about housing starts being down. So, you know, we're in a very depressed situation. And what I've realized because a lot of people keep looking at construction to try and um you know, think about the health of the real estate market. The reason construction has stayed strong is due to the data centers. That's it. It's not housing. And so, you know, I I think that a lot of people misunderstand what's actually going on right now, but it's just completely frozen, Kai. And those mortgage rates have come up. >> Interesting. Yeah. No, we we got to take a closer look at it. Maybe we'll start with inventory because I know we've been talking about it quite a bit as well. I just want to pull something up here real quick. Let me share my screen. Um, it's from Trading Economics. I'm sure you're familiar with the statistics, but that's total housing inventory um in in the US, of course. Hold on, let me zoom out just a little bit so we can see the years. Um, but uh there there's quite a bit of seasonality obviously in it. When we spoke here earlier this year, um, inventory was much lower. Um, it had it is coming up. Um, is that is that typical, Melody? Maybe you can explain what we're looking at right now. >> Well, so unfortunately what that they're looking at is likely um realtor.com's data. that's who supplies it to Fred and they don't capture all the inventory. But putting that aside, um, seasonally inventory always starts to grow in the spring. It usually tops out around September, sometimes August. And so, yes, on the one hand, we are seeing the seasonal inventory growth, but we also have a phenomenon right now where massive D-listings, we're calling it rage dellisting because they're not getting the prices they want. So, in a lot of areas, people are mistaking the fact that there aren't homes listed for sale as low inventory. What it really is is people have gotten frustrated, sellers have gotten really frustrated because they're not getting the offers that they think they deserve. And unfortunately, that's that's really the story of inventory. So, you can see in places like Florida where there's massive inventory, they're pulling it off the market and it's just sitting. Um, and a lot of people what they're doing is actually pivoting to long-term rental. They're trying that, but that that market is now saturated. So, again, uh, you know, the stock market mania has made it has bought a little bit of time. The boomers own most of the assets, uh, most of the housing assets, including, you know, second, third, fourth homes and also their mom and pop landlords. Um, so, you know, we're just yet again frozen. And it seems unbelievable, but the thing that's going to break everything loose, Kai, is that the inventory that we're is going to start to increase for foreclosures. And that's that by the end of the year, uh, we will see there will be forced selling in a way that we have not seen in this market um, in a very long time. >> Let's talk about that forced selling part because what what is going to trigger that forced selling? Is it increased mortgages? Um, you know, affordability of course is one thing as well, but like I'm really trying to figure out, okay, what is causing um the effect? Like what is causing the force selling here? >> Yeah. So, a lot of force selling right now that's happening are Airbnb investors that aren't cash flowing. Um, that's that's a lot of it. And then people that, you know, you take Boston for instance, where they've had double digit property tax increases for two years in a row and it's a very low owner occupancy there, meaning that's investors. And so they're trying to get out of that market that inventory Kai is up 50% year-over-year. And I'm not just looking at data. I'm talking to brokers on the ground. Um so you know, but the delinquency what what I'm talking about is so for year, you know, in 24 the Biden administration came out with a very aggressive program on the FHA, which I call government subprime, where people could just keep going back over and over, not pay, and go back and get some kind of workout. Well, limitations were put on that in October and as we knew and likely I talked to you at the beginning of the year that meant that delinquency was just going to start to grow from here. Now, because of how long it takes to do a foreclosure in many states because there's still, believe it or not, some small forbearance that people can do um is taking time for that delinquency to flow through the system. But by the time we get to Q4, Q1, it's going to be there. And at the same time, and what does that mean? That means increased sales. I think um you know, foreclosure sales, I think we're up 14% year-over-year this month, 26% year-over-year last month. Um we're going to just see that grow and grow and grow. Now, of course, from very historic lows, but what's concerning to me, Kai, is that what I'm seeing now in the Fenny and Freddy Prime books is early stage delinquency. And so they're going they're joining this subprime party. And a lot of people misunderstand the foreclosure crisis last time as the subprime. And in fact, it were the prime borrowers that made up most of the foreclosures. >> A lot of the, you know, real estate investors or homeowners in the US have long-term mortgage rates. 30-year mortgage rates seems to be the norm in the US. Um, how is that affecting now the cycle like the the forced selling? Um, when when is that starting to kick in? like we we've had some extremely low rates of course so those people should be fine, right? But uh you you you're shaking your head. So like what's what's changing there? Like explain that to us a little bit. Like what does that look like? >> Well, you know, your property tax and insurance, your serer has to pay those. um and that becomes part of your mortgage payment for most Americans, not everybody, but if you have a certain loan to value and those have just gone up. Um so you're seeing uh escrow notices go out where payments are going up by $500, $800 a month. And so maybe they have a low rate, but they cannot afford um these these increases in insurance and taxes. And insurance is just insane. you know, if you live on the coast, it's insane, but it's also insane in the middle of the country because of flooding and things like that. And so, yeah, those those low rate that they're not going to save anyone. Now, of course, could it be keeping people where they are to a degree, yes, but Fanny May did a survey and in reality, it's not having the effect that everybody thinks that it's having. Um, but you know, people are so focused on rates and not prices and you know, so that's that's what they often say as a reason we have a frozen housing market. But honestly, um, that's that's not what I see when I look at mortgage books. That's not what I see. >> Is rent keeping up with with the mortgages? So, if you're a real estate investor or so, and you got your payments, let's say 6.6% or so, is is rent keeping pace? Can will the rent still cover your mortgage payments? Is that another factor as well? >> 100%. And no, they they don't. I mean, that's the problem because rents are coming down. You've got so much supply on the multif family side. Plus, as I was just talking about, people are pivoting when they can't sell, they're trying to rent. And so, you've just got a ton of rental supply. So, rents are coming down, vacancy, rental vacancy is going up. Um, and it's going to continue to do that because we built more multif family than we have since the 70s without the demographics to support it. >> Yeah, it's it's interesting because I guess you rent it out if you can't sell it and you just try to get whatever you can at this point to cover as much as possible, right? >> Which is an interesting dynamic as well. Um, on that topic of renters, maybe we'll stay on that for a second like the US and I think we've discussed that before as well, Melody, is like it seems to be the fundamentals are changing in the US or maybe the the DNA is changing like the the American it was always the American dream to own your own house, but affordability is now becoming the issue, right? And we've we've discussed this at Nausea before, but uh is the DNA of Americans changing as well? Are they changing into a renter economy like we have in in Europe, for example, where people mostly rent these days? I don't know. I, you know, I think that's the narrative. Um, but I think most people still want to own. Um, I think people have given up to some degree. Uh, but it is cheaper to rent right now. Um, that's for sure. But I but I say I wrote a post last year called Make It Happen. And you know, we have the power and you know, we say no to these high prices, prices will come down. And so for, you know, our young Americans, I want them to have hope for the future, you know, and and not overextend themselves. So, yeah. >> Yeah. Let's talk about the young Americans. Like, how do we get the Gen Z's, the millennials into a house these days? Like, they are the renter generation because we can't afford houses. Like, the prices are ridiculous. Like, in in certain areas, of course, but how do we get them into houses? Are there like policies that could help? Well, at the moment, you know, that unfortunately we pulled forward a lot of demand and household formation and we gave them these FHA mortgages they can't afford. Um, you know, that has supported a lot of these prices. But the way that we get them into the housing market is not policy, Kai. In fact, if the government got out of the way, we would see prices correct very quickly and then they would be able to afford it. It's just that um the asset holders that is just untenable to them. >> Yeah. I'm trying to figure out like if there's a maybe a somebody responsible. I'm looking for like a villain, right? Like who who can we like I know the boomers are being branded as the villains to a degree as well. They build house houses too big. Nobody can afford them now. Like what is it? The minimum average size of a of a new house is like what 2200 square f feet or something like that. Uh back in the day it was 1,200 square feet. So um that's maybe another like symptom perhaps of the of the current housing crisis. Should we perhaps go back to smaller housing units? Like when we built new homes, should we go smaller? >> Um we're just it's hard for me because I've seen how much existing stock is out there, Kai, and um we have enough housing. It it it is just misallocated. And so there is that the problem is you know the the villain is kind of the worshipping of the investment. I mean that's you know housing became a cons a casino. It's not about Joe and Jane getting a house. I mean you can go look in CPI. They treat it as an investment. And so we have this mentality that this is an investment. It's not shelter. So you know I I think that we all want some bad guy like you say. We want some policy to come fix this, but what we need is for the speculation to rent out of the market and for people to view their homes as shelter again. And that's the answer. I've been to these housing policy conferences. I've seen all the proposals and most of them are just pay for play and it's just the public private partnership grift. Um, and that's, you know, these affordable housing initiatives always end up being, you know, Peter and Paul like, you know, and the money is just going in a circular fashion and it's not actually helping the situation at all. So, honestly, we just need to let the market um, correct. >> Yeah. funny like interesting part. We talked about your name like your your Twitter handle before hitting uh the record button and I think that's a perfect segue to bring that into the conversation cuz like maybe one of the symptoms of the inflated housing prices as well is the amount of money in the system M3 and M2 money supply here is like it's ridiculous of course um the question is like how do we reverse I would say that yeah no there is a trend how do we reverse the trend like we need to tighten um and that's maybe the Fed the segue also to the Fed meeting this week as well and Kevin Walsh coming in as a new Fed chair. What is your maybe policy prediction or what do you expect like Washington to do about this? Ideally, they just tighten and stop all spending and just cut all cut it all to to wait for that reset naturally. >> Yeah. Well, you know, I so I think the bond market is in charge. Um, you know, a friend of mine posted on ex Twitter and it was a picture of the 10-year and this and said this is Trump's boss and I believe that um, you know, the the two-year is already over four. Um, you know, so and I watch pricing daily and I'm looking up because I'm looking up at my pricing screen right now and there's a fight at the 4.4 level on the 10ear which is what dictates mortgage rates. The Fed does not. They've said that from the podium. several times. Um and so, you know, and and we've seen when they actually have cut rates, uh mortgage rates have gone up. Um it's a complicated how the spread works to the mortgage rate. But, you know, but you people need to understand that the Fed cutting rates is not going to help mortgage rates. It's what the bond market decides. And right now, it's it's not comfortable with lower rates. So, Worsh can do what he wants. Um what I think is actually happening and this is probably a contrarian take right now. It looks as if there is some intervention in the um bond market trying to keep the 10ear from going above five of course like because the US can't afford higher rates. It it's just not feasible right whether that's 5% or 6%. >> We got to stop that trend particularly. >> Right. They're trying hard. >> Yeah. but it's not working. Um, so you know, uh, it's it's actually kind of funny. It's not funny, but it's, you know, and they they were going to do these things like buy the mortgage box securities to tighten that spread so that rates would come down. Um, before they they did they were doing it before they announced it and that did have an impact on rates, but once they announced it, um, rates didn't care anymore. And then, uh, actually they have not even been buying that much. Housing, as I mentioned, is is a big part of the economy right now. So, should they be paying more attention to the housing market in in general? Do do you feel like it's being neglected or is it a big part of the conversation right now? Like, what's the temperature level? >> Um, I I feel like it's like everything in our um country right now. It's uh there's a lot of uh kayfabe around it. There's a lot of performance around it. But like I just said, you know, that that performance around those buying mortgage back securities, um, they can't even keep that performance up. So, you know, there's a bill stuck in the House or I don't know if it's stuck in the House or Senate right now. Um, I think the House has passed one version, the Senate's passed another. they've got to come together on this. But honestly, it just feels as if and and this is going to be again probably another contrarian take. It really does feel like they are letting the housing market do what it's going to have to do. Um they're not intervening at a large scale. Now, when we get foreclosures, uh you will likely see um some sort of intervention probably at the state level, but you know that this is just a it's a supply and demand issue and it's the opposite one that we're being told. Um we are overs supplied. Um and we can't we don't have the dem demand because people can't afford it. And so until those things change by either wages increasing are home prices coming down I mean you know that the home prices will have to come down. So >> I'm just going to quickly share like the 10-year with you as well. The 10-year um what was it called? The United States FHFA house price index. And I'm curious um because it has been going up. Let me share that on screen here real quick. This button here. There we go. Um let's go full screen here so we can all you know what? Let's zoom in here. I think that's everybody can see that just straight up from trading economics. It it has been trending higher like despite lower transaction volumes, people are struggling to finance 6.6% mortgage rates on the 10-year on the 30-year, sorry. Um housing prices aren't coming down like maybe in select markets, but overall >> this is going higher. Well, so but you got to look at the year-over-year change and um so what you're seeing is a deceleration at the national level. Um but so let me just give you an example, Kai. I I track 86 markets um for sales price inventory and last year this time uh there were 23 markets with year-over-year price declines. Um the year before that it was like 14 or something like that or 12. It's now 33. And these are big big markets. Um and you're starting to see the Midwest crack which is also been a hold out because there was a ton of speculation. I just got back from the road where I went to New Albany, Ohio. Um and you want to know where all those construction workers are? there's 25,000 of them on site in that location where the intel plant and other data centers are being constructed. So, you know that but then all of that speculation, everybody went to the Midwest because they couldn't afford anything in the South anymore um where they were speculating. But that's all starting to slow. Like I said, those slow those sales are slowing, inventory is growing, and you're seeing price declines in places like Indianapolis, Kansas City. So once the Midwest cracks, uh, Kai, then you're going to, um, we're really going to start having the national conversation, and we're we're very close. So those year-over-year increases are are very small now, you know, and every series is different. You you have to look at the methodology. Is it repeat sales? Does it include condos, which are taking a bath right now? Um, like K Schiller does not. So yeah, you know, you just always have to ask um exactly what is this information telling me? >> Yeah. >> And if you look at new home sales, Kai, uh new home prices, uh LAR just came out, their prices are down 24%. Um the census previously revised the all-time high in 22 by negatively by $30,000, but they're still down significantly um year-over-year. And in fact, you have a situation that is um the first time in history we've seen sustained uh sustained prices at the existing home level which are higher than new homes. And this is even like uh net of the concessions. So, um, yeah, it's it's looking at the existing home inventory does not I mean, sorry, not inventory but prices doesn't tell the whole whole story, but you're seeing the deceleration there. >> You might have noticed I've switched to the Case Schiller 20 city composite home price index here as well. And it's like there there were actually like decreases. Now it's ticking up higher again, which is a bit surprising. >> Um, so >> is that the seasonally adjusted or is that the non-seasonally adjusted? M I'd say it's the nonseason. >> Yeah. So with the nonseasonally it and this is what everybody home prices will go up in the se the season the selling season they did in 2008. I mean that's just because what you have are the people that can transact and this what's hard for people to understand. So if the only thing I'm able to sell are highriced homes and home prices are going to look higher. But what you have to look at is under the covers like I do every week. got to look at all 86 markets and you're seeing price declines, price declines, price cuts. Zillow in fact came out with an article last year saying that um you know 53% of the properties listed on its site had price cuts um and the average was 9%. And so you know because things aren't selling the prices look higher. So once you act and this is what I was saying about more transactions means we'll actually get price discovery and those foreclosures are going to have a massive so so when do I expect to see this on a national basis? Probably at the end of the year. Um but you know because things are so frozen it might take a little bit longer while these other markets just slowly start to crack. But if we get a credit event or some sort of correction in the stock market it's game over. It's just game over for real estate. >> Yeah. Well, I I can see that the transaction completely disappear like when that happens. I'm not sure I'd see if a housing price crash. Of course, there'll be more forced selling, but I'm curious. >> Correction. I don't say crash. >> Yeah. Correction, crash. I don't know like correction like what point per definition it's a crash. I think it's 20%, right? Then it's a crash after 20. >> I know. Yeah. I to me this could take a very long time. It could take a decade to of of the trends that I am watching and the macro headwinds which are largely around um demographics and so do I expect a massive correction this year? No. Um in fact we could just unfortunately just keep decelerating slower. Uh but the correction is coming uh because the supply is going to be overwhelming when people run out of options like they can't rent that house out. they need to sell it. And if you get a stock price, like a stock market correction or crash or whatever, like those that are sitting feeling pretty good right now are not going to be feeling good anymore. >> We got to touch on a like maybe controversial topic a little bit. Here's demographics in the US. Um over the last 18 months, they have changed. How has that impacted the housing market, Melody? Yeah, you know, it's very difficult to to know because of the way that we track the data, but you definitely I do think that um you know, most people were building based on what they thought were population increases that were uh you know, naturalborn, I mean, citizens born here in the United States. And and unfortunately, a lot of those population increases were the foreignb born. Um and so therefore I if we're not if they're not coming in at the level that they were then yes that is impactful and in fact you know somebody did a study and they think 6% of FHA mortgages were given to um non-citizens. So, uh, you know, it that doesn't help things in the housing market from sort of we we're just again over supplied, but it did I you know, when I was traveling around Texas between San Antonio and Austin and really the whole state, I mean, we built uh enough for a whole another country to come here, uh, guys. So, I mean, it's it's actually really insane. uh once you see this stuff on the road and and that's you know it's very difficult for people to accept my thesis because they they you know they don't they haven't seen it and you can you can show drone footage you can show but until you see the scale by literally driving across the country you're not going to understand like why I can be so convicted about this because it it it is just the opposite of what everyone is being Hold. >> No, it's interesting. Like I think we all know that Austin the Austin market is taking an absolute bath right now and >> Oh, yeah. >> It's 26%. Yeah. >> Dropping significantly. I'm curious like I'm starting to think I really enjoy our conversation, but California, I think nicks the wealth tax. So, a lot of people were leaving California in a hurry as well. Um, does that have any like impact on the housing market? I'm curious like do you see it like in Nevada and other places? Austin was a market a lot of people fled to um dur during COVID and during the like the tax hikes there in in California as well. Um does that do do you see any like policy impacts there from like maybe non-housing related policies? >> Well, I mean they've been leaving California for a long time. Uh you know just the the net migration out um is uh negative. They lost something like 400. LA alone, that area lost like 300,000 people over the last um several years. I mean, so I went out there as well, Kai, and you know that mar those markets are going to correct bigly because yes, people have been leaving, but they've most of them have already left Kai. I mean, it's when you go to LA, it's a shell of its former self. If you've ever spent any time there, you're just like, where am I? I mean, you know, Hollywood's pretty much dead out there. Uh, you know, people you when you talk to people that live there, um, it's about living there. It's not that they enjoy living there. It's part of their identity and they're the last ones there. I mean, and so, you know, but in terms of are they still going to Nevada? Are they still going to um, uh, you know, Utah, other areas? Um, we had the lowest relocations last year. Um, is in tracking and so yes is it going to continue to happen absolutely but not at the scale that everyone thought it was going to happen and then that's the problem is every sunb belt city built and even in you know Nevada and and Utah as if every California was coming to their city and so I see it here in East Tennessee East Tennessee little town Johnson City little new build construction sites all over the place empty. I mean, so it's, you know, we were ranked number four, I think, two years ago for a place to move. Um, but that has all slowed down. Uh, so yeah, I, you know, these policies matter, but this is, everybody thinks this happened in CO, but I meet people here all the time. Oh, when did you move here from Illinois? Oh, 2016, 20, you know, like so these policy people have been reacting to these policies for a very long time. So there's not going to be like the billionaire tax like what said how many people is that >> 12 >> right it's like that I mean it's just hil I mean last year I or what I can't the time um whenever you know the palisades fire happened and I went out there I mean everybody was saying oh this is you know now the LA market's going to be hot and I was like no way you know most of a lot of those were second homes in Pasadena it was a lot of actual rentals, although they're all under the cover rentals. I mean, I know people that were there, lost their home that they were renting. Um, >> so yeah, we all want to get excited about these. I mean, it's but they're immaterial to the problems we have. And so, yeah, those 12 people aren't going to, but people will continue to leave California for sure. The taxes are too high, just like they're leaving Boston. They're leaving Illinois. Yeah. Where's everybody moving to these days? Like what what market is hot? Because the prices haven't really come down yet. So, some markets got to be propping up the prices. So, where's everybody going? >> Well, they're not really going anywhere. That's the problem like I mentioned. But, you know, it's kind of where's a strong market? Well, it depends on how you define strong. Like for instance, right now San Jose is seeing increased sales. Well, why is that happening? Because of layoffs there. Um, and prices are down significantly year-over-year. And and so, uh, where where is everybody moving? They're not moving anymore. But they, those that are thinking of moving, they're coming down to the south. They're coming to Tennessee, South Carolina, Alabama. Um, not so much Florida because it's just gotten so expensive. Um, but that's the South is the, you know, the South and Midwest are the only places that are are experiencing population increases. I mean the country is really uh the northeast the demographics there are abysmal and that's that's the other thing is like so what happens when someone passes is a lot of times that property goes into probate it could take a long time to get it to the market like I just went to an auction with someone um the owner had passed away three years ago they were just getting it to auction and so this is why the northeast is so delusional they don't understand the demographic wave heading their way. But the south is where all the housing activity really is these days. >> Interesting. If you were a new home buyer right now, Melody, would you buy a home today? >> No. >> No. >> No. Um, you know, it it's so, and this is what I say, you know, it's not about affording the payment. We've become, and you kind of previously alluded to this, we've become a a payment nation. like, you know, oh, okay, give me a 50-year mortgage or a 40-year mortgage. So, but because I can afford that payment, but that's not how you have to think about home ownership. You have to actually think about the total debt. And so, what I tell people is the, you know, just simple math. Take your household median income times three, that is the home you can afford. And, and if you do that for the United States, for instance, that's, you know, that's not even 250k. So like it that that that tells you how far out of reality we are and then you pile on the taxes and insurance to that. I mean that's and then repairs and then Kai electricity bills are going up because of these data centers because of grid issues etc. Um, so yeah, no way. Like, and especially if you were going to buy a new home, you know what I'm hearing every day now is the poor people I tried to warn who bought a home in a new home subdivision and they're the only people there or uh the people sold the rest of the homes to a rental company and so now they're surrounded by renters. I mean, these are the or it's shoddy construction. I mean, that's another big thing that's happening. But no, I wouldn't I would wait. I would and I believe me I I now if you have all the money in the world, you have a year of reserves, um you this is your forever home that you're going to be there for the next 20 years, that's a whole different conversation. But if it's if you don't think you're going to be there for two, you know, two to five years, no way. Just rent, you know, um short-term tea bill and chill, whatever. like just you know just b your time because this market is in if you go to any banking website or any like uh where where they teach you about you know financial literacy they're always going to say your housing should never be more than 30% of your income yet that's not how they lend Kai not anymore that's not how they lend >> yeah well you can't anymore like with affordability like you can't as you said like try doing that times your what is your medium house income times three as you said like >> if you get to 300,000 you're you're in a lucky position but what can you buy for 300,000 if the average home price was what we saw in the case shill was 340 I think >> well that's an index but it's so it's an so but act like NARS uh last uh I think was 420 so >> home price index yeah 441.5 is the home price index whatever that means so fantastic melody like I could chat with you for hours I I enjoy these conversations because it's really like is a different conversation here on our channel. Um, and it just shows that the cracks are widening tremendously and we should all be worried where this is headed quite literally. So, um, Melody, like where can audience follow more of your work? >> Sure. Um, I encourage everyone to sign up for at least the free version of the Substack because I put a lot of data in, um, the top section above the payw wall. That's M3 Melody Substack and then on X Twitter at M3_Melody. >> Fantastic. Melody, thank you so much for your time. It was great catching up as always. We'll have to do this before the year is over to see where we're at because then we'll have a bit more input from the Fed as well. We'll see where mortgage rates are headed as well. So, lots to talk about. Thank you so much, Melody. Really appreciate your time. And everybody else, thank you so much for tuning in. If you're in the US, would you be buying a house right now? Have you been trying to sell a house? I'm I'm curious what your experiences. Please put that down below so we can include that in our conversation with Melody next time as well. Thank you so much for tuning in. Don't for don't forget to hit that like and subscribe button. A, we appreciate the support and B, it helps us out with the algorithm tremendously as well. Thank you so much. It means a lot. And uh don't let the emotions run your investments for you. Take care out there.
Buyer Beware: The Housing Market Is Cracking | Melody Wright
Summary
Transcript
Do I expect a massive correction this year? No. Um, in fact, we could just unfortunately just keep decelerating slower. Uh, but the housing market is the backbone of the economy anywhere in the world, but especially so in the US. And we have to take a close look at the housing market today. How is 2026 shaping up? Is it a good year for for being maybe a housing market in or real estate in not a housing market investor, real estate investor? And what should we be making of the new fetcher coming in? The mortgage rate, the 30-year mortgage rate is at 6.6%. What will potentially higher rates do to the mortgage rate? What will it do to the housing market? I've invited back Melody Wright of M3 Melody, and she writes a fantastic substake on the real estate market. She's a resident real estate expert here on Soore Financially, and I'm going to ask her those questions. Is it a good time to buy right now? Should we be waiting? And where can we go bargain hunting? How can we get a good deal on on real estate? Lot lots of good questions here to ask her. But before I switch over, hit that like and subscribe button. It helps us out tremendously with the algorithm and we truly appreciate it. Thank you so much for doing that. Now, Melody, it's a great pleasure to have you back on the program. Thanks so much for taking the time. >> Thank you for having me. It's my pleasure. Thank you. >> Yeah, really looking forward to an update on on the US housing market in particular right now. Um maybe we'll start with a bit of a recap to figure out like where are we at right now in in in the cycle. Um because we've been talking about a housing crash for a little while now. I'm curious like where are we in that cycle? How far down the road are we melody? Um maybe catch us up like where are we? It's mid June. Um what's happening? >> Yeah. So I was a I wanted to be a little excited at the beginning of the year when those mortgage rates came down briefly touched below six for a few seconds. Um, I thought that because what you're seeing and what we've seen is that where there are transactions, we're actually seeing price discovery. We're seeing price corrections. And I always say correction, not crash. Um, but you know, because this could be a very slow process, but where we are is where we have been. And that's deeply um depressed in the housing market. It's completely frozen. Um, you know, there are areas where you're seeing transactions like I was saying, but like sales are up slightly in the south and west and that's where you're seeing the price corrections. Um, but in the Northeast they're down 7% year-over-year. They're down over 2% in the Midwest. And so, you know, what we're starting to see in those areas is uh inventory pile up. And once that inventory gets to a certain level, we're going to see price corrections there as well. But this is turning out to be just a repeat of 23 24 25. So this is year four of a frozen housing market. And the builders, by the way, are a terrible month last month. Um they keep kind of doing this thing where they lower prices, they get some sales. Um they don't lower prices, they don't get any sales. And you might have seen that builder confidence came out yesterday and went down again. It's at 35, which is uh very low to begin with. Um and we just saw uh the announcement this morning about housing starts being down. So, you know, we're in a very depressed situation. And what I've realized because a lot of people keep looking at construction to try and um you know, think about the health of the real estate market. The reason construction has stayed strong is due to the data centers. That's it. It's not housing. And so, you know, I I think that a lot of people misunderstand what's actually going on right now, but it's just completely frozen, Kai. And those mortgage rates have come up. >> Interesting. Yeah. No, we we got to take a closer look at it. Maybe we'll start with inventory because I know we've been talking about it quite a bit as well. I just want to pull something up here real quick. Let me share my screen. Um, it's from Trading Economics. I'm sure you're familiar with the statistics, but that's total housing inventory um in in the US, of course. Hold on, let me zoom out just a little bit so we can see the years. Um, but uh there there's quite a bit of seasonality obviously in it. When we spoke here earlier this year, um, inventory was much lower. Um, it had it is coming up. Um, is that is that typical, Melody? Maybe you can explain what we're looking at right now. >> Well, so unfortunately what that they're looking at is likely um realtor.com's data. that's who supplies it to Fred and they don't capture all the inventory. But putting that aside, um, seasonally inventory always starts to grow in the spring. It usually tops out around September, sometimes August. And so, yes, on the one hand, we are seeing the seasonal inventory growth, but we also have a phenomenon right now where massive D-listings, we're calling it rage dellisting because they're not getting the prices they want. So, in a lot of areas, people are mistaking the fact that there aren't homes listed for sale as low inventory. What it really is is people have gotten frustrated, sellers have gotten really frustrated because they're not getting the offers that they think they deserve. And unfortunately, that's that's really the story of inventory. So, you can see in places like Florida where there's massive inventory, they're pulling it off the market and it's just sitting. Um, and a lot of people what they're doing is actually pivoting to long-term rental. They're trying that, but that that market is now saturated. So, again, uh, you know, the stock market mania has made it has bought a little bit of time. The boomers own most of the assets, uh, most of the housing assets, including, you know, second, third, fourth homes and also their mom and pop landlords. Um, so, you know, we're just yet again frozen. And it seems unbelievable, but the thing that's going to break everything loose, Kai, is that the inventory that we're is going to start to increase for foreclosures. And that's that by the end of the year, uh, we will see there will be forced selling in a way that we have not seen in this market um, in a very long time. >> Let's talk about that forced selling part because what what is going to trigger that forced selling? Is it increased mortgages? Um, you know, affordability of course is one thing as well, but like I'm really trying to figure out, okay, what is causing um the effect? Like what is causing the force selling here? >> Yeah. So, a lot of force selling right now that's happening are Airbnb investors that aren't cash flowing. Um, that's that's a lot of it. And then people that, you know, you take Boston for instance, where they've had double digit property tax increases for two years in a row and it's a very low owner occupancy there, meaning that's investors. And so they're trying to get out of that market that inventory Kai is up 50% year-over-year. And I'm not just looking at data. I'm talking to brokers on the ground. Um so you know, but the delinquency what what I'm talking about is so for year, you know, in 24 the Biden administration came out with a very aggressive program on the FHA, which I call government subprime, where people could just keep going back over and over, not pay, and go back and get some kind of workout. Well, limitations were put on that in October and as we knew and likely I talked to you at the beginning of the year that meant that delinquency was just going to start to grow from here. Now, because of how long it takes to do a foreclosure in many states because there's still, believe it or not, some small forbearance that people can do um is taking time for that delinquency to flow through the system. But by the time we get to Q4, Q1, it's going to be there. And at the same time, and what does that mean? That means increased sales. I think um you know, foreclosure sales, I think we're up 14% year-over-year this month, 26% year-over-year last month. Um we're going to just see that grow and grow and grow. Now, of course, from very historic lows, but what's concerning to me, Kai, is that what I'm seeing now in the Fenny and Freddy Prime books is early stage delinquency. And so they're going they're joining this subprime party. And a lot of people misunderstand the foreclosure crisis last time as the subprime. And in fact, it were the prime borrowers that made up most of the foreclosures. >> A lot of the, you know, real estate investors or homeowners in the US have long-term mortgage rates. 30-year mortgage rates seems to be the norm in the US. Um, how is that affecting now the cycle like the the forced selling? Um, when when is that starting to kick in? like we we've had some extremely low rates of course so those people should be fine, right? But uh you you you're shaking your head. So like what's what's changing there? Like explain that to us a little bit. Like what does that look like? >> Well, you know, your property tax and insurance, your serer has to pay those. um and that becomes part of your mortgage payment for most Americans, not everybody, but if you have a certain loan to value and those have just gone up. Um so you're seeing uh escrow notices go out where payments are going up by $500, $800 a month. And so maybe they have a low rate, but they cannot afford um these these increases in insurance and taxes. And insurance is just insane. you know, if you live on the coast, it's insane, but it's also insane in the middle of the country because of flooding and things like that. And so, yeah, those those low rate that they're not going to save anyone. Now, of course, could it be keeping people where they are to a degree, yes, but Fanny May did a survey and in reality, it's not having the effect that everybody thinks that it's having. Um, but you know, people are so focused on rates and not prices and you know, so that's that's what they often say as a reason we have a frozen housing market. But honestly, um, that's that's not what I see when I look at mortgage books. That's not what I see. >> Is rent keeping up with with the mortgages? So, if you're a real estate investor or so, and you got your payments, let's say 6.6% or so, is is rent keeping pace? Can will the rent still cover your mortgage payments? Is that another factor as well? >> 100%. And no, they they don't. I mean, that's the problem because rents are coming down. You've got so much supply on the multif family side. Plus, as I was just talking about, people are pivoting when they can't sell, they're trying to rent. And so, you've just got a ton of rental supply. So, rents are coming down, vacancy, rental vacancy is going up. Um, and it's going to continue to do that because we built more multif family than we have since the 70s without the demographics to support it. >> Yeah, it's it's interesting because I guess you rent it out if you can't sell it and you just try to get whatever you can at this point to cover as much as possible, right? >> Which is an interesting dynamic as well. Um, on that topic of renters, maybe we'll stay on that for a second like the US and I think we've discussed that before as well, Melody, is like it seems to be the fundamentals are changing in the US or maybe the the DNA is changing like the the American it was always the American dream to own your own house, but affordability is now becoming the issue, right? And we've we've discussed this at Nausea before, but uh is the DNA of Americans changing as well? Are they changing into a renter economy like we have in in Europe, for example, where people mostly rent these days? I don't know. I, you know, I think that's the narrative. Um, but I think most people still want to own. Um, I think people have given up to some degree. Uh, but it is cheaper to rent right now. Um, that's for sure. But I but I say I wrote a post last year called Make It Happen. And you know, we have the power and you know, we say no to these high prices, prices will come down. And so for, you know, our young Americans, I want them to have hope for the future, you know, and and not overextend themselves. So, yeah. >> Yeah. Let's talk about the young Americans. Like, how do we get the Gen Z's, the millennials into a house these days? Like, they are the renter generation because we can't afford houses. Like, the prices are ridiculous. Like, in in certain areas, of course, but how do we get them into houses? Are there like policies that could help? Well, at the moment, you know, that unfortunately we pulled forward a lot of demand and household formation and we gave them these FHA mortgages they can't afford. Um, you know, that has supported a lot of these prices. But the way that we get them into the housing market is not policy, Kai. In fact, if the government got out of the way, we would see prices correct very quickly and then they would be able to afford it. It's just that um the asset holders that is just untenable to them. >> Yeah. I'm trying to figure out like if there's a maybe a somebody responsible. I'm looking for like a villain, right? Like who who can we like I know the boomers are being branded as the villains to a degree as well. They build house houses too big. Nobody can afford them now. Like what is it? The minimum average size of a of a new house is like what 2200 square f feet or something like that. Uh back in the day it was 1,200 square feet. So um that's maybe another like symptom perhaps of the of the current housing crisis. Should we perhaps go back to smaller housing units? Like when we built new homes, should we go smaller? >> Um we're just it's hard for me because I've seen how much existing stock is out there, Kai, and um we have enough housing. It it it is just misallocated. And so there is that the problem is you know the the villain is kind of the worshipping of the investment. I mean that's you know housing became a cons a casino. It's not about Joe and Jane getting a house. I mean you can go look in CPI. They treat it as an investment. And so we have this mentality that this is an investment. It's not shelter. So you know I I think that we all want some bad guy like you say. We want some policy to come fix this, but what we need is for the speculation to rent out of the market and for people to view their homes as shelter again. And that's the answer. I've been to these housing policy conferences. I've seen all the proposals and most of them are just pay for play and it's just the public private partnership grift. Um, and that's, you know, these affordable housing initiatives always end up being, you know, Peter and Paul like, you know, and the money is just going in a circular fashion and it's not actually helping the situation at all. So, honestly, we just need to let the market um, correct. >> Yeah. funny like interesting part. We talked about your name like your your Twitter handle before hitting uh the record button and I think that's a perfect segue to bring that into the conversation cuz like maybe one of the symptoms of the inflated housing prices as well is the amount of money in the system M3 and M2 money supply here is like it's ridiculous of course um the question is like how do we reverse I would say that yeah no there is a trend how do we reverse the trend like we need to tighten um and that's maybe the Fed the segue also to the Fed meeting this week as well and Kevin Walsh coming in as a new Fed chair. What is your maybe policy prediction or what do you expect like Washington to do about this? Ideally, they just tighten and stop all spending and just cut all cut it all to to wait for that reset naturally. >> Yeah. Well, you know, I so I think the bond market is in charge. Um, you know, a friend of mine posted on ex Twitter and it was a picture of the 10-year and this and said this is Trump's boss and I believe that um, you know, the the two-year is already over four. Um, you know, so and I watch pricing daily and I'm looking up because I'm looking up at my pricing screen right now and there's a fight at the 4.4 level on the 10ear which is what dictates mortgage rates. The Fed does not. They've said that from the podium. several times. Um and so, you know, and and we've seen when they actually have cut rates, uh mortgage rates have gone up. Um it's a complicated how the spread works to the mortgage rate. But, you know, but you people need to understand that the Fed cutting rates is not going to help mortgage rates. It's what the bond market decides. And right now, it's it's not comfortable with lower rates. So, Worsh can do what he wants. Um what I think is actually happening and this is probably a contrarian take right now. It looks as if there is some intervention in the um bond market trying to keep the 10ear from going above five of course like because the US can't afford higher rates. It it's just not feasible right whether that's 5% or 6%. >> We got to stop that trend particularly. >> Right. They're trying hard. >> Yeah. but it's not working. Um, so you know, uh, it's it's actually kind of funny. It's not funny, but it's, you know, and they they were going to do these things like buy the mortgage box securities to tighten that spread so that rates would come down. Um, before they they did they were doing it before they announced it and that did have an impact on rates, but once they announced it, um, rates didn't care anymore. And then, uh, actually they have not even been buying that much. Housing, as I mentioned, is is a big part of the economy right now. So, should they be paying more attention to the housing market in in general? Do do you feel like it's being neglected or is it a big part of the conversation right now? Like, what's the temperature level? >> Um, I I feel like it's like everything in our um country right now. It's uh there's a lot of uh kayfabe around it. There's a lot of performance around it. But like I just said, you know, that that performance around those buying mortgage back securities, um, they can't even keep that performance up. So, you know, there's a bill stuck in the House or I don't know if it's stuck in the House or Senate right now. Um, I think the House has passed one version, the Senate's passed another. they've got to come together on this. But honestly, it just feels as if and and this is going to be again probably another contrarian take. It really does feel like they are letting the housing market do what it's going to have to do. Um they're not intervening at a large scale. Now, when we get foreclosures, uh you will likely see um some sort of intervention probably at the state level, but you know that this is just a it's a supply and demand issue and it's the opposite one that we're being told. Um we are overs supplied. Um and we can't we don't have the dem demand because people can't afford it. And so until those things change by either wages increasing are home prices coming down I mean you know that the home prices will have to come down. So >> I'm just going to quickly share like the 10-year with you as well. The 10-year um what was it called? The United States FHFA house price index. And I'm curious um because it has been going up. Let me share that on screen here real quick. This button here. There we go. Um let's go full screen here so we can all you know what? Let's zoom in here. I think that's everybody can see that just straight up from trading economics. It it has been trending higher like despite lower transaction volumes, people are struggling to finance 6.6% mortgage rates on the 10-year on the 30-year, sorry. Um housing prices aren't coming down like maybe in select markets, but overall >> this is going higher. Well, so but you got to look at the year-over-year change and um so what you're seeing is a deceleration at the national level. Um but so let me just give you an example, Kai. I I track 86 markets um for sales price inventory and last year this time uh there were 23 markets with year-over-year price declines. Um the year before that it was like 14 or something like that or 12. It's now 33. And these are big big markets. Um and you're starting to see the Midwest crack which is also been a hold out because there was a ton of speculation. I just got back from the road where I went to New Albany, Ohio. Um and you want to know where all those construction workers are? there's 25,000 of them on site in that location where the intel plant and other data centers are being constructed. So, you know that but then all of that speculation, everybody went to the Midwest because they couldn't afford anything in the South anymore um where they were speculating. But that's all starting to slow. Like I said, those slow those sales are slowing, inventory is growing, and you're seeing price declines in places like Indianapolis, Kansas City. So once the Midwest cracks, uh, Kai, then you're going to, um, we're really going to start having the national conversation, and we're we're very close. So those year-over-year increases are are very small now, you know, and every series is different. You you have to look at the methodology. Is it repeat sales? Does it include condos, which are taking a bath right now? Um, like K Schiller does not. So yeah, you know, you just always have to ask um exactly what is this information telling me? >> Yeah. >> And if you look at new home sales, Kai, uh new home prices, uh LAR just came out, their prices are down 24%. Um the census previously revised the all-time high in 22 by negatively by $30,000, but they're still down significantly um year-over-year. And in fact, you have a situation that is um the first time in history we've seen sustained uh sustained prices at the existing home level which are higher than new homes. And this is even like uh net of the concessions. So, um, yeah, it's it's looking at the existing home inventory does not I mean, sorry, not inventory but prices doesn't tell the whole whole story, but you're seeing the deceleration there. >> You might have noticed I've switched to the Case Schiller 20 city composite home price index here as well. And it's like there there were actually like decreases. Now it's ticking up higher again, which is a bit surprising. >> Um, so >> is that the seasonally adjusted or is that the non-seasonally adjusted? M I'd say it's the nonseason. >> Yeah. So with the nonseasonally it and this is what everybody home prices will go up in the se the season the selling season they did in 2008. I mean that's just because what you have are the people that can transact and this what's hard for people to understand. So if the only thing I'm able to sell are highriced homes and home prices are going to look higher. But what you have to look at is under the covers like I do every week. got to look at all 86 markets and you're seeing price declines, price declines, price cuts. Zillow in fact came out with an article last year saying that um you know 53% of the properties listed on its site had price cuts um and the average was 9%. And so you know because things aren't selling the prices look higher. So once you act and this is what I was saying about more transactions means we'll actually get price discovery and those foreclosures are going to have a massive so so when do I expect to see this on a national basis? Probably at the end of the year. Um but you know because things are so frozen it might take a little bit longer while these other markets just slowly start to crack. But if we get a credit event or some sort of correction in the stock market it's game over. It's just game over for real estate. >> Yeah. Well, I I can see that the transaction completely disappear like when that happens. I'm not sure I'd see if a housing price crash. Of course, there'll be more forced selling, but I'm curious. >> Correction. I don't say crash. >> Yeah. Correction, crash. I don't know like correction like what point per definition it's a crash. I think it's 20%, right? Then it's a crash after 20. >> I know. Yeah. I to me this could take a very long time. It could take a decade to of of the trends that I am watching and the macro headwinds which are largely around um demographics and so do I expect a massive correction this year? No. Um in fact we could just unfortunately just keep decelerating slower. Uh but the correction is coming uh because the supply is going to be overwhelming when people run out of options like they can't rent that house out. they need to sell it. And if you get a stock price, like a stock market correction or crash or whatever, like those that are sitting feeling pretty good right now are not going to be feeling good anymore. >> We got to touch on a like maybe controversial topic a little bit. Here's demographics in the US. Um over the last 18 months, they have changed. How has that impacted the housing market, Melody? Yeah, you know, it's very difficult to to know because of the way that we track the data, but you definitely I do think that um you know, most people were building based on what they thought were population increases that were uh you know, naturalborn, I mean, citizens born here in the United States. And and unfortunately, a lot of those population increases were the foreignb born. Um and so therefore I if we're not if they're not coming in at the level that they were then yes that is impactful and in fact you know somebody did a study and they think 6% of FHA mortgages were given to um non-citizens. So, uh, you know, it that doesn't help things in the housing market from sort of we we're just again over supplied, but it did I you know, when I was traveling around Texas between San Antonio and Austin and really the whole state, I mean, we built uh enough for a whole another country to come here, uh, guys. So, I mean, it's it's actually really insane. uh once you see this stuff on the road and and that's you know it's very difficult for people to accept my thesis because they they you know they don't they haven't seen it and you can you can show drone footage you can show but until you see the scale by literally driving across the country you're not going to understand like why I can be so convicted about this because it it it is just the opposite of what everyone is being Hold. >> No, it's interesting. Like I think we all know that Austin the Austin market is taking an absolute bath right now and >> Oh, yeah. >> It's 26%. Yeah. >> Dropping significantly. I'm curious like I'm starting to think I really enjoy our conversation, but California, I think nicks the wealth tax. So, a lot of people were leaving California in a hurry as well. Um, does that have any like impact on the housing market? I'm curious like do you see it like in Nevada and other places? Austin was a market a lot of people fled to um dur during COVID and during the like the tax hikes there in in California as well. Um does that do do you see any like policy impacts there from like maybe non-housing related policies? >> Well, I mean they've been leaving California for a long time. Uh you know just the the net migration out um is uh negative. They lost something like 400. LA alone, that area lost like 300,000 people over the last um several years. I mean, so I went out there as well, Kai, and you know that mar those markets are going to correct bigly because yes, people have been leaving, but they've most of them have already left Kai. I mean, it's when you go to LA, it's a shell of its former self. If you've ever spent any time there, you're just like, where am I? I mean, you know, Hollywood's pretty much dead out there. Uh, you know, people you when you talk to people that live there, um, it's about living there. It's not that they enjoy living there. It's part of their identity and they're the last ones there. I mean, and so, you know, but in terms of are they still going to Nevada? Are they still going to um, uh, you know, Utah, other areas? Um, we had the lowest relocations last year. Um, is in tracking and so yes is it going to continue to happen absolutely but not at the scale that everyone thought it was going to happen and then that's the problem is every sunb belt city built and even in you know Nevada and and Utah as if every California was coming to their city and so I see it here in East Tennessee East Tennessee little town Johnson City little new build construction sites all over the place empty. I mean, so it's, you know, we were ranked number four, I think, two years ago for a place to move. Um, but that has all slowed down. Uh, so yeah, I, you know, these policies matter, but this is, everybody thinks this happened in CO, but I meet people here all the time. Oh, when did you move here from Illinois? Oh, 2016, 20, you know, like so these policy people have been reacting to these policies for a very long time. So there's not going to be like the billionaire tax like what said how many people is that >> 12 >> right it's like that I mean it's just hil I mean last year I or what I can't the time um whenever you know the palisades fire happened and I went out there I mean everybody was saying oh this is you know now the LA market's going to be hot and I was like no way you know most of a lot of those were second homes in Pasadena it was a lot of actual rentals, although they're all under the cover rentals. I mean, I know people that were there, lost their home that they were renting. Um, >> so yeah, we all want to get excited about these. I mean, it's but they're immaterial to the problems we have. And so, yeah, those 12 people aren't going to, but people will continue to leave California for sure. The taxes are too high, just like they're leaving Boston. They're leaving Illinois. Yeah. Where's everybody moving to these days? Like what what market is hot? Because the prices haven't really come down yet. So, some markets got to be propping up the prices. So, where's everybody going? >> Well, they're not really going anywhere. That's the problem like I mentioned. But, you know, it's kind of where's a strong market? Well, it depends on how you define strong. Like for instance, right now San Jose is seeing increased sales. Well, why is that happening? Because of layoffs there. Um, and prices are down significantly year-over-year. And and so, uh, where where is everybody moving? They're not moving anymore. But they, those that are thinking of moving, they're coming down to the south. They're coming to Tennessee, South Carolina, Alabama. Um, not so much Florida because it's just gotten so expensive. Um, but that's the South is the, you know, the South and Midwest are the only places that are are experiencing population increases. I mean the country is really uh the northeast the demographics there are abysmal and that's that's the other thing is like so what happens when someone passes is a lot of times that property goes into probate it could take a long time to get it to the market like I just went to an auction with someone um the owner had passed away three years ago they were just getting it to auction and so this is why the northeast is so delusional they don't understand the demographic wave heading their way. But the south is where all the housing activity really is these days. >> Interesting. If you were a new home buyer right now, Melody, would you buy a home today? >> No. >> No. >> No. Um, you know, it it's so, and this is what I say, you know, it's not about affording the payment. We've become, and you kind of previously alluded to this, we've become a a payment nation. like, you know, oh, okay, give me a 50-year mortgage or a 40-year mortgage. So, but because I can afford that payment, but that's not how you have to think about home ownership. You have to actually think about the total debt. And so, what I tell people is the, you know, just simple math. Take your household median income times three, that is the home you can afford. And, and if you do that for the United States, for instance, that's, you know, that's not even 250k. So like it that that that tells you how far out of reality we are and then you pile on the taxes and insurance to that. I mean that's and then repairs and then Kai electricity bills are going up because of these data centers because of grid issues etc. Um, so yeah, no way. Like, and especially if you were going to buy a new home, you know what I'm hearing every day now is the poor people I tried to warn who bought a home in a new home subdivision and they're the only people there or uh the people sold the rest of the homes to a rental company and so now they're surrounded by renters. I mean, these are the or it's shoddy construction. I mean, that's another big thing that's happening. But no, I wouldn't I would wait. I would and I believe me I I now if you have all the money in the world, you have a year of reserves, um you this is your forever home that you're going to be there for the next 20 years, that's a whole different conversation. But if it's if you don't think you're going to be there for two, you know, two to five years, no way. Just rent, you know, um short-term tea bill and chill, whatever. like just you know just b your time because this market is in if you go to any banking website or any like uh where where they teach you about you know financial literacy they're always going to say your housing should never be more than 30% of your income yet that's not how they lend Kai not anymore that's not how they lend >> yeah well you can't anymore like with affordability like you can't as you said like try doing that times your what is your medium house income times three as you said like >> if you get to 300,000 you're you're in a lucky position but what can you buy for 300,000 if the average home price was what we saw in the case shill was 340 I think >> well that's an index but it's so it's an so but act like NARS uh last uh I think was 420 so >> home price index yeah 441.5 is the home price index whatever that means so fantastic melody like I could chat with you for hours I I enjoy these conversations because it's really like is a different conversation here on our channel. Um, and it just shows that the cracks are widening tremendously and we should all be worried where this is headed quite literally. So, um, Melody, like where can audience follow more of your work? >> Sure. Um, I encourage everyone to sign up for at least the free version of the Substack because I put a lot of data in, um, the top section above the payw wall. That's M3 Melody Substack and then on X Twitter at M3_Melody. >> Fantastic. Melody, thank you so much for your time. It was great catching up as always. We'll have to do this before the year is over to see where we're at because then we'll have a bit more input from the Fed as well. We'll see where mortgage rates are headed as well. So, lots to talk about. Thank you so much, Melody. Really appreciate your time. And everybody else, thank you so much for tuning in. If you're in the US, would you be buying a house right now? Have you been trying to sell a house? I'm I'm curious what your experiences. Please put that down below so we can include that in our conversation with Melody next time as well. Thank you so much for tuning in. Don't for don't forget to hit that like and subscribe button. A, we appreciate the support and B, it helps us out with the algorithm tremendously as well. Thank you so much. It means a lot. And uh don't let the emotions run your investments for you. Take care out there.