Housing in 2026: What Buyers & Investors Must Know NOW | Melody Wright
Summary
Housing Market: The guest describes a frigid U.S. housing market with existing home sales near multi-decade lows, heavy price cuts, and more sellers than buyers.
Mortgage Rates & MBS: Fannie/Freddie MBS buying has tightened spreads and nudged rates lower, but transaction volumes remain weak and the Fed does not directly control mortgage rates.
Multifamily Pressure: Apartment rents are falling with elevated vacancies and incentives amid an overbuilt multifamily pipeline, creating distress.
Homebuilding Dynamics: Builders’ rate buydowns have supported activity, but median new home prices have slipped below $400k and inventory is set to rise into spring, aiding price discovery.
Credit Tightening: A proposed 10% credit card APR cap would hit bank interest income and tighten lending, compounding already high mortgage rejections.
Delinquencies & Foreclosures: Student loan delinquencies and stricter FHA workout rules point to rising serious delinquencies and a material foreclosure wave by Q2 2026.
Institutional SFRs: A floated ban on single-family investors targets a small but locally impactful institutional segment, with a likely quiet exit path via nonprofit partnerships.
Opportunities & Risks: Distressed real estate funds are forming, with relative deals in parts of the South and West, but buyers should deeply research local employment, demographics, and ownership concentration.
Transcript
While the CPI print came in in at 2.7% within expectations, shelter has been ticking higher. And we need to break that down. What is happening in the housing market? President Trump is proposing some midterm election gifts, $200 billion mortgage back security purchases, credit card interest rate cap. How does it affect the housing market? I think it's a really, really important discussion to have. I've invited a phenomenal guest to discuss this with us today. Her name is Melody, right? Her she's M3 Melody over on Substack. phenomenal. Like I call her the real estate queen and the housing market queen. So I'm really looking forward to getting her insights because I think it's quite important. The housing market is one of the biggest, maybe the most important economic pillar in the US. And we'll break it down for you. Before I switch over to my guest, help us achieve our goal of reaching 100,000 subscribers here by the end of this quarter. We tremendously appreciate your poor support and thank you for it. So thank you so much for hitting that button. And now Melody, it is great to welcome you back on the program. It's good to see you again. Happy New Year. Good to see you. Happy New Year and thanks for having me. >> Absolutely. Yeah, you're the the queen of real estate and housing, Melody. We we have to catch up. Uh I I love our like bianual check-ins here. Um really get a good a temperature check. What is happening in the housing market? Maybe let's start at a very high level. What is the temperature in the housing market right now? >> It's chilly. It's chilly, Kai. Um, you know, we just got new home sales that have been delayed by two months and it, you know, they significantly revised down the prior months, but this the, uh, the October month looked a lot stronger. Um, but the previous months were heavily revised downward. So, um, but, you know, you look at the existing home sales, it they're just abysmal. They're the lowest uh, you know, we've seen since 1995. And, you know, we may get a little bit stronger. December sales. We'll know tomorrow. NARS going or National Association of Realtors going to report. Um, however, that's still not uh it's it's abysmal. It's basically tracking along 2008 at this point. So, it's very frigid in the housing market. You know, Red Fin has come out saying that there's a whole bunch more uh sellers than there are buyers. Uh you've got Zillow coming out and saying, you know, on over 50% of the homes, uh you've seen a 9.6 uh reduction, price cut reduction. Um so those estimates are going down. Um, you know, and you mentioned CPI, uh, apartment list came out last uh, month and said they had the, you know, they were seeing uh, year-over-year rent declines as well as kind of the highest vacancy they seen since they started tracking in 2017, which was somewhat expected because of all of that multif family that was in progress without the demographics to support it. So, right now the housing market is pretty frigid. Um, you know, we will be talking about, I'm sure, some of these announcements, um, that, you know, folks are hoping to kind of pry it loose in that spring selling season. And to be honest, I would like to see it pried loose because, uh, then we'll get actual price discovery, which is not what a lot of people are saying, but you can see it. You can see anytime that we get a little bit lower rates and we get a higher number of transactions, we tend to see lower prices. And you can see it on the builder side. they just came in um for their October reported median home price is below 400,000. Um and that's also uh backed up by what the builders have kind of announced during their earnings. So, you know, things are uh things are pretty frigid, but I'm hoping to see some things shake loose by the spring. >> Would you call it a full-blown crisis yet, or is it just a cold market? >> So, you know, crisis. Uh so um you know it's a people are delusional. The sellers are delusional. Uh it's a crisis because our young Americans can't afford homes. But you know I'm of the opinion that government needs to stay out of it if they did. We would clear the market of this speculation. Um and and those young Americans would be able to afford homes. You know, realtor.com came out and said there's three ways that we could see affordability improve in the housing market. One is rates go to 2.65%, which I'll talk about. Incomes rise over 50%. Our home prices go down by 35%. This isn't Melody, right? This is an industry magazine saying this. And you know, I think that that rates number actually, I don't think that's accurate because you've got so many rejections. um mortgage credit is not really available right now and you've got over 20% rejections on purchases. You've got over 42% rejections on mortgage refi. Both the highest in the series since the Fed has been tracking and so you know um lower rates I don't think is going to do a lot. We can if you want to pivot to right now we can talk about that NBS buying because that has effectively lowered rates since May. >> Yeah. Let's go there because President Trump uh like said like, "Well, we we're going to repurchase or purchase $200 billion worth of mortgage back securities." Maybe break that down for us. What does that mean? And you already hinted at the the ripple effects there. >> Yeah. So, I find it interesting because they've been doing it since May. Uh there was a Bloomberg ear art article in early December, you know, and just doing the math cuz so they after the great financial crisis um there was a cap put on how much they could buy of those mortgage back securities because they kept there they became like a self-eing snake when they were buying those things. And so that was really looked on uh as a big no no after the GOC. But here we all realize uh they've been doing it since May. No one would comment from Fanny May or Freddy Mack. So when Trump came out and said, you know, this is what we're going to do, he didn't really say this is what we've been doing because, you know, they've been doing they did about 50 billion in purchases. We have seen rates come down, but importantly, we have not seen sales increase. And so everybody needs to remember that the builders have been doing these permanent buy downs that effectively have lowered rates uh for the past two years. And yet, you know, they've got a lot of inventory and their sales are are not good. As much as people are going to celebrate today, they have to look at those uh downward divisions and look at what's like what the whole year would look like. And it it's not good. So, you know, they can buy this 200 billion. And what I did in my latest stack is I kind of showed two periods um in history. You know, you go back, the Fed started buying MBS mortgage back securities in 2009. uh it didn't do anything to really help the housing market. You you might have slowed things down a little bit, but not really. Um and you can see home prices continue to come down even as those rates were coming down. Uh they also uh if you think about 200 billion and and there's a possibility they they raise that cap. I mean they're getting desperate. Um, but the Fed bought over 700 billion in NBS from 2021, January 21 to when they started raising rates in March. Now, before that time period, they'd bought a whole bunch, but I'm talking about um that time period specifically, and you had mortgage rates rise. And so, everybody kind of jumping on this bandwagon like this is going to be some kind of panacea for the uh housing market. That's just not accurate. And so, you know, I'm a little excited and I'm one of the only bears that gets excited about this, Kai, to be honest. They all think I'm a little crazy. I mean, what's new? Um, but I'm excited to see mortgage rates down because I want transactions. And I think what we've seen over the past year, because we know the boomers own the majority of the homes, we've seen a lot of what my colleague John Brooks calls rage delisting where they can't get the price they want. Instead of just letting it sit there and age on market because everybody can see that and they can say, "Oh, you're desperate, aren't you? You've been this house has been on the market for 100 days." They've been delisting that. We had some of the highest numbers of delisting last year. And so, um, you know, the spring is going to be very interesting. And I think it will bring more inventory back to the market because mainstream media will tout this as, you know, things are more affordable. You're going to be able to sell this. And so I think we're going to see a lot of inventory show up in the spring. And I do think that with those lower rates, that's going to shake things loose and we're going to see those home price declines. >> Talking about lower rates, I just looked up the 30-year uh mortgage rate and it hasn't really moved since September. It's fairly flat, like 6.3% or so. And but we've had three rate cuts since. Um so it has really like kept up. Like where's the discrepancy? Like what am I missing here, Melody? >> Yeah. Well, so the Fed doesn't control mortgage rates and it just cracks me up. You know, for an extended period of time, mortgage rates would track their action, but it it they're they're independent. The bond market controls the 10-year Treasury, and that is how, you know, mortgage rates are kind of uh identified. Right now I use uh a mortgage back security live tool and so right now we're at 6.01%. Um and that's real time. We got down as low as 5.99 on Friday. Uh we shot back up to 6.06. And just for perspective, the lowest point we got last year in 24 uh was 6.08% right before the Fed did that massive cut and rates went up. So, um, you know, people that look to the Fed in terms of controlling mortgage rates, that's just that's not how it works. And so, but what happens when Fanny and Freddy or the Fed buy those mortgage back securities, what you do is you tighten the spread between the 10-year um, and those mortgage rates. And that's what's been happening. But I agree, you know, they've they've cut, I think, four times since September of last year. And uh, it did nothing for mortgage rates. But we've come down uh a little bit, you know, since uh since the beginning of 2024. I mean, sorry, 2025. Um but, you know, and I'm excited to see us at this low level. And again, I'll be the only housing bearer that's going to say that. >> No, that that's good though. There's got to be a little positivity, right? So, there's always opportunity as well. Um since we started down the path of like potential midterm election gifts, um let let's stay on that. Uh it's the credit card interest rate uh what do you call it cap um that that has been proposed 10%. It sounds great because people are drowning in debt, credit card debt. But the question is like what are the ripple effects? You talked about credit markets and credit tightening. Um what what are the effects of that because like the 30% interest rate that you get on your credit card is pretty much unchecked and unsecured, right? So what is going to change there if that really comes? >> Yeah, this is wild to me. It's hard to even process, right? Like, um, you know, I feel like we're just, you know, we're not even pretending anymore. We live in a capitalist society and I just can't even imagine the conversation with Diamond, right? Unless there was some sort of backroom deal on this because what's going to happen is lending will tighten. I mean, you know, you cut you cut and I haven't had time to do the math. um you know uh but you cut interest income which is the bread and butter of the banks or these credit card holders and I mean this this they're going to take a massive hit and you can see today and again haven't had time to dive in but I can see that JP Morgan uh took a big provision for loan loss um you know that that that means that they are already in kind of a distress situation having to take you know wipe some off of their net income come and put it in a reserve because of loan losses. So, you know, this isn't this is going to tighten lending, which is uh not going to be good for the housing market. And I find it wild, but also in a weird way uh you know, it's kind of an interesting move, right? You you pick I mean, I was like, is this Elizabeth Warren that we're seeing here? Is this Bernie Sanders? No, it's Trump. And so Trump kind of stole their platform. I think Bernie had this as proposed legislation and so but it this is wild Kai. I mean, you know, telling the banks >> you can't do X Y and Z is kind of kind of crazy. >> Well, he's trying to do the same with the defense contractors as well, right? So, Oh, yeah. >> Um, so it's not too far-fetched, but uh >> I mean, with what we've seen, right? like but historically speaking this is pretty this is pretty yeah >> it's it's unprecedented what we're seeing so which makes it fun to talk about quite quite honestly as an outsider because I said in Germany for me it's always easier to talk about something that's not happening here right >> um >> that's right >> um what I was going to come back to you you talked about rejections have already increased dramatically and I think that ties in perfectly to what we've just been talking about so do you see that number of rejections increase then even further it's not positive obviously >> it could increase further or you just see fewer applications. I mean, you know, that's the thing. It's like when you know you're going to get rejected, you don't apply. Uh, and that and that's, you know, I have family members that were one of those rejections for their refinance and they're not going to apply for some time, you know. So, we might we might see it, but really what's going to increase those uh rejections is uh we still don't have all this the delinquent student loans reporting to credit. Once we get all of those, then yeah, you're going to see more rejections. Um, but that's really what's happening right now is that you had a whole bunch of people that weren't reported as delinquent that are, you know, I say suddenly, it happened last spring, but they're now being reported as delinquent, which is a big deal. Um, in mortgage, if you have an FHA loan and you have um a del a student loan delinquency over 270 days, you're not going to be eligible for any loan modification or workout. And so, you're going to be fully responsible for that mortgage. So this is this is a big deal and we'd all been waiting those of us that track the consumer. We'd all been waiting really to see this ripple and it you know the ripples have started. >> It sounds like an unfair qu I wouldn't say unfair. It's like macab question I was to ask like how do you profit from that now? Like of course there there's investors and others sitting on the sidelines um waiting for this to maybe crash properly. Like what what's the timeline on that? Like should we be sharpening our knives for that to happen? Well, yeah. I know a lot of people who are already building funds, you know, for distressed assets because there's going to I know people who are already buying multif family because it is so distressed like uh that they're they're getting it for cheaper than the construction cost. I'm sorry. I don't mean to laugh. I mean, that's somebody's livelihood, but that's that's what's happening. And so I think you know build if you're interested in in those distressed properties and you know probably be saving uh for that that time period. So what's going to happen is now that those guardrails are on that FHA program um we're seeing delinquency rise and we're seeing serious delinquency rise. What had been happening is that anybody that was serious delinquent could keep going back to the teal for a workout um until maybe they ran out. But that's it was hard to do under that uh last program. Now they can't do that. They can go to get it one every two years. Um and they also have to do something called make trial payments which what was happening is a lot of people get that workout and they become performing and they wouldn't pay again for the next three months do the same thing not pay again. Now to be eligible for that workout you have to pay for three months in a row. And I've heard from my colleague John Kamiski who's talking to some folks that uh in servicing that think that that uh fallout rate is going to be about 50%. Which is unheard of. Kai, you know, I managed default uh back during the crisis. And I mean nothing like that um in terms of fallout to work out. So, this is a really nasty situation, which means we're going to have more material for closures by Q2 of 2026, which is also going to be a drag on home prices. >> Why do you say Q2 2026? Is there a certain like why >> is the timing? So, after the GFC, you have to wait 120 days um of delinquency before you can refer a loan to foreclosure. Well, when they're in these workouts, like let's say you sign up for one of these partial claim workouts, but you don't make your trial payment for 3 months, the serer has to wait until that time is over before they can refer you to foreclosure. And then each state has a ton of noticing requirements. Sometimes you have to do a mediation before you refer people to foreclosure. And so it just takes a ton of time for these things to flow through the system. And so we're already seeing uh them come over the dam in uh November and December. We just got December results. Um and that's just going to build and build and build. And so, you know, I we're going to see the increases. There's always a push and pull to delinquency because of those workouts, but by Q2 2026, enough are going to be coming through the pipeline that you're going to see it and it's going to have a significant impact on the market. >> Gotcha. No, I appreciate that. that um you know clarifies timing a little bit as well. Um another fun headline I just read as well like Trump wants to ban investors from purchasing single family homes. What do you make of that headline and uh what are the ramifications possibly here? >> Yeah. So I see this differently. I mean I'm I watch narratives Kai, you know, it's my background and probably literature and and history and um and you know they try they they floated this before the election. it was popular. Um, you know, really the institutionals own less than 2% of the entire market, don't get me wrong, where they have a significant presence. It's a big a big deal in those markets like Atlanta, Tampa, Charlotte, San Antonio. In Atlanta and San Antonio, you're seeing them fireell and you're seeing that impact on prices. And so, this is, you know, it makes for good uh politicking. Um, but in reality, what I think this is is a setup for an institutional bailout that they'll, you know, um, they've got two housing bills in committee. You know, it'll be very easy to add sort of a out for the institutionals where they could partner with a nonprofit, get some sort of credit if they sell at a certain price floor to nonprofits who then turn around and make those homes available in affordable housing. like, you know, let's say you make 75% of your area's household median income. These are the types of programs that they're looking at. And so I I see this uh a bit long like further out and I see this as this although all they're talking about is putting a ban on it. I guarantee you there's going to be a phase two and it may be very quiet. Uh that that's what they've been doing with the non-performing loan sales. I used to do big auctions for some of them and they've actually created this partner program specifically on FHA where they're they're selling them more quietly now. And so, you know, it probably won't be splashy headlines, but they're providing an exit strategy for the institutionals. >> Interesting. Yeah, I haven't looked at it from that uh from that angle, so we'll see how that develops, of course. Um Melody, we we talked about it a little bit already, but it's it's really inventory. Like we've talked about it before like inventory used to be tight but now it sounds like there's a lot of shadow inventory like what do we make of this shadow inventory and how do we gauge that properly like do we need to build more houses now uh or is there enough? No, I mean, no. There there might be areas, Kai, where you you need a little bit of building, but we have so many housing units in this country. You know, we have 15 million vacant homes. Um, you know, we have a lot of second, third, fourth home ownership, but we have a lot of investors that participate in the market. I mean, especially in the Northeast and on the coast, you know, you look at owner occupancy, it's very low because the boomers, you know, landlording is a an American pastime. And so, they bought those up. They did long-term rental, they did short-term rental. You know, you look at somewhere like San Diego. Um, it's just it looks like a infestation for short-term rental, like over 12,000 Airbnbs. I mean, San Diego is not that big, Kai. And they have plenty of hotels. So, um, you know, people just went nuts and, uh, we'll start to that inventory already started coming in the market, you know, in 24 and 25 and and and it's just going to continue to accumulate. And then, of course, we have the demographic silver tsunami that's coming our way, you know, where Harvard believes we're going to lose over 15 million of our boomers between 2025 and 2035. And again, they own the majority of the homes. And then, you know, Charles Schwab did a survey that said se 70% of the time, uh, people who inherit a home sell it. And so, I'm already seeing people that have passed on, you know, their homes are sitting in probate because that also takes some time and it takes some times for the kids to decide what to do. So, you know, we have plenty of inventory today. Uh, I I or last night I tweeted something. There was an article in the Wall Street Journal about all the rental incentives um in multif family and you know the Wall Street Journal used the word overbuilt and I remember when I used that word how I was roasted on on social media. I mean people called me absolutely insane. And so, you know, it all this stuff that I've been talking about for years because I was looking way ahead, not at what was listed on a multiple listing service or MLS or Zillow. I was looking at what, you know, what is actually coming. And so, you know, all this is it's playing out. These are these are themes that take a long time to uh play out and when the government gets involved and intervenes, it takes even longer. >> Yeah, I think we can all agree on that. Yeah, >> I think that's uncontested. Um, Melody, like we're trying to leave our audience with a bit of advice as well. Like if you were buying a house in 2026, like what what should you be paying attention to? Like if you had a like a a top three checklist, um, what would you do? >> Yeah. So, you know, um, I it's what people do today is not what you do, Kai. You don't go to Zillow and look at what school is in that neighborhood. I mean you really need to understand the area that you're buying into. You need to understand employment. You need to understand your demographics. Um you need to so how much are there institutional owners in your market? Um so that takes a lot of deep research and time and you know a lot of people don't want to do that amount of work but it's really important. I recommend a tool like property radar um which you can really get the behind the scenes of what's going on in a housing market. It's going to be very different than what you look at on Zillow because it's going to to show you tax lans like the people that aren't paying their taxes. It's going to show you owner leans. It's going to show you bankruptcy. It's going to show you divorces, um death. Uh and so you'll get a very different view of a market than say what you see on Zillow. So that's what I would recommend um for buyers. and and and honestly, you know, uh sign up for the free version of my Substack. I do I talk, you know, I provide a lot of data in that free version. You don't even have to pay to understand how I look at the market. But that's what I would say for people that need to buy. And if you don't have to buy, be very careful. Um because this is we are in one of those inflection po points in the market where you could get burned. No, that's very sound advice and the websites make a lot of sense checking out. So, thanks for that. Um, ju I just curious like what what cities are hot right now and which ones are cold? Like where do you get the best deal? >> The best deal I mean you're getting the best deals uh in the south. I mean, you're getting the best deals in Texas, Florida. I mean, you're getting uh so people in California might think they're deals. I don't think they're deals, but you're definitely in the West, you're also seeing um year-over-year price declines. And so, but it's still not enough. I mean, I I was talking to someone yesterday who sells houses in Nashville, and he's like, "But look how how much affordability has improved." And I'm like, "Yes, compare that to uh household median income. Compare that to history, and it's still way too expensive." And so although we've had sort of this uh very small uh improvement in affordability, it's not enough. And so that's the other thing I would say. Look at your household median income and look at your household uh and look at your median sale price. Um and you'll see how to how out of whack things are. And for perspective, you really should only be paying about 28% of your income toward housing. I mean that's that's a tried andrue kind of um metric. >> Yeah. No, that makes absolute sense. Uh 28% I think when I when I was a student, I read Donald Trump's books as well. And I think there was one takeaway I actually had from his books. He said 25% I think max is what you should be investing in. I forgot which book it is. I don't have them behind me like they're somewhere in the garage. But uh um so >> what's quickly what's fascinating is they'll say that they'll say that on the FDIC website. They'll say that on the Fanny May website, but you can look at the existing book of business for Fanny May right now, and they're at a 38% debt to income, which is where we were in 2008. Um, and so we're over that. Uh, even though everybody has done all that credit quality gospel singing, you know, that underwriting standards got tighter, that's just that's just untrue. People learned how to game the automated underwriting systems. And I've seen seen things in this cycle that I didn't even see last time in servicing, which is where you always see the works. You see what happened in the heyday once it gets into regular old mortgage servicing, you know, and when things go delinquent. >> Interesting. No, it's uh fascinating times. Um I'm trying to make, you know, trying to put money aside a little bit for a distressed asset fund. It'd be fun. Like I think I told you that before, Melody, like I had a friend reach out to I think it was 2008, 2009, and he was looking at a house in Las Vegas. It was like $150,000 and asked me if I wanted to go in with him. That was way before I'd accumulate anything, right? So, I was like, "Yeah, I can't do that. That house probably be worth $500, $600,000 now." And uh I don't think we'll see 150 again, but uh what's your expectation? What do you think we'll see again? It'll it will be uh it will so it won't match median income, but it will be that historical relationship, you know, which you know, I think you're looking at a median around 250. Um you know, that's really uh and you know, Las Vegas is they're about to get take a bath again, Kai. So you you never know. >> I'm sharpening my knives already, so I'm getting ready. >> Yeah. It's so overbuilt in Las Vegas. Yeah. >> Yeah. No, Melody, tremendously appreciate your insights. You already hinted at your Substack, but just repeat it like where can people find more of your work? >> Sure. So, my Substack, uh, M3 Melody Substack, uh, you can find me on X Twitter at M3_Melody and infrequently I post on my YouTube channel at M3 Melody YouTube. >> Fantastic, Melody. Thank you so much. I tremendously appreciate your time. It's always great to catch up. love having specialists on the show, uh, meaning market sector specialists, because it gives us a bit of a look underneath the the hood here. So, >> absolutely, >> tremendously appreciate it, Melody. Thank you so much. Can't wait to do this again about 6 months time to get another temperature check from you there. So, thank you so much. And to everybody else, thank you so much for tuning in to Soore Financially. I hope you found this conversation uh of of interest and useful, of course, as well, especially if you're buying a house here in 2026. If you haven't done so, hit that like and subscribe button. It helps us out tremendously and we want to reach our goal of 100,000 subscribers, but it's only possible with your help and we tremendously appreciate it. Thank you so much for doing that and uh take care out there. Be safe.
Housing in 2026: What Buyers & Investors Must Know NOW | Melody Wright
Summary
Transcript
While the CPI print came in in at 2.7% within expectations, shelter has been ticking higher. And we need to break that down. What is happening in the housing market? President Trump is proposing some midterm election gifts, $200 billion mortgage back security purchases, credit card interest rate cap. How does it affect the housing market? I think it's a really, really important discussion to have. I've invited a phenomenal guest to discuss this with us today. Her name is Melody, right? Her she's M3 Melody over on Substack. phenomenal. Like I call her the real estate queen and the housing market queen. So I'm really looking forward to getting her insights because I think it's quite important. The housing market is one of the biggest, maybe the most important economic pillar in the US. And we'll break it down for you. Before I switch over to my guest, help us achieve our goal of reaching 100,000 subscribers here by the end of this quarter. We tremendously appreciate your poor support and thank you for it. So thank you so much for hitting that button. And now Melody, it is great to welcome you back on the program. It's good to see you again. Happy New Year. Good to see you. Happy New Year and thanks for having me. >> Absolutely. Yeah, you're the the queen of real estate and housing, Melody. We we have to catch up. Uh I I love our like bianual check-ins here. Um really get a good a temperature check. What is happening in the housing market? Maybe let's start at a very high level. What is the temperature in the housing market right now? >> It's chilly. It's chilly, Kai. Um, you know, we just got new home sales that have been delayed by two months and it, you know, they significantly revised down the prior months, but this the, uh, the October month looked a lot stronger. Um, but the previous months were heavily revised downward. So, um, but, you know, you look at the existing home sales, it they're just abysmal. They're the lowest uh, you know, we've seen since 1995. And, you know, we may get a little bit stronger. December sales. We'll know tomorrow. NARS going or National Association of Realtors going to report. Um, however, that's still not uh it's it's abysmal. It's basically tracking along 2008 at this point. So, it's very frigid in the housing market. You know, Red Fin has come out saying that there's a whole bunch more uh sellers than there are buyers. Uh you've got Zillow coming out and saying, you know, on over 50% of the homes, uh you've seen a 9.6 uh reduction, price cut reduction. Um so those estimates are going down. Um, you know, and you mentioned CPI, uh, apartment list came out last uh, month and said they had the, you know, they were seeing uh, year-over-year rent declines as well as kind of the highest vacancy they seen since they started tracking in 2017, which was somewhat expected because of all of that multif family that was in progress without the demographics to support it. So, right now the housing market is pretty frigid. Um, you know, we will be talking about, I'm sure, some of these announcements, um, that, you know, folks are hoping to kind of pry it loose in that spring selling season. And to be honest, I would like to see it pried loose because, uh, then we'll get actual price discovery, which is not what a lot of people are saying, but you can see it. You can see anytime that we get a little bit lower rates and we get a higher number of transactions, we tend to see lower prices. And you can see it on the builder side. they just came in um for their October reported median home price is below 400,000. Um and that's also uh backed up by what the builders have kind of announced during their earnings. So, you know, things are uh things are pretty frigid, but I'm hoping to see some things shake loose by the spring. >> Would you call it a full-blown crisis yet, or is it just a cold market? >> So, you know, crisis. Uh so um you know it's a people are delusional. The sellers are delusional. Uh it's a crisis because our young Americans can't afford homes. But you know I'm of the opinion that government needs to stay out of it if they did. We would clear the market of this speculation. Um and and those young Americans would be able to afford homes. You know, realtor.com came out and said there's three ways that we could see affordability improve in the housing market. One is rates go to 2.65%, which I'll talk about. Incomes rise over 50%. Our home prices go down by 35%. This isn't Melody, right? This is an industry magazine saying this. And you know, I think that that rates number actually, I don't think that's accurate because you've got so many rejections. um mortgage credit is not really available right now and you've got over 20% rejections on purchases. You've got over 42% rejections on mortgage refi. Both the highest in the series since the Fed has been tracking and so you know um lower rates I don't think is going to do a lot. We can if you want to pivot to right now we can talk about that NBS buying because that has effectively lowered rates since May. >> Yeah. Let's go there because President Trump uh like said like, "Well, we we're going to repurchase or purchase $200 billion worth of mortgage back securities." Maybe break that down for us. What does that mean? And you already hinted at the the ripple effects there. >> Yeah. So, I find it interesting because they've been doing it since May. Uh there was a Bloomberg ear art article in early December, you know, and just doing the math cuz so they after the great financial crisis um there was a cap put on how much they could buy of those mortgage back securities because they kept there they became like a self-eing snake when they were buying those things. And so that was really looked on uh as a big no no after the GOC. But here we all realize uh they've been doing it since May. No one would comment from Fanny May or Freddy Mack. So when Trump came out and said, you know, this is what we're going to do, he didn't really say this is what we've been doing because, you know, they've been doing they did about 50 billion in purchases. We have seen rates come down, but importantly, we have not seen sales increase. And so everybody needs to remember that the builders have been doing these permanent buy downs that effectively have lowered rates uh for the past two years. And yet, you know, they've got a lot of inventory and their sales are are not good. As much as people are going to celebrate today, they have to look at those uh downward divisions and look at what's like what the whole year would look like. And it it's not good. So, you know, they can buy this 200 billion. And what I did in my latest stack is I kind of showed two periods um in history. You know, you go back, the Fed started buying MBS mortgage back securities in 2009. uh it didn't do anything to really help the housing market. You you might have slowed things down a little bit, but not really. Um and you can see home prices continue to come down even as those rates were coming down. Uh they also uh if you think about 200 billion and and there's a possibility they they raise that cap. I mean they're getting desperate. Um, but the Fed bought over 700 billion in NBS from 2021, January 21 to when they started raising rates in March. Now, before that time period, they'd bought a whole bunch, but I'm talking about um that time period specifically, and you had mortgage rates rise. And so, everybody kind of jumping on this bandwagon like this is going to be some kind of panacea for the uh housing market. That's just not accurate. And so, you know, I'm a little excited and I'm one of the only bears that gets excited about this, Kai, to be honest. They all think I'm a little crazy. I mean, what's new? Um, but I'm excited to see mortgage rates down because I want transactions. And I think what we've seen over the past year, because we know the boomers own the majority of the homes, we've seen a lot of what my colleague John Brooks calls rage delisting where they can't get the price they want. Instead of just letting it sit there and age on market because everybody can see that and they can say, "Oh, you're desperate, aren't you? You've been this house has been on the market for 100 days." They've been delisting that. We had some of the highest numbers of delisting last year. And so, um, you know, the spring is going to be very interesting. And I think it will bring more inventory back to the market because mainstream media will tout this as, you know, things are more affordable. You're going to be able to sell this. And so I think we're going to see a lot of inventory show up in the spring. And I do think that with those lower rates, that's going to shake things loose and we're going to see those home price declines. >> Talking about lower rates, I just looked up the 30-year uh mortgage rate and it hasn't really moved since September. It's fairly flat, like 6.3% or so. And but we've had three rate cuts since. Um so it has really like kept up. Like where's the discrepancy? Like what am I missing here, Melody? >> Yeah. Well, so the Fed doesn't control mortgage rates and it just cracks me up. You know, for an extended period of time, mortgage rates would track their action, but it it they're they're independent. The bond market controls the 10-year Treasury, and that is how, you know, mortgage rates are kind of uh identified. Right now I use uh a mortgage back security live tool and so right now we're at 6.01%. Um and that's real time. We got down as low as 5.99 on Friday. Uh we shot back up to 6.06. And just for perspective, the lowest point we got last year in 24 uh was 6.08% right before the Fed did that massive cut and rates went up. So, um, you know, people that look to the Fed in terms of controlling mortgage rates, that's just that's not how it works. And so, but what happens when Fanny and Freddy or the Fed buy those mortgage back securities, what you do is you tighten the spread between the 10-year um, and those mortgage rates. And that's what's been happening. But I agree, you know, they've they've cut, I think, four times since September of last year. And uh, it did nothing for mortgage rates. But we've come down uh a little bit, you know, since uh since the beginning of 2024. I mean, sorry, 2025. Um but, you know, and I'm excited to see us at this low level. And again, I'll be the only housing bearer that's going to say that. >> No, that that's good though. There's got to be a little positivity, right? So, there's always opportunity as well. Um since we started down the path of like potential midterm election gifts, um let let's stay on that. Uh it's the credit card interest rate uh what do you call it cap um that that has been proposed 10%. It sounds great because people are drowning in debt, credit card debt. But the question is like what are the ripple effects? You talked about credit markets and credit tightening. Um what what are the effects of that because like the 30% interest rate that you get on your credit card is pretty much unchecked and unsecured, right? So what is going to change there if that really comes? >> Yeah, this is wild to me. It's hard to even process, right? Like, um, you know, I feel like we're just, you know, we're not even pretending anymore. We live in a capitalist society and I just can't even imagine the conversation with Diamond, right? Unless there was some sort of backroom deal on this because what's going to happen is lending will tighten. I mean, you know, you cut you cut and I haven't had time to do the math. um you know uh but you cut interest income which is the bread and butter of the banks or these credit card holders and I mean this this they're going to take a massive hit and you can see today and again haven't had time to dive in but I can see that JP Morgan uh took a big provision for loan loss um you know that that that means that they are already in kind of a distress situation having to take you know wipe some off of their net income come and put it in a reserve because of loan losses. So, you know, this isn't this is going to tighten lending, which is uh not going to be good for the housing market. And I find it wild, but also in a weird way uh you know, it's kind of an interesting move, right? You you pick I mean, I was like, is this Elizabeth Warren that we're seeing here? Is this Bernie Sanders? No, it's Trump. And so Trump kind of stole their platform. I think Bernie had this as proposed legislation and so but it this is wild Kai. I mean, you know, telling the banks >> you can't do X Y and Z is kind of kind of crazy. >> Well, he's trying to do the same with the defense contractors as well, right? So, Oh, yeah. >> Um, so it's not too far-fetched, but uh >> I mean, with what we've seen, right? like but historically speaking this is pretty this is pretty yeah >> it's it's unprecedented what we're seeing so which makes it fun to talk about quite quite honestly as an outsider because I said in Germany for me it's always easier to talk about something that's not happening here right >> um >> that's right >> um what I was going to come back to you you talked about rejections have already increased dramatically and I think that ties in perfectly to what we've just been talking about so do you see that number of rejections increase then even further it's not positive obviously >> it could increase further or you just see fewer applications. I mean, you know, that's the thing. It's like when you know you're going to get rejected, you don't apply. Uh, and that and that's, you know, I have family members that were one of those rejections for their refinance and they're not going to apply for some time, you know. So, we might we might see it, but really what's going to increase those uh rejections is uh we still don't have all this the delinquent student loans reporting to credit. Once we get all of those, then yeah, you're going to see more rejections. Um, but that's really what's happening right now is that you had a whole bunch of people that weren't reported as delinquent that are, you know, I say suddenly, it happened last spring, but they're now being reported as delinquent, which is a big deal. Um, in mortgage, if you have an FHA loan and you have um a del a student loan delinquency over 270 days, you're not going to be eligible for any loan modification or workout. And so, you're going to be fully responsible for that mortgage. So this is this is a big deal and we'd all been waiting those of us that track the consumer. We'd all been waiting really to see this ripple and it you know the ripples have started. >> It sounds like an unfair qu I wouldn't say unfair. It's like macab question I was to ask like how do you profit from that now? Like of course there there's investors and others sitting on the sidelines um waiting for this to maybe crash properly. Like what what's the timeline on that? Like should we be sharpening our knives for that to happen? Well, yeah. I know a lot of people who are already building funds, you know, for distressed assets because there's going to I know people who are already buying multif family because it is so distressed like uh that they're they're getting it for cheaper than the construction cost. I'm sorry. I don't mean to laugh. I mean, that's somebody's livelihood, but that's that's what's happening. And so I think you know build if you're interested in in those distressed properties and you know probably be saving uh for that that time period. So what's going to happen is now that those guardrails are on that FHA program um we're seeing delinquency rise and we're seeing serious delinquency rise. What had been happening is that anybody that was serious delinquent could keep going back to the teal for a workout um until maybe they ran out. But that's it was hard to do under that uh last program. Now they can't do that. They can go to get it one every two years. Um and they also have to do something called make trial payments which what was happening is a lot of people get that workout and they become performing and they wouldn't pay again for the next three months do the same thing not pay again. Now to be eligible for that workout you have to pay for three months in a row. And I've heard from my colleague John Kamiski who's talking to some folks that uh in servicing that think that that uh fallout rate is going to be about 50%. Which is unheard of. Kai, you know, I managed default uh back during the crisis. And I mean nothing like that um in terms of fallout to work out. So, this is a really nasty situation, which means we're going to have more material for closures by Q2 of 2026, which is also going to be a drag on home prices. >> Why do you say Q2 2026? Is there a certain like why >> is the timing? So, after the GFC, you have to wait 120 days um of delinquency before you can refer a loan to foreclosure. Well, when they're in these workouts, like let's say you sign up for one of these partial claim workouts, but you don't make your trial payment for 3 months, the serer has to wait until that time is over before they can refer you to foreclosure. And then each state has a ton of noticing requirements. Sometimes you have to do a mediation before you refer people to foreclosure. And so it just takes a ton of time for these things to flow through the system. And so we're already seeing uh them come over the dam in uh November and December. We just got December results. Um and that's just going to build and build and build. And so, you know, I we're going to see the increases. There's always a push and pull to delinquency because of those workouts, but by Q2 2026, enough are going to be coming through the pipeline that you're going to see it and it's going to have a significant impact on the market. >> Gotcha. No, I appreciate that. that um you know clarifies timing a little bit as well. Um another fun headline I just read as well like Trump wants to ban investors from purchasing single family homes. What do you make of that headline and uh what are the ramifications possibly here? >> Yeah. So I see this differently. I mean I'm I watch narratives Kai, you know, it's my background and probably literature and and history and um and you know they try they they floated this before the election. it was popular. Um, you know, really the institutionals own less than 2% of the entire market, don't get me wrong, where they have a significant presence. It's a big a big deal in those markets like Atlanta, Tampa, Charlotte, San Antonio. In Atlanta and San Antonio, you're seeing them fireell and you're seeing that impact on prices. And so, this is, you know, it makes for good uh politicking. Um, but in reality, what I think this is is a setup for an institutional bailout that they'll, you know, um, they've got two housing bills in committee. You know, it'll be very easy to add sort of a out for the institutionals where they could partner with a nonprofit, get some sort of credit if they sell at a certain price floor to nonprofits who then turn around and make those homes available in affordable housing. like, you know, let's say you make 75% of your area's household median income. These are the types of programs that they're looking at. And so I I see this uh a bit long like further out and I see this as this although all they're talking about is putting a ban on it. I guarantee you there's going to be a phase two and it may be very quiet. Uh that that's what they've been doing with the non-performing loan sales. I used to do big auctions for some of them and they've actually created this partner program specifically on FHA where they're they're selling them more quietly now. And so, you know, it probably won't be splashy headlines, but they're providing an exit strategy for the institutionals. >> Interesting. Yeah, I haven't looked at it from that uh from that angle, so we'll see how that develops, of course. Um Melody, we we talked about it a little bit already, but it's it's really inventory. Like we've talked about it before like inventory used to be tight but now it sounds like there's a lot of shadow inventory like what do we make of this shadow inventory and how do we gauge that properly like do we need to build more houses now uh or is there enough? No, I mean, no. There there might be areas, Kai, where you you need a little bit of building, but we have so many housing units in this country. You know, we have 15 million vacant homes. Um, you know, we have a lot of second, third, fourth home ownership, but we have a lot of investors that participate in the market. I mean, especially in the Northeast and on the coast, you know, you look at owner occupancy, it's very low because the boomers, you know, landlording is a an American pastime. And so, they bought those up. They did long-term rental, they did short-term rental. You know, you look at somewhere like San Diego. Um, it's just it looks like a infestation for short-term rental, like over 12,000 Airbnbs. I mean, San Diego is not that big, Kai. And they have plenty of hotels. So, um, you know, people just went nuts and, uh, we'll start to that inventory already started coming in the market, you know, in 24 and 25 and and and it's just going to continue to accumulate. And then, of course, we have the demographic silver tsunami that's coming our way, you know, where Harvard believes we're going to lose over 15 million of our boomers between 2025 and 2035. And again, they own the majority of the homes. And then, you know, Charles Schwab did a survey that said se 70% of the time, uh, people who inherit a home sell it. And so, I'm already seeing people that have passed on, you know, their homes are sitting in probate because that also takes some time and it takes some times for the kids to decide what to do. So, you know, we have plenty of inventory today. Uh, I I or last night I tweeted something. There was an article in the Wall Street Journal about all the rental incentives um in multif family and you know the Wall Street Journal used the word overbuilt and I remember when I used that word how I was roasted on on social media. I mean people called me absolutely insane. And so, you know, it all this stuff that I've been talking about for years because I was looking way ahead, not at what was listed on a multiple listing service or MLS or Zillow. I was looking at what, you know, what is actually coming. And so, you know, all this is it's playing out. These are these are themes that take a long time to uh play out and when the government gets involved and intervenes, it takes even longer. >> Yeah, I think we can all agree on that. Yeah, >> I think that's uncontested. Um, Melody, like we're trying to leave our audience with a bit of advice as well. Like if you were buying a house in 2026, like what what should you be paying attention to? Like if you had a like a a top three checklist, um, what would you do? >> Yeah. So, you know, um, I it's what people do today is not what you do, Kai. You don't go to Zillow and look at what school is in that neighborhood. I mean you really need to understand the area that you're buying into. You need to understand employment. You need to understand your demographics. Um you need to so how much are there institutional owners in your market? Um so that takes a lot of deep research and time and you know a lot of people don't want to do that amount of work but it's really important. I recommend a tool like property radar um which you can really get the behind the scenes of what's going on in a housing market. It's going to be very different than what you look at on Zillow because it's going to to show you tax lans like the people that aren't paying their taxes. It's going to show you owner leans. It's going to show you bankruptcy. It's going to show you divorces, um death. Uh and so you'll get a very different view of a market than say what you see on Zillow. So that's what I would recommend um for buyers. and and and honestly, you know, uh sign up for the free version of my Substack. I do I talk, you know, I provide a lot of data in that free version. You don't even have to pay to understand how I look at the market. But that's what I would say for people that need to buy. And if you don't have to buy, be very careful. Um because this is we are in one of those inflection po points in the market where you could get burned. No, that's very sound advice and the websites make a lot of sense checking out. So, thanks for that. Um, ju I just curious like what what cities are hot right now and which ones are cold? Like where do you get the best deal? >> The best deal I mean you're getting the best deals uh in the south. I mean, you're getting the best deals in Texas, Florida. I mean, you're getting uh so people in California might think they're deals. I don't think they're deals, but you're definitely in the West, you're also seeing um year-over-year price declines. And so, but it's still not enough. I mean, I I was talking to someone yesterday who sells houses in Nashville, and he's like, "But look how how much affordability has improved." And I'm like, "Yes, compare that to uh household median income. Compare that to history, and it's still way too expensive." And so although we've had sort of this uh very small uh improvement in affordability, it's not enough. And so that's the other thing I would say. Look at your household median income and look at your household uh and look at your median sale price. Um and you'll see how to how out of whack things are. And for perspective, you really should only be paying about 28% of your income toward housing. I mean that's that's a tried andrue kind of um metric. >> Yeah. No, that makes absolute sense. Uh 28% I think when I when I was a student, I read Donald Trump's books as well. And I think there was one takeaway I actually had from his books. He said 25% I think max is what you should be investing in. I forgot which book it is. I don't have them behind me like they're somewhere in the garage. But uh um so >> what's quickly what's fascinating is they'll say that they'll say that on the FDIC website. They'll say that on the Fanny May website, but you can look at the existing book of business for Fanny May right now, and they're at a 38% debt to income, which is where we were in 2008. Um, and so we're over that. Uh, even though everybody has done all that credit quality gospel singing, you know, that underwriting standards got tighter, that's just that's just untrue. People learned how to game the automated underwriting systems. And I've seen seen things in this cycle that I didn't even see last time in servicing, which is where you always see the works. You see what happened in the heyday once it gets into regular old mortgage servicing, you know, and when things go delinquent. >> Interesting. No, it's uh fascinating times. Um I'm trying to make, you know, trying to put money aside a little bit for a distressed asset fund. It'd be fun. Like I think I told you that before, Melody, like I had a friend reach out to I think it was 2008, 2009, and he was looking at a house in Las Vegas. It was like $150,000 and asked me if I wanted to go in with him. That was way before I'd accumulate anything, right? So, I was like, "Yeah, I can't do that. That house probably be worth $500, $600,000 now." And uh I don't think we'll see 150 again, but uh what's your expectation? What do you think we'll see again? It'll it will be uh it will so it won't match median income, but it will be that historical relationship, you know, which you know, I think you're looking at a median around 250. Um you know, that's really uh and you know, Las Vegas is they're about to get take a bath again, Kai. So you you never know. >> I'm sharpening my knives already, so I'm getting ready. >> Yeah. It's so overbuilt in Las Vegas. Yeah. >> Yeah. No, Melody, tremendously appreciate your insights. You already hinted at your Substack, but just repeat it like where can people find more of your work? >> Sure. So, my Substack, uh, M3 Melody Substack, uh, you can find me on X Twitter at M3_Melody and infrequently I post on my YouTube channel at M3 Melody YouTube. >> Fantastic, Melody. Thank you so much. I tremendously appreciate your time. It's always great to catch up. love having specialists on the show, uh, meaning market sector specialists, because it gives us a bit of a look underneath the the hood here. So, >> absolutely, >> tremendously appreciate it, Melody. Thank you so much. Can't wait to do this again about 6 months time to get another temperature check from you there. So, thank you so much. And to everybody else, thank you so much for tuning in to Soore Financially. I hope you found this conversation uh of of interest and useful, of course, as well, especially if you're buying a house here in 2026. If you haven't done so, hit that like and subscribe button. It helps us out tremendously and we want to reach our goal of 100,000 subscribers, but it's only possible with your help and we tremendously appreciate it. Thank you so much for doing that and uh take care out there. Be safe.