#787: Why The Housing Market Is Rigged To Fail with Melody Wright

**SPEAKER_1** (0:07)
You've had a dynamic where money's become freer than free.

**Melody Wright** (0:10)
When you talk about a Fed just going nuts, all the central banks going nuts.

**SPEAKER_1** (0:16)
So it's all acting like safe haven.
I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In a world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bold case for Bitcoin. If you're not paying attention, you probably should be. Probably should be.

**Marty Bent** (0:37)
Melody Wright, welcome back to the show.

**Melody Wright** (0:40)
Marty, thank you for having me. It's my pleasure.

**Marty Bent** (0:43)
Well, I think we've got a lot to catch up on. Last time you were on earlier this year, you made some calls particularly around what we may see in terms of increase in foreclosures across the country in the housing market. Since then, your call seems to be pretty dead on.
You have the latest stats, you just refresh them, so I'll let you talk about them. But I think a lot of what you described may come to be in the spring of this year has come true through the summer. So what has been happening in the housing market?

**Melody Wright** (1:21)
Yeah, it was just another really disappointing spring season. So we are on now year four of a completely frozen housing market. Last year, we had the lowest sales since 1995, and we've increased population by over 20 percent since then. So that's just, it's worse. It's worse than the GFC from a sales perspective.
But also what you're now seeing and what I specifically talked about last time is that we know the housing market has been frozen. We got a little excited at the beginning of the year as rates were a little bit lower. That all changed on February 28th.
Rates moved higher and everyone said goodbye to any sort of spring selling season. We're running about, just for perspective, when you look at existing and new home sales, we're running about 2 percent ahead of next year. I mean, I'm sorry, of last year. But it's just not meaningful. I mean, this still looks like the depths of 2007, 2008 from a sales perspective. But because you have such low sales and just a complete, we've had massive government intervention which stopped any foreclosure sales, those home prices have just stayed high and have stayed sticky because the only people transacting are the ones that can transact, which the National Association of Realtors said in July, that homes priced above a million increase 14 percent year over year. Your typical American can afford about a $300,000 home, and only 8 percent of people in the country can afford a home over a million dollars. So that pushing down of any of the default activity has just left prices floating at this point. Now, that's changing because these things in the housing market just takes so incredibly long to play out. But in April of last year, they put guardrails on the loss mitigation program for FHA. That didn't go in effect till October because of the way the rules work. An additional relief that borrowers could get, those won't fully run out of room until the end of this year. But you're already starting to see people fail out of those plans, which is why I knew that we would have an increase foreclosure referral rate, increase in foreclosures by June. June is typically when you start to see default increase. You come out of the spring season where you have your bonus payouts, your tax refunds. This year, we thought tax refunds would be huge, but we did not. Typically, in mortgage, you see a seasonal improvement and delinquency. In the spring, we did not see that. It's worse, Marty, than even I thought, when I was talking to you back in the early spring.
Now, what's happening is you're going to start seeing those foreclosure sales. My clients are seeing the first foreclosures they've seen since 2019 That's insane. Just for perspective, in June, foreclosures referrals, that's where you refer to an attorney for the process, because attorneys handle it in all 50 states, even if it's not a judicial state, we're up 39 percent year-over-year. July just got published today. They're up 22.84 percent year-over-year. You have foreclosure sales up 14 percent year-over-year this month. Now, once those sales get registered, that's going to impact your case shiller.
Today, we got case shiller out. Know that that is for basically, I think that was probably June data, and they use a three-month moving average. We're not going to see what I'm seeing right now, but it's going to impact case shiller until probably Q1, just because of how delayed that series is. Let me give you an example. A client foreclosure sale happened on July 28th.