REAL ESTATE BLOODBATH: Are We Entering a Depression?

Michael Zuber (0:01)

We need to talk about the evolving housing bloodbath, the housing depression. With interest rates going higher and seemingly higher every day, the 10-year note, if you don't know, hit a 30-year high just this morning at 5.36. It is trading off just a bit, so it's the peak. But let's talk about what the housing bloodbath is, and probably more importantly for this channel, what it is not. Again, as I've shared for at least a month now, I believe the last six months of 2026 and probably January of 2027 are going to be the worst, the hardest, the weakest, the shittiest, the whatever you want to call it of this four year cycle. It is already painful, and it frankly is going to get worse for some people. So again, let's talk about what the housing bloodbath is and isn't. One of the things you will undoubtedly see in the next, I'm guessing, 48 hours is more and more people talking about foreclosures, bank repossessions being up 42%.

Now, is this foreclosure increase significant? Sure, on a percentage basis. But is it something to yawn about on a absolute basis? Of course it is. Folks, for anybody out there that is trying to paint the picture that last month was the same as the GFC, or dare I say worse than the GFC, let's give you just one fact. While last month it was up 42% on a percentage basis, it totaled, the grand total was $5,780.

Now, for some of you, let's say $6,000, let's round up. $6,000 might seem like a lot. Well, for anybody telling you that that is worse than the GFC, they're insane. In the GFC, we were foreclosing upwards of $250,000 a month.

Folks, $6,000 is about 2% of what we were doing in the GFC. So, the housing bloodbath that I do believe is occurring is not happening in foreclosures. That is false. That is wrong. But what is happening? Well, I think we can go to mortgage demand. There are so many stats I've collected for you today. Again, higher rates mean that people are less active, right? Less approvals, less demand. Weekly demand for home purchases, down 2%. That's week on week. Down 15, one five, year on year. You think that's bad. Refi, refinance says, hold my beer. Refizer down 8% week on week.

56, 56% year on year. So the housing bloodbath is clearly occurring for your mortgage broker, refinance professionals, anybody in that line of business. With refinances being down 56%, that is extremely significant. If you are in the lumber business, I don't know if you've seen this, shout out the uneducated economist, I'm sure he's covered it. But I saw a note on CNBC that lumber, lumber is at a two year low. Again, makes complete sense, right? Demand is down, home builders are pulling back, they're not building on spec anymore, they're just building to contract. So lumber is at a two year low. How about Mike Simonson? Mike Simonson does a weekly update, which I read nearly every week. What is occurring with active inventory? Inventory is up to 1.14 million, that is 4.4 percent. We are really moving and grooving on active inventory. New listings, again, what is mom and dad doing? Well, they're not listing as much. 78k, that is down 1 percent year on year. How about pendings? Again, you don't think interest rates matter, you don't think there's a bloodbath in transactions. 69k, down 10.5 percent. Folks, mortgage demand is a leading indicator, it is collapsing. Pendings is your next indicator. Then will be closings. And then finally, price cuts. Price cuts are increasing. Roughly 43 percent, roughly, I rounded up, 43 percent of listings have had at least one price cut. This is what is going on. Now, to the good news. We are in a housing bloodbath. Transactions are down, inventory is up, motivation is up. And I want to share a story with you that you can actually go back and watch. This was a friend of the channel, Jacob. It just went out yesterday. I want to get the title of the video. The title of the video is Home Sellers Panic. And I want to tell you what Jacob did. So Jacob is an out-of-state investor. He lives in Southern California, and he invests where he used to live in Minneapolis, Minnesota. Jacob has a very, very tight buy box. He knows what he's doing. He knew that the inventory is usually between 30 and 40 active listings. It is now blown out to 80 active listings. Jacob has been tracking this one particular townhouse for a long time. It was originally listed at 310

This particular house had all the right, all the right wrong problems. Jacob says this house smelled like wet dog. Why is that important? Well, not many buyers in this market are going to want to step into a house that smells like wet dog. Also, it should be noted that the house needed some love and attention. New flooring, paint, things of that nature. So what did Jacob do? Well, Jacob did what people in my community do. He tracked it. He saw a price drop from 310 to 290 and then 280 So what does Jacob do? He takes a shot. I think he said his first offer was 260 The seller said no.