Buying a House in 2025? Listen First, Buy Later (Uncut) 02-28-2025

Buying a House in 2025? Listen First, Buy Later | Melody Wright

If you actually look at 2023 and 2024, they’re almost mirror images of themselves in terms of home sales. But if, you know, for someone like me, who is an analyst studying it, that’s hard to believe, right? Because it was just so much drama around the housing market and ups and downs and swings in the mainstream media, you would have thought, you know, there was so much going on, but in reality, nothing was going on. Home prices are too high and people simply cannot afford.

Hello, and welcome to Soar Financially, a channel where we discuss the macro to understand the micro. My name is Kai Hoffman. I’m the Etjair mining guy over on X and of course, your host of this channel.

And I’m really looking forward to a very special conversation today. It’s with Melody Wright. She’s the author and the brain behind M3 Melody’s Substack.

And we’re going to talk about real estate, primarily US real estate. It’s a topic we haven’t really tackled on this channel. We’ve touched on it a little bit with Ted Oakley the other day, but it’s time to dive deep.

We got some interesting numbers out of, you know, we got some interesting numbers today on new house sales and new house inventories and home inventories. So we’ll dive a little deeper, scratch on the surface and see what’s underneath that. How strong, how healthy is the market? What are the opportunities? You might remember that we’ve been talking about real estate a little while ago when I was talking about Airbnb inventory hitting the market.

I’m curious where we stand on that. Like how fragile is the real estate market? So we’ll talk with Melody about that. But before I switch over to my guest, our regulars know that, hit that like and subscribe button.

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Now, Melody, it’s a great pleasure to have you on the program. Thank you so much for joining us. Thank you so much for having me.

It’s my pleasure. Yeah, I’m really looking forward to this. As I mentioned to you before hitting the record button, real estate is like a market I don’t, I know very little about in comparison to other topics potentially.

So I’m really looking forward to getting educated together with my audience here. And just excited, quite honestly. Melody, maybe we’ll just start at the top here.

Like, okay, very, very simple question. Like how healthy is the housing market? And since I’m from Germany, I’m going to ask you housing versus real estate. Is there a difference? I think it probably depends on who’s talking about it.

But you know, housing as kind of as a percent of gross domestic product, our GDP is anywhere from 16 to 20%. Because that’s going to include like your building products, and things like that. And then when we use the word real estate, we’re often just talking about the transaction of selling or buying homes or commercial real estate property.

So you know, there’s a little bit of difference, but sometimes they’re used interchangeably. Okay, I was struggling with that as a German, like foreign language, housing, real estate, like, what is it? So huge industry, because if you look at, you know, one of the things that I’ve noticed, and we’ll get into it. But, you know, when I drive around and look at sites, new build sites here in the United States, you just see all this industry around them, you see food trucks, you see people advertising pools to put in, you see people advertising the nursery that they hope their little kids are going to go to.

So there’s just so much industry around real estate. And that’s really what they mean by housing. No, no, I appreciate that.

Thanks for clarifying is like, again, as a German, English as a foreign language, sometimes you stumble over words where he’s like, doesn’t it mean the same thing? Right? Right. No, but let’s jump into the topic here. Like, Melody, how healthy is the real estate market, the housing market in the US right now? Well, yeah, it’s, it’s, it’s on his deathbed at the moment.

That’s how unhealthy it is. And just to give you perspective throughout this conversation today, I’m going to be referencing new homes and existing homes. And so existing homes are kind of like those used homes that, you know, they, they were built some time ago and they get they get sold out into the market.

And then what we have right now in the US is a glut of new homes being built the highest that we’ve seen in inventory since 2007. And when they’re all said and done, it’s going to far surpass the peak that we saw previously. And so the health of the market right now is, as I said, it’s on life support.

If that the existing home market was the worst we’ve seen in 30 years. And so we have just reached peak unaffordability. There was a lot of run up in, you know, just post COVID and you saw a ton of speculation enter the market.

And that had really, you know, that had been going on since really the late 90s. And then in 2008, during that crisis, we kind of had a pause. And this is how I’m actually starting to think about it as one long cycle.

But that speculation bug, it never really got dampened during the GFC because there weren’t, there wasn’t a lot of accountability and the banks got billed out. Everybody got billed out. Nobody went to jail.

And so here in the United States, we were watching television shows about fixing and flipping properties. And everybody was looking around, realizing that their paycheck just wasn’t going that far anymore. While many people in administration, and this goes far back, you know, even before this, before Biden, think about 2015, 2016, everybody was saying that, you know, everything was great in the economy and in the labor market.

But in reality, you just continually felt like your wages were not keeping up. And so people were looking out all just to find something they could do to ensure that they could make enough money for retirement, because it didn’t look like it was going to happen in the traditional way. And so everyone got addicted to what we call these fix and flip shows, which is just where people would go out, buy homes, used homes, fix them up, and then sell them back out for a profit.

And then what you had post COVID is you had everybody get involved and they weren’t just buying up used homes anymore. They were actually building new homes just for speculation. And so what you basically have is a whole bunch of unsophisticated investors piling in into short term rental.

Some of you may know it by Airbnb or Vacasa. And they really got over their skis. And so in the US, everyone talked about a housing shortage.

In reality, we have more housing per capita than we ever have. And because we also have that multifamily coming on, which are apartments and things like that, as well as we have the aging demographics of the boomers who between now and 23rd, 2035, 15.6 million of them will be leaving us and they own most of the homes in the United States. So there’s a lot going on, Kai.

But generally, the market is in very bad shape. And I’ll stop there. And then we can talk about the numbers that we got today, if you’d like.

Yeah, no, maybe we’ll start first. Like what’s the glue that’s holding everything together right now? Like you said, it’s barely hanging on. So it’s like something must be keeping it together.

Like, what is that? That’s a really good observation. And so what is that? Well, a lot of things. Last year, people got super excited about the stock market.

It was an election year in the US, and everybody else put pause on any decision that they had to make. So sentiment was improved last year, especially for our top 10% to 20%. And so the only sales that seem to be happening at the moment are those that can afford to buy.

And that’s why you’re seeing that median home price continue to go up, although that’s changing and starting its way down. So really, what kept the housing market, again, worst existing home market in 30 years, but what kept it from being the worst ever was that we had that top 10% getting really excited about what was going on in the stock market, and thinking, you know what, it’s all going to be okay. And also, there was a lot of hope of rate cuts.

But in September, when the Fed did cut rates and mortgage rates did not move, a lot of that hope started to dissipate. And so what I would say kept the market where it was last year was the stock market sentiment, and that what I call the rate cut hopium, is that the Fed can come in and save the day. But finally, what people understood is that mortgage rates are not controlled by the Fed, they’re controlled by the bond market.

I was going to say, I wrote that down as the next follow-up question, is really the mortgage rate. Why did it go up when the Fed cut rates? You know, me as a layman here would expect like the Fed is cutting rates, it should get cheaper to borrow money from the banks, but it didn’t. Why is that the case? Okay, so mortgage rates typically follow the 10-year treasury, which is really the world’s borrowing rate.

And they do that because although you’re taking out a 30-year mortgage in the US, you actually only hold that mortgage on average about seven years. That’s about the life cycle of a loan. And so we follow those rates.

And the 10-year treasury had a little something to say to Jay Powell after he cut rates. And that, of course, is controlled by the bond market. And there’s a lot going on there.

And anybody that tells you that they know exactly what’s happening right now, they’re not being honest. But you have a lot of themes. You have themes like certain countries aren’t buying as many of our bonds anymore.

They’re kind of holding back. Now, a lot of people will point and say, well, still China is getting them through the back door and things like that. But I think that what happened when essentially Russia and Ukraine, that conflict started and we seized those Russian assets, our foreign holders said, you know what, this doesn’t look so hot.

And so you’ve got less foreign participation in the bond market. And then at the same time, you have the bond vigilantes that may be kind of throwing their weight around. And then there are those that believe that inflation is coming back.

But whatever the case, that 10-year treasury rate has been very sticky. Now, we’ve seen some recent moves in the past two days, which has made mortgage rates come down a little bit. So we’re going to watch it from here.

But in reality, I think mortgage rates are never going to get down to where they were or where they need to be to come in and rescue the mortgage market in the way that folks are hoping. And one other thing I’d like to mention, Kai, is that another reason those mortgage rates went down is because the Fed was buying mortgage-backed securities. And when they did that, that is really what forced those rates so low because of that appetite.

And so the spread tightened between the 10-year mortgage-backed securities. So it’s very unlikely that the Fed’s going to come back and do that again because it causes inflation, that everybody understands that now. So it’s just unlikely we’re going to see the kind of mortgage rates that could come in and just save this market by themselves.

When you mentioned the Fed bought mortgage-backed bonds or bonds here, that was back in 2008, 2009 during the global financial crisis, correct? And then they bought them during COVID as well. And they went bananas buying them. I mean, way more.

And it is, honestly, you can just see it. You can see them buying those bonds and the strength in the housing market. And so it’s unlikely that would happen again.

It can’t happen again. The market is already like, what do you call it? It’s off-kilter. It’s not balanced anymore.

It’s unhealthy. It’s completely unhealthy. Unhealthy, exactly.

It’s screwed. Looking at the CNBC headline here, it says, mortgage rates dropped to lowest, and then I read next, since mid-December, but demand still falls short. Okay, it sounded interesting, the first four or five words.

And then it’s like, since mid-December. I was like, hmm, what are we trying to create here with this headline? Exactly. It’s like, since mid-December, that’s six weeks ago.

Why should we be excited? And we could talk maybe momentum in the housing market in general, how quickly does it react to something? And the reason I’m asking is because I spoke to a mortgage broker the other day, for personal interest, about acquiring an apartment here. We’ll get to the apartment side in a minute. But he says whenever it dips, you get an influx of calls, of course.

So I’m asking you, what’s the momentum in the housing market here? When you see a dip, when you see the lowest mortgage rate since mid-December, what do you expect to happen? Nothing. But let me tell you, so rate cut hopium is, if you actually look at 2023 and 2024, they’re almost mirror images of themselves in terms of home sales. But for someone like me, who is an analyst studying it, that’s hard to believe, right? Because there was just so much drama around the housing market and ups and downs and swings in the mainstream media.

You would have thought there was so much going on, but in reality, nothing was going on. Home prices are too high and people simply cannot afford. So what’s changing is that top 20%, and even those that are sitting on homes, get excited when they hear that rates are coming down because they believe that there’s going to be more demand.

But now what’s happening is the people that could have sat on those homes, those second homes, third homes, those rental properties, those short-term rental properties, they kind of held onto them and did everything else they could. They went to try to find leverage somewhere else last year, but now they have to sell. As well as we’ve had some disasters in this country, and there are many of those folks, and those disasters did not have insurance.

And so what you’re now seeing is inventory racing to market or listings for sale increasing exponentially because people have to offload these properties. So those tiny little moves in interest rates have nothing to do with the story. This is going to be about distress in 2025, motivation, meaning, oh, I may need to sell this in the next couple of years.

People are going to be looking at their neighbors. They’re going to be looking at those for sale signs increasing, and they’re going to list. And so what we’re going to see in the spring is a ton of inventory.

But those headlines, those tiny rate moves, that does not move the needle. Yeah. In the end, it was like 0.05 points.

They have to have something to say. Instead of doing deep analysis, they have to come up with some headline. I was just shaking my head.

Again, I don’t follow the market as closely as you do, but I was reading it like, oh, yeah, mortgage rates dropped from 6.93 to 6.88. And I was like, all right, try again. You know, try it again to excite me. Yeah.

Really stupid question that popped in my head. You mentioned the seven-year cycle for a mortgage. And I’m looking at the 30-year mortgage rate and the 15-year mortgage rate.

Why seven years? What’s so special about seven years? And why not just finance with a 15-year and get a lower rate? Oh, I wish. We’re so poor in the United States. We talk about being so rich.

If you watch influencers, media, whatever, everybody thinks they’re a lot richer than they are, but they can’t even qualify for that 15-year because they don’t have enough down payment. And so they simply cannot qualify. That would make the most logical sense.

But what happens is because we’re a nation in slave to debt in the United States is that people don’t look at what they actually can afford or the ability to repay. They look at the payment they can afford. And so if the payment looks okay.

And so that’s why we’re doing things for those that are in distress right now. We’re doing a 40-year modification, low modification, because it’s just about making that payment affordable. And most people can’t qualify, which is just insanity.

Yeah, it’s interesting. I think I even heard about 50-year mortgages as well. Well, they’re talking 100-year.

I mean, there’s a lot of crazy talk out there. At what point does it get unrealistic? I know I can pay back a 100-year mortgage. I’m pretty sure of that.

Science, yes, is great, but I don’t think we’re that far yet. In all honesty, 30 years. The U.S. is somewhat unique when you look across the world with the 30-year mortgage.

And it very much was introduced as a financing mechanism, not only for the government, but to theoretically help home ownership. But I think 30 years is also too long. No, for a fixed rate.

In Germany, it’s usual 10, 15, 20, I think. Everybody pushes you towards 10 anyway. Right.

So, yeah, everybody pushes you to 30. Here in the U.S., when in reality, you should, you know, that 15 would be probably even a little too long, but still. Well, Melody, there’s so many avenues we could take now.

But you mentioned the numbers that came out today. Maybe we’ll start there. I know you’re itching to talk about the Airbnb economy, and me too, to learn more about it.

But we got to talk about the numbers that came out today. Catch us up. What do they mean? And what does that tell you about the market right now? Yeah.

So today we got new home sales. And so just as a reminder of what I was saying, is that we have seen more building than we’ve seen since the great financial crisis on those new homes. We’re also building things called built for rent.

So not only are we building new homes to sell, we’re building them to rent. And so the builders, as they do, and as they did in the last cycle, got very excited about building. And you’ll hear in mainstream media that, you know, it was really just like Death Valley between the last crisis and 2020 in terms of building.

And so we need all this supply. But those making that argument aren’t looking at our demographics at all. And so the builders went crazy.

In 2023, I went out on the road, I drove over 10,000 miles here in the United States and could see that they had overbuilt. And I got back and started talking about it. People called me crazy because unfortunately, it’s just the way things are reported.

You have small regional builders that people really weren’t taking into consideration, but people were building on every empty plot of land. And so that’s the backdrop for today’s results. So what happened? Last year, the builders were able to get market share because they had a cheaper product.

And you can actually look at what actually increased in sales last year. And that was their below 400,000 median price product. And so they were able to make it last year.

And they got a little, they got real excited at the end of last year, thinking about those rate cuts, thinking that this administration was going to be, you know, nice to them, was going to loosen regulations and maybe make it cheaper for them to build. But lo and behold, you know, the first thing out of this new administration’s mouth is tariffs, which would impact the housing market significantly for new homes, as well as, you know, mass deportations, which the labor that has really been out there building these new homes has been that immigrant labor. So that’s the backdrop.

So today, just as kind of everybody got a little excited at the end of the year, and but month over month sales for the builders were flat. Okay, now I talk about non seasonally adjusted numbers, because those seasonal adjustments in this series, they mask what’s really going on with those seasonal adjustments do is they they really tell you what’s wrong with the forecast more so than what’s happening. And so if you looked at the non seasonally, it’s flat month over month.

But this is the the month that they’re supposed to be doing really well, their season starts earlier than existing homes. So the idea is they get a lot of market share in January, February, while existing homes, they don’t really get cranking until March. And so these results were very disappointing.

Year over year, they were down almost 4%. And notably, the median home price was up again, just a unrealistic number, because there’s no way that so last two months were actually revised down, I should talk about this, this series is very volatile, but came in with a very high median price that tends to happen when those transactions are so low, but we’re probably going to see that revised as well next month. But the builder should have done, they should have knocked it out of the park, especially as we saw the existing home market really stopped dead in its tracks down 27% month over month.

This is when the builder should have stepped in and taken that market share. But they didn’t come in with a price cuts hot enough. And they had a very chilly January, which does not pretend or is not good news for the future.

Now, very, very interesting here, like you mentioned the medium house price, and we need to talk about that. And why it isn’t coming down. A controversial topic is really the immigration deportation topic as well.

If you could that include in your answer how that might be impacting like supply and demand of housing as well and new homes, existing homes, in your answer, and when you talk about the house price, in general, like what, why isn’t it coming down? Well, it’s very, I mean, it’s math, it’s the median, right? If the only people that are transacting are the millionaires, the top 20%, then that median price is going to look much higher. And you can actually see it, the National Association of Realtors and the census, they both so National Association of Realtors does the existing home sales, census does the new home sales. And you can actually go they do these deep dive schedules.

And you can actually see where most of their sales are. And it’s in those above a million category, which is going to bring up that median price. So in fact, if we start to get a little bit higher sales, as we get more inventory onto the market, as we start to see more distress from layoffs, we’re hearing about these government layoffs and things like that.

That is when we’re actually going to start to see that median price go down. And so I’m actually looking forward to more transactions, which will give us better price discovery. Now, moving on to the immigration topic, I mean, this is very complicated.

So on the one hand, you know, that cheap labor made it possible to build, you know, more homes than we’ve seen since 2007. We’ve got about nine months of supply right now. And guys, I can tell you, based on what I’ve seen on the road, that’s a very low estimate.

There’s a lot more of that supply out there. So that cheap labor, they were able to really churn out those houses. Now, what happens when that labor goes away? Theoretically, homes would become costlier.

But on the other hand, you had a lot of that immigrant labor in subsidized housing. So for sanctuary cities, different locations where essentially they were getting their housing costs, either for free, or they weren’t paying anything, or it was being significantly subsidized. And so if we do see deportations, significant ones, then you’re actually going to have more supply on the market.

And you know, I think this is probably more significant than many folks are thinking. Now, that is very interesting, because you brought in government contracts and very different things, especially during crises. I’ve been hearing on the podcast, I’ve been listening to ridiculous numbers, like $25,000 for six, seven bedroom apartments, because there is no availability in general.

And the government is just gobbling that up and paying it. That’s right. It’s insane.

Now, which brings me a bit to the Airbnb economy. And I told you, I’m listening to a certain podcast from time to time when I find the time, like Graham Stephan, he’s doing an interesting Iced Coffee Hour, and he has influencers and YouTube personalities on the podcast. And they talk about other characters that they’re in touch with.

And one of them was a 24 year old who has an $80 million real estate portfolio. How does that work? And when I say that, what goes through your mind? And please be honest. I mean, it terrifies me.

I mean, it terrifies me, because even as annoying as some of these younger bros, real estate bros out there that are, you know, I have an $80 million. I mean, what we know is going to happen is, you know, they’re going to get wiped out. And it’s going to take them 10 years to recover if they ever do.

I mean, unfortunately, you know, we saw many cases during the GFC that folks never recovered. So what do I think about that? I think it’s a lost generation that, you know, they looked around, there wasn’t a lot of ways to make money. And so they all started watching YouTube, these get rich quick schemes, with no understanding of the market, they would then go into a lender.

And the lender would say to them, hey, we’re using this program. It tells me that if you buy this house, and you do Airbnb, you’re going to get $600 a night, and you’re going to be occupied 55% of the year. Well, most people didn’t understand that those programs were built on COVID error expectations of travel, are just the most positive way you could possibly look at it.

And so you had a lot of underwriting of loans. So the lender would say, hey, don’t just buy one, buy 10. Come on, don’t be silly.

And so the whole industry was basically saying, take on leverage, take on leverage. You know, if he had an $80 million real estate portfolio, free and clear, that’d be a whole different story. But we know that’s not the case.

And unfortunately, there were just so many people out there pushing these narratives, pushing people to invest. And I’ve seen time and time again, where they did it without even going to visit the property, they just bought it from Facebook. And you know, now they’re not cash flowing because tourism is down, or you know, insurance is up, property taxes are up.

And so they bought with very thin margins if they existed in the first place. But now there’s nothing there. And we’ve had two major disasters in the United States, where in areas where there was significant short term rental volume, and that’s going to have a huge impact to those owners.

Yeah, absolutely. Like, it’s an interesting economy and how that works. But as you said, like, it’s all built on sand.

Like, as a 24 year old, how can you finance like mostly 100% of your purchasing price? Like, which brings me to another topic as well, like the the medium home price versus like rent. And that relationship, like I told you, like I was speaking to a mortgage broker, like they’re building some new apartment buildings behind us here. And I was like, let’s maybe for the home office, let’s look into it and see if it makes financial sense.

But my mortgage rate doesn’t even cover like, is way higher than the rent income. Right? So I’m curious, like, what’s the situation in the US? Like, is it even feasible to be an investor in real estate right now? I don’t think so. It’s not feasible.

But you know, so what in the United States right now, it used to be that it was cheaper to own than rent. I remember because as a young professional, I moved a lot and people are always yelling at me about not buying a house. And I’m like, I don’t know where I’m gonna live.

I don’t want to buy a house. But that has flipped. And so in the US now, it is actually cheaper to rent.

And it’s getting cheaper, by the way, because people that realize that they realize that people were not going to be able to buy, they went and built the most multifamily we’ve seen in the United States or apartments, multifamily equals apartments since the 70s. And we don’t have the demographics to support it. And so now what’s happening is you now have that those apartments are actually competing for this housing stock, these new homes, these existing homes, because it’s much cheaper to rent.

And then on top of that, because there is so much supply, you can walk into one of these apartment complexes and say, I don’t like your rent, I want a discount. And they’ll say, okay, well, we’re not going to give you a discount, but we might give you three months free. Because that’s a way they can keep that top line price, not really admit that they’re not getting that full price.

And so the apartment situation is just insane in the United States right now. In Vancouver, it’s the complete opposite, like really recent recent stories, like there was a bidding war for an apartment to rent. Like, I think it listed for 2600 Canadian a month, I’m not sure the specifics of all of it, but it went for 2850 or something, because it was the highest bid.

So completely different. Like, that’s why I find that usually interesting. And I just through the episode, like I thought it like the podcast episode I was listening to and into chat GPT, I have it summarized, so I can get the points.

And they were talking about some niche strategies for cash flow. And I thought it was hugely interesting, right? One is rent by room, co living, Airbnb, short term rentals, furnished rentals, residential assisted living, accessory dwelling units, which is an interesting one. And built to rent communities.

Yes. Interesting models. Like, yeah, and those so those ADUs just to me are the saddest thing.

I mean, basically what it is, we have plenty of inventory, we have 15 million vacant homes in the United States. A lot of those are, you know, vacation rental, second homes, third homes, fourth homes, but we have a lot of empty inventory already. And then you pile on all of the short term rental, all the people that went out, for instance, in Austin, there’s over 15,000 Airbnbs.

I mean, that doesn’t even make sense. So there’s a whole bunch of strategies out there, like the 80. So my point is, sorry, is that we have a ton of inventory, but people still felt like they needed to build these ADUs, or these dwelling units, these tiny homes on properties, and rent them out, because people could not afford to rent any of the existing inventory.

So that’s one of those that you were talking about. But pretty soon, I think those are going to go away, except for families that have to consolidate. Like mom and the grandchildren, you know, grandparents, the parents and the children will all be living together.

We’re going to see that household size get bigger just because of inflation. And then the built to rent, those actually, I was just mentioning those. They’re basically, they look like just your single family starter home, but they’re renting them out.

They’re building them new to rent them out. And this was because everybody thought that if you can’t buy a home, then you’re going to want to rent something that looks like the home that you could have bought. Another topic they touched on is really creative financing ideas.

Oh, yes. And that’s way out of my area of expertise, but FHA and 203k loans, or 203k loans is one. Seller financing is an interesting one, which to me doesn’t make any sense at all.

Like it just really decreases the tax burden on the sellers, like you don’t have to pay tax all at once, I get that part. But why would you sell something that’s worth, I don’t know, let’s say a million dollars to somebody and only take in, for math’s sake, $1,000 a month in payment, but you don’t own the house anymore? Yes, you might have actually obligation to the title, it’s technical. But it seems like the market is getting more and more creative to cope with what is about to happen.

Is that something you’re seeing? Yeah. And I think that it has, and we don’t know about it yet, because there’s very little reporting. So last year, I went to a private note conference.

And so this is a conference of people that are only doing seller financing, something we call sub twos, don’t get me started on that. Or just a private note where they themselves go and offer to lend money for someone to buy. Because as inflation has increased, as those rates got higher, people were getting creative.

And so that seller financing, I think, is much bigger than people realize. In 2023, it was like, I think 23, I want to say, I don’t want to say the B word, but I think it was 23 billion. But we don’t have a way to track any of this, how much of this is happening.

But anecdotally, by going to those Facebook groups, the big influencers that talk about this stuff, this market is much bigger than anyone knows. And I think that that is going to, as we enter into the default cycle, that is going to be very problematic. Because there has been a lot of creative financing, as well as our government in the US has backed subprime.

That’s that FHA 203k program you were talking about. But just generally, FHA, you don’t have to have a high credit score, you don’t have to have a high down payment. And so in essence, it has taken the place of the subprime of the previous cycle, it’s just that it’s theoretically backed by our government, which I could talk to you forever Kai about how that doesn’t really work, because they never pay their claims the way that they say they’re going to.

And so it just becomes a real for the people that originate or service these loans, it’s a real cost burden. But people are just now starting to figure that out. Because most people weren’t doing that type of lending and originating and servicing last cycle, my company happened to be one of them that did.

And we ended up in bankruptcy in 2012. Another creative version I’ve heard, and I’m not even sure that’s possible in Germany or in Europe is so you take over somebody’s mortgage. That’s the sub two.

Yeah. That’s the sub two. Okay.

Well, it’s not possible here either, but they’re doing it. I mean, so you’re not supposed to do it. In every contract, there’s a due on sale clause that if you sell that property, then it would be called as due and owing.

We’ve just been in such a speculative cycle that people don’t really know the scale of how this is happening. But once the banks figure it out, are they are in need of liquidity? They will call that power on sale clause. But there are ways you could potentially do it here that are legal, but a lot of people are not doing it that way.

And we’re going to see some gremlins here in the next couple of years. Yeah. I can imagine somebody buys a property off market from somebody, just pays them the monthly mortgage rate so they continue paying it.

But then that buyer defaults. Yeah, we can take the buyer defaults and the person that’s on the note is the borrower, the original theoretical homeowner, right? And so they will be the ones who lose the property as that investor walks away. So it’s very dangerous and very risky.

Yeah. The conference you talked about sounded like the guest on the show was also there, Brandon Turner. I’m curious if that name rings a bell because he was the guest who was on that program that I was listening to.

Nathan Turner is who runs the DME note conference in Nashville. So I don’t know if they’re related or… I don’t know. It was interesting.

It was an interesting podcast, right? About opportunities in general. They were talking to also commercial real estate, which we can get into. I’m just curious, where’s opportunity in the real estate market right now? There’s always a little niche probably you can find, but warehouses apparently is one.

I’m curious what you think. It’s probably market to market. It’s different, of course.

I’m sure real estate in Washington DC is more lucrative for some than maybe down in Florida still. Yeah. I would say right now, there’s not a lot of opportunity.

Now, there are people talking about opportunity, but I don’t think that time has come yet. We need to be in a little bit more distress. So that time could be in the than the rule.

And of course, there’ll be people that do their homework, figure this out, might find exactly that place to invest, but there’s more danger out there. Think about, for instance, let’s take the investor who wants to buy one of those million dollar plots in Altadena in Los Angeles. Well, they don’t know how many years it’s going to take to get the infrastructure rebuilt there to remove the toxic waste.

And so they could have that cash outlay and not get any cash flow for 3 to 5 to 10 years. There are places in California right now that had fires five years ago that they have not been able to rebuild. And so it’s just a very perilous time in the market right now.

And so any opportunity is going to be an exception, and it’s going to because someone did a lot of work to figure it out. So honestly, anybody that’s wanting to invest, I would encourage them, and this is an investment advice, of course, but encourage them just to hold on because we are in a state of change right now. And until it’s very clear what that’s going to look like, I wouldn’t recommend it.

Interesting. Really interesting commentary and feedback here, Melody. One last question, maybe, and I’m a victim of that as well.

I watched way too much HGTV when I was living in Canada, and I’m never going to buy an existing home in the US after seeing all those shows. That’s insane. Whenever they rip up a wall, it doesn’t matter how old the house is, there’s something behind it that shouldn’t be there, right? But my question is more general.

The impact of HGTV on the housing market in general. Are consumers more picky? The flippers you touched on briefly probably wiped up the market at the low end, causing probably a shortage there. But maybe just on that topic, how have those flipping shows, HGTV, home remodeling shows, changed the housing market? So I think, I mean, it’s not even those shows, right? It’s also the Kardashians.

It’s also everything in our cultural is about this real estate, owning real estate, empires of real estate. And so how much of it is chicken and egg? You know what I mean? How much of it is out there that encourage this versus it’s there because this is already happening? I think that’s a good question. But I definitely think that as a culture, and honestly, I don’t want to even blame it on media.

Let’s blame it on Greenspan. Let’s blame it on easy money policy of those really ultra low rates. Meanwhile, we weren’t reinvesting back into our companies.

We were just doing share buybacks and things like that. And so I think that that really is the culprit. And mainstream media has definitely played along and, of course, added drama to this whole thing.

And it is now very dramatic. But we have we have really backed ourselves into a corner in the US. Yeah, no, absolutely.

It’s an interesting market. And as you know, it’s like real estate is not my topic. So I’m hoping we’re covering everything here.

One more topic or like buzzword I wrote down is regulatory changes. We got a new president, the White House. I think one of the examples they mentioned on the podcast as well is like they talked about regulatory changes in California in regard to ADUs, the dwelling units, just as an opportunity.

But my point is like regulatory changes. Is that something you look forward to? Is that something we should price in or look at closely? I think it’s I think it is important. But for where we are in the cycle right now, it’s a lot of much ado about nothing.

We already have all the inventory we need. We it just has to be priced appropriately and allocated appropriately. And so I’m not as interested in those regulatory changes.

I think those were a lot of promises. And then we’ll see how the states react. So you can have federal changes.

But, you know, the states and counties have that grift is how they fund most of their obligations. And so, you know, I don’t know that that’s it was a good buzzword. And maybe in the future, it’s going to have an impact.

But for the near term, I’m not as interested now. The more interesting is the closing down of the Consumer Finance Protection Bureau or the CFPB and halting that work. So what you’re actually seeing is a less friendly environment in terms of making borrowers whole or protecting them.

So we’re going to see foreclosures. We’re and it’s unless there is some kind of huge exogenous event that really impacts us as a whole. It’s unlikely they’re going to step into the mortgage market the way that they did during COVID, for instance.

And so it you know, we could actually see the great financial crisis finally play out because it has just become almost impossible to to honor contract law to, you know, to have foreclosures when people are not paying those mortgages. Yeah, no, I think you might have just given me the YouTube title as well. The great great financial crisis happening now, which is an interesting because it feels like we’ve been kicking the can down the road ever since anyway.

So we have on on very in various areas. Maybe one strong statement here from that. I like that podcast.

I’d listen to it without like thinking about that. We’re chatting, but it’s giving me a lot of good ideas to ask you and grill you on. But they made one statement.

I’m curious if you still think that’s the case. But property values in the US have always increased over a 10 year period. So if I was to buy something today, would it be worth more in 10 years? Is that still a true statement? I don’t think we know that.

I really don’t think we know that. And so when I look across, it’s just math. We can’t afford our median income is nowhere near where it needs to be to afford that median home.

And so and add on top of that. So what’s coming from a job perspective? What new jobs are coming? Okay, so we are probably going to get some manufacturing jobs. That’s going to take some time.

At the same time, we have white collar jobs being erased by AI. And at the same time, we also have those boomers who are leaving us and leaving their homes. And I’m working with several people right now helping them deal with estate planning.

And what are they doing? They’re either selling the home because they don’t want it, or they’re moving into that and selling their home. Now, that’s just going to increase at scale. Like I said, between 2025 2035 15.6 million boomers will leave us and then between 2035 and 2050 is 23 million.

And so we’ve got massive headwinds to housing. And so I would just encourage everybody don’t talk about the last 10 years. Go look at the price graph from Fred that goes back a lot farther than that.

Because I believe we are seeing changes now and what has been for the last 40 years is not going to be not, you know, at least right now. And I get anybody that’s watching what’s happening in the United States will have to say that that changes around the corner. Things are changing quickly here.

Now, I’m watching with one eye as well, like I’m not really in the market. But if there’s an opportunity, like I have a small sliver of regret, like a friend of mine, I went to high school in the US. And he asked me back in, I want to say it was 2011.

I went to business with me buy it buy a house in Las Vegas. And it was like $250,000. Like a nice, I think it was a see, that’s what I learned HGTV shows like ranch style home.

I think it was a ranch style, right? I’m not even sure why I know that. But it was like $250,000. That’s sort of the number I still have that image in my head.

I’m sure that would be worth 1.2 million right now, like or was at one point, like, I don’t know, I was recently out in Vegas, you just hold on. I mean, it, the amount of inventory that they’re building out there, if he sold it right now, he might be okay. We didn’t do it.

It was like, that’s why I mean, there’s a bit of a sliver of regret. But 1415 years ago, there was no way I was thinking about buying a home or investing property. So yeah, but here’s the thing, just wait until what we see what happens after this cycle.

Now, was there an opportunity that was missed, perhaps, but timing these things is impossible, you know, and so I honestly looking at Las Vegas, there is a ton of trouble coming there because there is so much short term rental ownership. And every boomer decided they needed a second or third home down there to short term rental, and they’re not getting cash flows. So those will be let go of faster than any other property.

A lot of California refugees will probably gobble those up, though. Well, but they’re not because and this is funny, I’m watching this very. So I’m just so you know, Kai, I’m headed out to California tomorrow.

But because I’ve been hearing a lot about this narrative, oh, they’re coming to Nashville, they’re going to Newport Beach, they’re going to Las Vegas. You’re not saying that happened in any market yet. And you got to look at the very low percentage of actual owner occupancy in California.

What you have is a lot of landlords in California. And so that distress is coming back to the landlord. It’s not you know, those primary homeowners are are fewer than you think.

And a lot of them even had second homes. And so we’ll watch but they’re not going to Vegas. So and they’re not going to any of the other cities people are saying so it’s going to be very interesting to see it play out.

But I don’t think it’s going to save any market out there. No, it’s it’s so dynamic. It’s so much fun to watch, actually, just as an outsider, because during COVID, everybody’s moving to Vegas, lower tax rates, and are just more freedom to degree in comparison to California, during the lockdowns and all interesting times like it is very interesting.

Yeah, unfortunately, we have to wrap it up now. Like I still wrote I wrote down a few topics we still need to talk about like next time, perhaps it’s like really democrat changing demographics, the labor market, how AI and house printing and like humanoids potentially impact the housing market in like 1015 years time, like lots of different interesting topics. Yes.

But in the meantime, where can we send our audience? Where can we find more of your work? Sure. So you can follow me on x Twitter at m three underscore melody me lody y, or m three melody substack. That’s where I do my newsletter I try to do every week.

And then m three melody YouTube as well. Fantastic. Now we get we do have to end on a positive note, though.

Any positive advice that you have for our listeners? Um, patience will pay off, you know, save your money, stop getting Starbucks every day, like these, this stuff will actually start to matter, pay down your debt. And if you’re in that position, and you have a job, you’re going to, you’re going to have some opportunities here in the not too distant future. Fantastic.

Awesome. Melody, thank you so much. It was a great pleasure.

Really, really engaging and fun conversation. Thank you so much. And everybody else.

Thank you so much for tuning in here to sort of financially very different discussion today with melody, right? Make sure to follow her on her substack. And I really enjoyed it. I learned a lot about the US real estate in general.

Like what what’s the situation out there? What’s happening? Should we be patient? Should we be buying? Like what’s the situation? It’s really, really interesting. If you enjoyed this episode, make sure to hit that like and subscribe button. It helps us out tremendously.

It helps us reach a wider audience. And we thank you very much for it. We’ll be back with lots more.

So stay tuned and good luck out there.