The Housing Crisis Already Started. The Data Just Hasn’t Caught Up w/ Melody Wright

You cannot trust salesmen to give you accurate information and so you're gonna have to do a little work if you want to protect yourself and your financial well-being. You cannot use Zillow, Redfin, any of these guys to truly make decisions because they're just trying to sell you something. Consumers are feeling the effects of the Strait of Hormuz closure starting to hit their wallets. Could the housing market be the place where things break first and is it going to pull down the rest of the market with it when it goes? Hello and welcome to Milk Road Macro, the podcast that knows that a real housing crisis is checking your bank account after you pay rent. I'm your host John Gill and today is Friday, June 5th. We'll be releasing this episode on Tuesday, June 9th and today we are joined by everyone's favorite housing market expert, Melody Wright. Melody is a housing market analyst and commentator who is on the front lines during the great financial crisis. Since then, she's become one of the most sought-after analysts in the housing and real estate markets in the world. She publishes a lot of great analysis and insights on her Substack M3. Melody, if you're not subscribed, check it out. It's worth your time. Whether you are a tenant or a homeowner, today's episode is going to be full of a lot of alpha you're not going to want to miss, so make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. Today's episode is brought to you by Cape, the privacy first mobile carrier. Nexo, earn, interest, borrow and trade crypto. And Kalshi, where your takes finally pay out. And now we're going to get some good takes from Melody. Welcome back to Milk Road Macro. How are you? I'm doing well. Thank you, John. And thank you for having me. It's my pleasure. It's my pleasure, too. You're always one of my favorite guests and one of our audience's favorite guests as well. Melody, I thought a good place to start would be just catching up on things. Last time you were on the channel was January and you were saying that Q2, we would start to see cracks begin to form in the housing market. What's your updated outlook here? And have you seen these cracks begin to form in the housing market? Yeah, absolutely. And specifically what I what I was mentioning is delinquency. We knew it was going to increase. We knew foreclosures were going to increase because of those parameters or limitations that were put on that FHA program in the fall. And so it's actually happening out of season, John, because, you know, everything in the housing market gets delayed reporting for at least a month to six weeks. And so when I say Q2, I meant we'd start talking about this, you know, probably in July or August, the delinquency, because what you typically see in mortgage specifically, as you see seasonal firming in prices and home prices, sales prices, because the people that are transacting can. And what do I mean by that? Housing has a very specific season. Everybody moves around the school calendar. So this is when you're going to have people participate in it. It's a strong seasonal wind. You can go back for years and see it. But and so while that's happening, delinquency should be going down because we're getting those tax refunds. And typically bonuses in corporate America are paid out in March. And so you're typically having two things happen. People can afford because they got a big tax refund to like get caught up on their mortgage. And then on the other hand, you've got all these players participating in the selling season that's going to firm those prices. Well, weirdly, we are seeing delinquency not only go up in some areas, but, you know, it's a little shocking where it's going up, which is in 30-day delinquency, which is early day. And I often joke that in the U.S., you'll sell a kidney before you'll go 30 days late because that impacts your credit score. And we live, we revolve around our credit scores in the United States. So this just shouldn't be happening. So that's one component of the delinquency. And then I can go and talk about what's going on in the the selling season. But I want to pause the delinquency in case you have questions on that. Do you fancy yourself an analyst and or a content creator in this space? Well, we want you specifically if you live and breathe tech equities, Milk Road could be the home for you. We're hiring for two positions right now, analyst and content creator. So check out the careers page below. Yeah, well, I do want to come back to the delinquency things, but I think just to frame the situation for our audience still at more of a high level, the gap between housing market buyers and sellers is something I've been watching. This is at an all time high. And I want to get your thoughts on why this keeps widening. It's now we have 630 home sellers, more than buyers. It's a we have 1.46 sellers for every buyer on the market. So this is what I wanted to start with just to frame this for the audience. This gap keeps growing. And I want to get your thoughts as to why and how long before it closes. Nobody likes to hear I told you so. But you know, it's like, you go back to the article I wrote in 2023. And I was like, this is about to happen. No one understood what was going on in the housing market. They didn't understand all of the speculation that was happening. They didn't understand that everybody, especially millennials and some boomers were kind of like, and even yeah, so everybody was getting in on the speculation game and buying up a second home to fix or flip it, to rent it out, to do Airbnb. And so it's, you know, if you think about this, just like a story, everybody was talking about all the inventory shortage. And there were so many more buyers than there were sellers. That script has flipped because as humans, we never think, okay, like, this is a short term problem. Let's, let's, you know, maybe let's be patient. No, we jump in and both feet and we're like, there's no inventory. So let's go build, you know, a million more homes. And that had already happened actually by 2023. And so you knew that all of this was going to come to market, especially as property taxes and insurance were going to rise. And you also knew the demographics that most of the homes are owned by the boomers. We know they're aging out and not only do they own their primary home, they own other homes, a lots times long-term rentals, sometimes just second homes that they vacation homes. And so all these factors are going to hit at once, unaffordable record, unaffordability, the boomers aging out, needing to get rid of those properties because renting doesn't make sense somewhere like Boston because property taxes have gone up double digits two years in a row. So they have, they can't cashflow and then people just can't afford it. I love what you said at the beginning about, and that is, I mean, this is what I've been screaming from the hilltops. If people are looking at their bank accounts after they're paying their mortgage or their rent and they're stressed out, that's a housing crisis. And that's been happening for a very long time. Okay. So there's a lot of factors for different generations, but all of it adds up to one thing. We have a lot of inventory and no buyers stepping in to consume it. Melody, I want to ask you a specific question about an article you wrote on your substack. A lot of analysts will just trust the data they get from the major data aggregators. You actually do front lines on the ground research. You wrote an article called on the road again. And you talked about, you drove over 3000 miles over 13 different States to do on the ground market research on this. Tell me about what you learned from this trip and why is it so important to you to specifically do your own market research by foot on the ground? Yeah. So it, you know, just a quick history. I was, I was reading, you know, I come from the mortgage industry. I started in 2006. And so I was reading everybody's coverage. I was reading Bloomberg's coverage of the housing market back in 2023. I was even reading one of my favorite at the time, not so much anymore Zellman, who was an industry expert who called the last, they called her poison Ivy last time because she was the one basically saying a lot of what I was saying. But in the early days, she was kind of on the same board, a boat with demographic. But my point is I was listening to what they were saying. I was like, why is no one getting this? You know? And so the data at the time I didn't have as much of a handle on it as I do now. So I needed to go out and prove my theories to myself of what I thought was happening. And that's when I took my first road trip. So you asked me, what did I learn John? You know, this time around it's important because what I learned last time around is that the data does not match reality in any way, shape, form, or fashion. And I couldn't understand why the permits didn't match. I couldn't understand why the listings for sell didn't match. I couldn't understand why there were all these missing listings on even the new home sites that, you know, so, so then I came back and I just started digging and figuring out how all this data was collected. And, you know, every time you come back from one of those trips, you start to wonder, did I really see what I saw? I really see what I saw. So what did I learn? This trip was more just a confirmation that nothing has changed. It's the same. And that the data is not accurate at all. And so you have to figure out why. And I've now, I have such a background in why all of that data is missing, but it's a difficult message because it's not one thing everybody wants it to be. It's a prime or it's the arms or what? No, this is a massive macro story that also is micro in many ways. And so you have to be able to go look to put those two things together. I hope that made sense. I don't know. Well, I think it, it gets to your, your, the reason why you did all these things, but maybe like a salient takeaway, you said the data is not correct. And where's a gap on that? That like, just one example of something you learned that doesn't match up with the story that they're telling like broadly. Yeah. I mean, you know, well, so you just, you go to somewhere like Lakewood ranch and you know, realtor.com might say there's, you know, a hundred new homes for sale and you know, the, but no, there's thousands of them, thousands. You know, you, I did a secret shopper trip where I talked to the salesman. We had just gotten new census numbers that showed that net 22,000 people moved to Florida last year. And we said, Hey, we've heard, you know, maybe that population is slowing all that, you know, that increase. No, that's just not untrue. That's not true. Like, I mean, they just lied about everything. So yeah, the listing sites don't have all the listings, not even a new home source, which has the new homes. And, and so that's what I found out specifically, which is something I had known before, but that is what, so the, the most important takeaway from that trip is again, just said what they're saying online is not boots on the ground reality. And so if you're using just that to make your decisions, you're in trouble. And I'll quickly, I'll mention the permits. Again, the permits don't match when you look at what is actually being built, what's for sale, but in unincorporated areas, often you don't have to file permits. And so there's a lot of building that no one knows anything about. Okay. So there's a lot of inventory new building on the market that's not being accurately measured and captured. So even the picture of more sellers to buyers, that still doesn't capture how much excess inventory we have. Is that the idea? I would say we're missing about 25% of our inventory. Like that's, and so, so everybody needs, so sorry, it's, it's hard. So many things, but like realtor.com, they are who supplies listings for sell to Fred. So if you go to the Fred right site right now, you know, the feds, you know, where you can get all the data, it will say source realtor.com and realtor is missing even more than that 21st, 25% I'm telling you about for new homes, even more than that. Some others like Redfin have more new homes. So, because it all goes into how these things get supplied to realtor.com and it's a long story, but yeah. So think let's, let's say you're at a town you're looking and it says 300 new homes. You can imagine if you're looking at realtor.com, it's more like 1500. And so Fred is using realtor.com to talk about inventory and that's what everyone is using. And so they have no idea what's actually happening out there. Gotcha. So just to be clear for our audience, there's no allegations of anything malicious here. It's just, you know, people don't know what they don't know. And Melody, you know, there's old phrase trust, but verify Melody verifies, and there's a lot missing. Melody, they're not saying they have everything. You know what I mean? Sorry. I mean, that's not what they're claiming it, but you just know how it's constructed and you know why now I know why they don't, but go ahead. Sorry. Right. It's important detail. Yeah. Okay. So we talked a little about this. I want to ask another question over half of the local markets that you've been tracking for a long time are showing signs of distress selling. I've seen you writing about this, talking about this. I wonder if you could tell us how pervasive is this distress selling and just, you know, like what is the takeaway from that? Is this accelerating? What are you seeing in that? It's accelerating, but we're in that part of the season where distress may look like regular activity because you're, you know, this is when people should be buying and selling homes. And so you have the areas that are truly distressed take San Jose. Okay. People are going to say, well, it's not, it's a hot market right now. Days on market are like 11 and all this. I'm like, and home prices are down 6% year over year. Like that's a distressed market. It's a motivated market, but everybody's like, no, it's hot, hot, hot. It's similar to San Fran. It's like, we're, we're actually, you do have prices going up there, but it's also based around, I've been told out there that a lot of the laid off people are trying to catch the new Nvidia millionaires, you know, and get their homes. So while we're in the season, it's going to look like regular activity. If you're not paying careful attention, like I do look at those year over year home prices. But we are definitely seeing, I think even since my last sub stack, there were like 33 of my 85 cities that had year over year home price declines that was compared to like 23 last year. And so this just is like, it's a very slow moving train and it's building and building. And what's going to happen on the back half of the year is that delinquency is going to keep marching up. And so the people that need to sell because of like death distress default, they are suddenly going to be competing with foreclosures and things like this. And so we're going to start to see an acceleration of those price declines in the second half of the year, barring some exogenous event. Yeah. All else being equal. Okay. So I want to ask more about these delinquencies and as you mentioned, the foreclosures, I've seen some data on this delinquencies are up in Q1 of 2026. And I saw data on foreclosure filings up 26% year over year. Yeah. So tell me about this picture and what's, I think you said the FHA loans are a big contributor to this, but yeah, give us a sense of this, where this is now and why you think this is going to keep accelerating here. Yeah. So let's be very clear. This is coming off historic lows because you've, you got to think about what the government intervention did. So last time we had a massive foreclosure crisis you know, really which did not peak delinquency didn't peak till 2012. And then they did all of the stimulus. Then they did all of the loan modification programs and, and were able to slow that down. We did all that before COVID hits in March, bam, everybody's on a forbearance. They don't pay for 18 months. Then they get some kind of workout where they don't even, they, I mean, they put that balance on the back of the loan only has doesn't accrue interest only has to be paid off when you sell the home or do a refi, something like that. So we slowed that bus, that train down. And then when that wasn't enough, John, they put a moratorium on VA, VA loans really for no particular reason. And then they did this crazy program for FHA just so everybody knows FHA is for is typical. It's supposed to be first-time home buyers, but it's, it's more now used by investors, but they did this ridiculous FHA program where you could just keep going back. You can't pay for three months. Okay. We'll put that on the back of your loan another three months. Okay. So you not only have had 18 months of forbearance, you might've had, you know, six months of some other hardship, and then you can still keep doing this over and over. And they finally shut that down in October of this year. And so that just made everything screech to a halt in terms of a delinquency. So it's coming off the and this is where it gets technically complicated. So they have to, so the net, they get one more shot after that October shutdown, kind of, but they have to pay what's called a trial payment, which is what most modifications require, but somehow that didn't matter anymore. But now they do again, but if they don't pay them for three months, the servicer will wait to actually start referring them to foreclosure because they want to give them every opportunity. And again, I know this is very technical, but everybody needs to understand it. Just you can forget everything I'm saying. You just need to know that the clock is really going to start ticking in Q4 and Q1. But we're going to see from here, all of those foreclosures, just kind of like they're going to slowly keep just going up. But by the time we get to Q4, they're going to be unless, you know, we could have some state AG shut that down. I call it the 2011 playbook where they'll come in and say the servicers aren't doing things correctly because they're probably not because of their bad technology. But, you know, these are the things that can happen, but just know delinquencies are going out from here. Okay. So I want to ask about the two sides of this, right? You said that there are some things that can be done to like mitigate this. Tell us a bit more about what that might look like. And then on the other side of that, you know, if they don't do anything about this, we do get this foreclosure crisis. What does that do to the housing market? Do we get more distress selling? Like, just walk us through the two sides of that a little bit more. Yeah. So they're kind of, this is something that is, you know, hard for people to understand. They've kind of used every tool in our toolbox now in terms of slowing this down. So the last one is a regulatory playbook. And what do I mean by that? Well, you always have a regulatory cycle after each one of these bubbles. You know, the servicers got blamed last time for the originators issues. I mean, it's just, it's all a song and dance, John. And so what they could come in and do, and I can tell you they'd be, is say, they're going to start blaming the servicers. Like, oh, you're trying to foreclose on them. Like if you haven't, you know, you're trying to take their property and then the state AGs are going to come in and there's going to be some investigations. And so what the state AGs did last time is they put halts on foreclosures in a lot of states. And so that's what they can do, but that is about it. Everything else they've said is not working. In fact, they stopped buying mortgage-backed securities, Fannie and Freddie, which is, you know, they pledged to buy a whole bunch. They really didn't last month. And so the other thing they're doing is they're launching this new credit score called Vantage Score, where they're going to try to bring a few more people in to refinances. The problem is with those student loans reporting, people just don't qualify. Even with using a credit score that, when I look at servicers who are now implementing this, nine times out of 10, it is materially higher than FICO. That is just really bad, really bad, because we knew credit scores were already inflated. So these are the last two kind of things in their toolbox. If they did try to do a forbearance or anything like that again, there would be rioting on the street, because people do now understand what this was. And they feel like, why didn't I just take out a loan and overextend myself? That's how they feel about it. So that's that side. Questions on that side? Yeah, it seems like people are kind of fed up with things being unfair. So there's extreme things that they could do, but none of them are really good options, exactly. And there's not really a great solution here. So on the other side of that, then, if all this does start to play out and these foreclosures start to take off, what happens then? Yeah, I mean, the wheels could come off the bus if they don't intervene. And it's going to be ugly, because we're missing so much of the information, because it's not everybody's going to go look at the mortgage delinquency schedule on the Fred site, and they're going to see this super low delinquency. Read the title. It's for commercial banks. Commercial banks don't do the majority of lending and mortgage anymore. And also, you can't forget that the agency sold off a lot of their non-performing assets to people, hedge funds that don't report to credit. And so there is distress out there that's happening right now that no one knows about, understands. And so if things don't, if they don't start slowing things down, and if what I'm seeing, which is distress in the prime books two months in a row, what do I mean by prime? This is not your FHA. This is not what I would call government subprime, which is what FHA is with low credit scores. You can go as low as 500 with a big down payment, but 580, 660, around there, the prime books are those 750 credit scores, those 800 credit scores. I've seen two months in a row of, in my client books, distress in the prime books. If prime starts to join the party, the wheels could quickly come off the bus. And so it's all a matter of, and this is what I would say, is that people, they're talking a lot right now in the press, right? But we got to look at what they're doing, not what they're saying. And the fact that they said they were going to buy all that MBS and they're not really. They talked about the 50-year mortgage, but they're not really. They're going to take Fannie Private, not really. So we have to just watch what they're doing. Right now, John, they're not doing anything to save housing. Your phone carrier knows more about you than your best friend does, where you go, who you call, when you sleep, and they're selling all of it. AT&T, Verizon, T-Mobile, they've all been caught leaking data or cashing in on it. And your VPN, your encrypted messaging app, they can't fix what's broken at the network level. That's where Cape comes in. Cape is America's privacy-first mobile carrier. Same premium coverage you'd expect, built with privacy from day one. Your phone's network identifier rotates every 24 hours, so you look like a different subscriber every day. Call logs are deleted after 24 hours. You get two encrypted secondary numbers for signups and 2FA included in your plan, plus SimSwap protection that puts you in control of your number, so no one, not even Cape, can hijack it. Use code milkroad at milkroad.com slash cape for 33% off your first six months. The way we build wealth is changing. Stocks, savings accounts, real estate, that playbook is getting rewritten in real time. Nexo is the platform built for what's next. It's an all-in-one digital wealth platform where you can earn interest on your crypto, borrow against it without selling, and trade a wide range of assets, all in one place with 24-7 support and institutional-grade security. Oh, and by the way, Nexo is back in the U.S., with new U.S. clients getting 30 days of Wealth Club Premier Access. That means elevated interest rates, lower borrowing costs, and crypto cashback on trades, benefits usually reserved for loyalty program members. Get started at milkroad.com slash Nexo. Okay, so Melody, I appreciate that answer on this. One of the things I was looking for was, is there a specific trigger that you're looking for? And it sounds like you're saying two consecutive months of distress selling in the prime loan books. When do you think that happens? Has it already started to happen, or how far ahead is that trigger point before we hit that and start to have this cascading effect start to take place? Yeah, so specifically in the prime books, it's early-stage delinquency. You've already, I mean, I have seen distress selling for several years in all of mortgage, but when you get that early delinquency, it tells you what's to come. You never want to see that, and you certainly do not want to see that in the spring when people should be feeling fat and happy with their tax rebates and their big bonuses they got paid out. And so the timing is tricky because these guys, it's hard. The data is so hard, John. I can't tell you exactly because the industry hides a lot of this data. The only way you can get it is by paying ridiculous subscription fee, like $40,000. If I had it, I could tell you exactly, but what I can tell from just looking at client books is that these are folks that probably got a modification already. They're starting to, what we call, re-default. But if they aren't the ones, then that means they've got a little bit of runway. There's things that can happen, but what I'm sensing is that these are folks who have already had some sort of workout, which means they're going straight through the pipeline. And that, if that happens, and again, in mortgage, okay? Everybody has to, this is not like overnight, like this stuff, because foreclosure takes, in most states across this country, foreclosure can take up to a year. There are certain states like Georgia and Texas where it can, it goes very fast. But so these things, you can't say exactly it's going to be this date when everything starts, but I guess what's important is that it's already started and it's just going to start snowballing. And barring us all getting really high paying jobs and are able to afford these homes or the robots or the UFOs wanting to live in a home, like what is going, it's just, it's going to just start speeding up and getting faster and faster. And so, I wish I could tell everybody timing, but I will tell you that the fireworks will probably start late Q4 or early Q1. So this selling season next year should be, I mean, nuts with what the information we have today, but you know, I'm calling balls and strikes right now because I can't, there is so much going on. There is literally no way, and you started this off saying correctly at the beginning of the show that my regular thesis didn't bank on higher rates. It didn't bank on gas price increases for all these people that moved out to the excerpts, meaning, you know, like we came into this year looking at lower rates. We hit below six, which we had not done in a long time. And now all my timeline now has, we're adding, you know, this, what's higher prices on all of the goods and services we use, higher gas prices. Everywhere you go right now, I don't know about you guys, but my gym membership, everything, I'm just getting the notice, like increase in price. And so this could accelerate things when the boomers wake up and realize, you know, they don't have a lot of options. And I don't want to, you know, participate in the generational anger, but they are the ones that have the assets and they're the ones that are being stubborn about selling right now. And it's not their fault. They've been listening to mainstream media who has not given them the right information to make the right decision. Well, I want to ask about some of this in a different way. The Trump administration has talked about several possible solutions or things they might do to help. Trump has talked about, and I don't know what this means, but declaring a national housing emergency. Another thing he floated, I think in a press gaggle was talking about, you know, no tax on realized gains from home sales to try to incentivize some, let's say boomer homeowners to sell without having such a big tax penalty. Do you think any of these ideas might be helpful? Do you think there's any likelihood of them actually being implemented or what's your outlook on that? So the other thing I learned on my trip, I went to a housing policy conference, John, and which became abundantly clear to me is that none of these policies are meant to help the housing market. They're meant to help the developers that line the pockets of the politicians. That's it. That's it. And so everything you just mentioned is rearranging the deck chairs. It has nothing. And, you know, I see industry experts get on top of that, you know, capitalized gains. I mean, they already get like a 250,000 exemption, I think, or whatever. I mean, I don't know, because I would have never qualified for it. So, you know, my point is, like, this is, it's a show game. And that's it. They're rearranging the deck chairs, everything they've announced, it will not, that's not what's gonna save this. You cannot, you literally, like, it's just math. The boomers can't have high prices, and the younger Americans afford them. Like, it's just, so a politician can say that, just like Bush can say, read my lips, no new taxes, and day one, you know, that's what, like, so I'm tired of everybody, why are people listening to what these people say? Like, just look at what they actually do. And because if you keep listening to them, you're gonna, I mean, you are gonna find yourself in a really bad situation. And I, you know, and I know a lot of people are angry at the boomers, but I mean, I feel sorry for a lot of them, because they have not been done any favors by mainstream media. I want to ask a question about something you mentioned around mortgage rates. And, you know, going into this June meeting, or up until this conflict with Iran started, there was hope and expectation of continuing lower rates for this year. A lot of that has disappeared, as you said, because of rising inflation. Do you think that we're going to see even higher mortgage rates later this year? How does that play into this? And, you know, let's say that the conflict does end and the Fed does decide to come down on rates. Does that even help us at all here? Or is it not really going to do much? Okay. Yeah, well, so yeah, like, so for three years, I kept telling the industry, I mean, I try to be friends with everybody at first. I was just like, but what about Japan? And what about all this is going on? Like, why do we really think this is going to happen the same way again? But I've been very cautious because I've been alone out here saying that I didn't think that mortgage rates, let me be clear, the Fed does not control mortgage rates. Jerome Powell has had to say that multiple times on the podium, but nobody listens, for whatever reason. The bond market controls mortgage rates. And you can see what the bond market is telling the Fed clearly right now, which is, you're not at the right, look at the two year, you know, you need to be over 4% right now. So the Fed, they can do whatever they want to do. I don't really care. They don't impact. We've seen it now multiple times. They've, you know, reduced rates. And then the 10 year has gone up, which is what dictates mortgage rates. Okay. And yes, the spread between that can, you know, matter. But materially, the bond market decides and they have clearly decided they don't trust the Fed anymore. I'm sorry to say it. But I mean, it's like, how many times do we have to have this happen? And we all pretend like they have some kind of impact, but they don't. But I think a lot of people make a lot of money talking about them, but, you know, they don't. But what could happen geopolitically? John, I mean, I don't know about you. I'm not buying a 10 year treasury right now, not with what's going on. And why would foreign governments do that? I mean, look at the what we're doing. We're, you know, we're being a jerk to every single, I mean, who's left that we haven't sort of made mad, you know? So like, it's just kind of like, okay, so rates could go higher. They could. I mean, that's, you know, because I want price discovery, I would love for them to go a little bit lower because then more people could participate and you could get real price discovery. But that's just not, that's not looking like the path right now. And even if they get below 6%, like the amount of people that can participate even between six and four is not that material. Sorry. Yeah, it makes sense. But I thought it was a worthwhile question to discuss. I've seen some other analysts presenting different views of the market here. And I think that, well, for whatever reason, I'm going to read you something I saw somebody say. They said that they looked at the market in San Francisco and said that it's starting to form a bottom. And it looks like that might be leading the rest of the market as it forms a bottom and turns around here. And you're already giving me your answer by your reaction. What do you think of that idea? Do you think that the bottoming housing market in San Francisco and the increasing demand there might be a sign that the market's turning around here? Local matters, John. And so that's, you know, that's why I track 85 cities. And if we think San Francisco somehow represents the rest of the country, no. Look at your demographics in California right now. I mean, for the love of all things holy, people are not moving to your state. They're fleeing. And I don't care if 10 people, you know, in tech are, you know, impacting this housing market in San Francisco when you finally have interest after years of that. I mean, just go. When I was in San Francisco last year, I was afraid for my life. And I'm not kidding around. And I've walked the streets of New York at 4 a.m. for most of my life. Like I, that place, no. And so could they, could they take what's happening right now and, you know, and change their politics and really start to turn around that city? Sure. But what's happening in that the spring market out there right now with this minimal optimism and your higher home price bracket has absolutely no bearing of what's the affordability crisis across the United States. I mean, San Francisco probably has the highest median local income of any place in the country. Ours in the U.S. is 84,000. That's it. That's household. That's not one salary. And so no, San Francisco, you know, it's an oddity. It's a market you look at in isolation. It's around all this NVIDIA, AI, data center mania. And that's what's happening out there. And the rest of the country has said F you to AI and to data centers. So no, sorry. I guess I'm a little spicy today, John. I'm sorry. I intentionally asked a spicy question. Melody, I think a lot of our audience are self-directed investors and they might be interested in the housing market, but they're also invested in a lot of other markets. And I want to have some conversation connecting this crisis to those broader markets. And I wanted to start with like the private credit markets, because I think that people don't understand how connected these are. And I wonder if you could just like help us understand how the housing market impacts the private credit markets and what that connection relationship is. Yeah. So private credit went into real estate bigly and, and, and, you know, and it's, they lent to a lot of stupid companies, a lot of stupid software companies, a lot of stupid ideas like, oh, let's, let's, you know, let's give somebody $30,000 based on their credit score that was inflated. And I've talked to some of these guys on the backend that did exactly that. And then you had the student loan reporting happen and they were like, oh my, you know what, you know, they, they, these private credit lent to Klarna, buy now pay later. So not only were they in crappy software, they're in crappy real estate lending. They were the biggest lenders. Well, they were a fourth of the lending to commercial real estate last year, which is one of the reasons we got in another year of extended pretend. But the problem with private credit now is that they can't get new capital. And this is how any Ponzi scheme works. You have to make sure you're getting in more capital to be able to pay off the other folks. And now that, you know, it's not about the gating, everybody wants to, well, yeah, the gating triggered the fact, because many of these funds have gated, redemptions, but that triggered the fact that, what are you, now you're going to go fundraise? Like, are you kidding me right now? You know, so, so, you know, you're going to have, the financial system is a system. And so on the one hand, they're going to blow up. A lot of this real estate lending is going to blow up, that's going to hurt. But, you know, everything's connected. And so once you have a real blow up in one sector, it could start to create what I call a, and others call a collateral shortage around the entire system, meaning that we could have a credit event and a credit blow up. And not from the, everybody keeps repeating the 1.8 trillion of private credit, but that private credit is connected to private equity, is connected to, there are tentacles of this around every asset class. And by the way, guys, data centers are real estate. That's what they are. And I can tell you from what I've seen on the road, and that's, so the new things I learned were not what I knew about the housing market per se, John, it was more about when I landed in New Albany, Ohio, I was in for a real surprise. And the 25,000 construction workers there at the data center, if something happens to them, which by the way, Meta does not have the power it needs there, then those 25,000 are going home. And just imagine what that does to those, to the economy, but also so much building has happened around New Albany and Columbus, because it was a new tech hub. All that just goes away overnight. And so, we've built a really good house of cards out here. That's a great description of the house of cards and of the system there. Okay. So we've seen this historic bull run in the equity markets, right? This AI driven investment, the stock market has never seen such strength and strong upward momentum. At what point do you think that this to threaten that? Where does this house of cards start to break? Is it in the housing market? Is it in private credit? Where do you think this starts to really impact this insatiable bull run in the markets that we've seen? Yeah. I don't know about you, but we sure are seeing a lot of stories about AI over the last two weeks, right? Like Uber saying, no, thank you. Starbucks saying, no, thank you. A lot of, you know, Ed Zitron is out there crushing, you know, what my buddy, Nobody Special has been talking about for two years around tripping, you know, the accounting shenanigans. It feels as if we are getting a lot of, you know, it really started with DeepSea, but since then, we are starting to get a lot of stories about the lack of ROI, you know, on these companies. And so I think we're gearing up toward that. But if you've been around Wall Street for a while, you know, usually things don't happen in the summer because everybody's in the Hamptons. So, you know, like, but here's and this is what I think is so problematic for everybody because you can look at back in history and you can say, well, this was this, this was that, and maybe that's the way it was designed to look, but everything. So it could be literally from anywhere that this could start to pull the thread. But I have a feeling it's likely going to be a combination of the AI, a sudden realization, one, you know, perhaps maybe one of these IPOs does not go forward. And then you already saw what I would call a sector rotation a little bit yesterday, you know, so I think you're going to see more and more of that. And so it could start slowly, but then, you know, we have our all at once. But honestly, real estate itself probably would, it would start if it was going to start kind of really coming over the top, it would be after that kind of stock market event, if that speed was going to increase all things equal. Q1 of next year is going to be a very stressful time for real estate. But if if we get a credit event, if we get a stock market event, like those things would accelerate, obviously. You're listening to the Milk Road Show, which means you've got takes strong ones, I bet. But where do those takes actually go? Do you tweet them into the void, argue them in the group chat, or do you try to express them by buying a stock? The thing is, stocks move on like 50 other things at once. And that's where Calshi comes in. It's a CFTC regulated prediction market where you bet directly on outcomes like Bitcoin hitting 100k, Fed rate cuts, GameStop buying eBay with a clean yes or no. We did a full deep dive on why prediction markets might be crypto's third product market fit moment. Check the show notes for the full report and claim $10 free when you trade $10 on Calshi. Gotcha. Okay. Yeah, really helpful on that. And I think what I'm hearing you saying, and this is one of the reasons why I like to check in with you. The housing market is one of the largest markets in the entire economy, but it's relatively slow moving. So it's really important and you have to pay attention to it and be aware of what it's doing. But it's one of those things where it doesn't really happen overnight, but it drives so much that it's important to stay informed about it. Melanie, I want to just ask a couple of questions. Well, just one more question here about what you're focusing on researching on now and what you're writing about on your subset and what's got your attention at this moment in the markets and what you're looking at here. Yeah. So lastly, in my most recent sub stacked, and this is why the message is so important about these data providers. So Redfin has been around since 2012 and they got started after NAR, National Association of Realtors had to restate housing prices for four years during the previous housing bubble. And so they came out and said, we're going to be truth tailors. We're going to tell you what's actually going on. Well, I'd been using them. I've been using them for all my data and they suddenly changed all the formatting of their data, the data that was available. And I went and I looked at their historical numbers and I looked at, and they basically restated home prices going back to 2012, much lower on average by $44,000 lower. And I've reached out to them and I've asked them, you know, was it a change in methodology, which it could have been, was it in the way that you change what that house price, sales price means? They did not respond. I went on social media asking them to respond. It got tons of thousands of views. They did not respond. They responded to other people. I sent them emails. So what you just witnessed, John, is a revision of history. And so in March, they said the median sales price, Redfin, was $476,000 nationally. The number they came out for the revised was 390,000. And so that is a massive difference. And so I just, I'm not saying this again. I don't know if Redfin did something wrong because they won't answer my questions. What I do know is they told you that the median sales price across the country was $476,000 a month ago, and now it's 390,000. So take for that what you will, but these guys are published every housing, what you just talked about, about the buyers and sellers, that's them. They publish that every month. And so if our data providers are lying to us, I mean, what else do we not know? So in terms of this big part of the economy, which is housing. So I'm passionate about it, and I used to be a lot nicer about these types of things, but the census did it. They took $36,000 off new home prices. Realtor.com did it with median list prices. They restated that last year. They came out with an article this week that said, we just saw the largest drop in nine years in median list prices because buyers are starting to get, our sellers are starting to get more realistic in listing that properly. And I was kind of a jerk and I'm like, well, maybe why did it take them so long to get realistic? Because you restated them without telling anybody why the median list price last spring, a year ago. Because if they had not done that, John, it would have been year over year negative a year ago. And so my point is, we can't trust, you cannot trust salesmen to give you accurate information. And so you're going to have to do a little work if you want to protect yourself and your financial wellbeing. You cannot use Zillow, Redfin, any of these guys to truly make decisions because they're just trying to sell you something. Melody, I really appreciate you coming on Milk Road Macro. Our audiences are big fans of yours. I really appreciate you being here, sharing this truth and being a truth teller at a time like this. Where can we send people to find more of you and your work online? Sure. You can find me on X Twitter at M3 underscore Melody and M3 Melody sub stack. Thank you so much for being here. I'm really looking forward to our next conversation. Hopefully we'll be in a better and different place by then, but thank you so much for being here, Melody. Thank you. It's my pleasure. Thank you. Thank you all for joining us. I hope you all learned something today. Until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of the Milk Road Macro Show. Thanks for being here, everyone. Bye. Want insights on what's really moving markets and how we're trading each event? Subscribe to our channel, then join the Milk Road Macro and Macro Pro newsletters. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.