Sales in 2023 ended up being higher than what we would see in both 2024 and 2025 by a hair. Mortgage rates peaked in October 2023 at 7.79% with rates averaging 6.80% in 2023, 6.73% in 2024 and 6.50% in 2025.

Source: FRED, Census and National Association of Realtors (NAR)

Remember, since 1971 the 30-year mortgage rate has averaged 7.69%. As you can see above, modest improvements in mortgage rates did nothing to stimulate sales. The industry could not stomach that perhaps home prices had reached a level that did not make sense. Realtors and mortgage originators make a lot more money when prices are appreciating. Instead, the industry focused on Fed actions and purported inventory “shortages” for three years while sales remained frozen. The industry called for lower rates so you could get a lower payment. The problem is that even with that lower payment for mortgage principal and interest your property taxes and insurance are calculated based on your assessed value, crushing affordability. This is why I spent my first year on social media focused on the increases in property tax and insurance that had not yet hit homeowners’ mailboxes. Fed actions were a much sexier topic than taxes and insurance. While industry analysts watched the Fed, I went to where the puck was headed. I could see that Hurricane Ian was going to change the Florida (and national) market drastically and wrote about it here in late 2022.

U.S. homeowners insurance rates rose 40.4% over the past six years, with the biggest increases hitting in the last two years, a new report shows.

LendingTree’s 2025 State of Home Insurance Report shows rates from 2019 through 2021 remained stable, with increases of 2% in 2019, 2.1% in 2020, and 3% in 2021. Then rates started rising in 2022 with increases of 5.4%, 11% in 2023, and 11.4% in 2024.

When visiting the third largest mortgage servicer in the United States they confirmed they had seen insurance increase over 50% since 2020 across their servicing book. Property taxes also skyrocketed, rising “almost 27 percent faster than inflation since 2020” according to the Tax Foundation. At the same time, labor and replacement parts were becoming more expensive which really hurt those who bought sight unseen, waiving property inspections and appraisals, between 2020-2022. Then insult after insult was added to injury with rising electricity costs.

But, but, but rates and inventory!

Mean ol’ Jay Pow must cut rates and the builders must build! Hopefully I don’t have to remind you that Jay Pow does not control mortgage rates as he has said from the podium several times and as evidenced by mortgage rates moving up after the Fed cut rates in multiple instances. As to the clamoring for more building from the elites who circulate at think tanks and focus on dubious household estimates to argue building is the cure to what ails us…funny story. The listings for sale you see above do not include a large portion of the new build inventory. Many of the builders pivoted to building whole neighborhoods of spec homes versus building for any specific buyer. Typically, they will only list one of these spec homes on the listing sites (if that). After visiting hundreds of new-build sites I can tell you definitely there is more inventory out there than is on the listing sites and in the permit data. To illustrate - below you will see listings for new construction for Dallas, TX from Realtor.com who is connected to more multiple listing services (MLS) than any other listing site including Zillow.

Realtor lists 826 new homes for sale while New Home Source shows 16,178.

Now this of course has a lot to do with how each site is defining “Dallas”, but in case you are wondering, the above number for New Home Source does NOT include Fort Worth:

If Fort Worth was included, there would be almost 21K new homes in the DFW metroplex.

With respect to permits I spent a lot of time trying to reconcile those with what I was seeing on the road. I never could and found out that in many unincorporated areas across the country you do not have to obtain permits. Although permits are helpful for macro-strategists, they do not tell the whole story. And, honestly, that is the case for most of the data we receive these days. Is our inventory mispriced? Is it misallocated? Yes and yes. The argument that we need a ton more building out there is not based on field analysis, though. It’s based on models which have dubious inputs.

Despite it being obvious that listings for sale were increasing but sales were not, the industry hid behind seasonal adjustments and the Fed. They still refuse to fully acknowledge the price-to-income disparities, increasing costs and the overbuilding that is occurring. Even if rates come down, property tax and insurance will not decrease unless prices do as well, and even then, there is no guarantee those costs will come down for some time. Cities desperately need that revenue and have resorted to outright fraud in some cases to ensure values remain high. Take Montclair, NJ for instance:

Battles over property taxes are playing out across the country as cities addicted to federal money go into withdrawal, needing to address budget shortfalls.

Now that home prices are not rising at an accelerated pace your aspiring homeowner is not the only one impacted.

Source: Cotality via FRED

Landlords are getting hit hard. During Covid, landlording - as it was in the runup to the Great Depression - was all the rage, but it has since lost its luster. If landlords abide by the law, they don’t get homestead exemptions meaning property taxes are even higher than yours. Insurance and replacement costs are crushing them as well, and this is before they had to worry about additional increases to costs due to the war and supply chain disruptions.

I can vouch for Jon who I met in Jacksonville. I have also been invited to speak to a group of these high-net-worth individuals at Jon’s request which should happen here in the near future.

While the housing market has been frozen for three years much has occurred under the surface bringing us to this moment. These cycles take an incredibly long time to play out. When I first did a forecast in late 2023 so Logan Mohtashami would debate me, I used dozens of current data points as well as historical data to try and arrive at a forecast. In late 2023, I projected a -5% decline in 2024 and a -12% decline in 2025. Although I talked nonstop about the impact of government intervention often and how it would slow the process, I underestimated the impact of election year politicking. I also underestimated the amount of nontraditional liquidity that would flood the real estate market. By the time I did my second forecast, I used approximately 100 data points to arrive at a -9.0% decline in 2025. Wrong again, Ms. Wrong. In fairness, new home median sales prices have declined -12.99% since their peak in 2022. The surprising thing is that those prices do not even include the incentives that have been thrown at new home buyers. If they did, using Lennar’s estimate for incentives, those median sales prices would be down something like -24% since the peak. Existing home prices nonetheless have stayed stubborn, bucking their long-term trend of being less expensive than new homes, despite this headline from Zillow:

The average loss? -9.7%. You need sales to actually have price discovery, and on the existing home side we just have not seen enough sales to matter. As I say repeatedly, we are seeing similar sales to those seen during the depths of the housing crisis while having increased population. For today’s post, we will probe further on a theory I’ve discussed previously as to why sales could be so low while population has increased over 20% since 1999. I believe there may be a significant blind spot in macro land which may have repercussions for what’s to come. I will also do a quick pulse check on our private credit saga and Dimon’s latest warnings as well as share the M3 Price Tracker, delinquency data for February (interesting), the Top-5 summaries for sales, prices, inventory and days on market. In addition to the lists of cities with motivated, distressed and depressed selling, I will also provide trending data for the cities in my series with populations over 500K which took the top spots for largest increase and largest decrease for February sales, respectively. The Northeast has definitively offered its first significant tribute in the house price correction hunger games.

Let’s get to it…

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Alas, it just wasn’t meant to be. In addition to war headlines, the debacle that is private credit captured the attention of mainstream media. Suddenly talking about this suspect asset class is all the rage. Since we last spoke, we’ve had a rating agency downgrade (rare) and an additional fund gate redemptions, while we are learning more gory details about MFS and its blowup.

Once Chase did those writedowns, it was inevitable that the rating agencies would show up. Dimon’s public comments were the rating agencies’ permission slip. There will be more downgrades. In every financial services firm that lends to this space, they are doing audits to review collateral and ensure that the collateral pledged to those lending facilities are money good. Remember the Australian bank that found $1B in fraudulent loans because they decided to look after a peer bank found fraud in their portfolio? Had they not looked, that surprise might have taken much longer to uncover. CFOs and risk managers now know that there is hidden risk in their balance sheets.

This week I’ve had several conversations with analysts and researchers about how opaque the securitization markets are. Inquiring minds want to understand if these blowups can cause something systemic. Where are the losses for these commercial real estate distressed sales for instance? Who is on the hook? Following the money is almost impossible due to the shady nature of the shadow banking derivatives market. We all want answers but at this point I think we have to accept we don’t know where and when contagion might emerge…there are just so many options. What we do know is that companies like Cliffwater did some really stupid stuff, “creating something akin to a fund-of-private-credit-funds.” Cliffwater has stakes in over 50 private investment vehicles which include companies like Ares and Blue Owl. Recently, Cliffwater capped redemptions at 7% or $2.3B which was greater than their inflows in the first quarter. That is indeed now going to be the problem.

From the start, Cliffwater went after a broad audience. Through wealth consultants, formally known as registered investment advisers, people with as little as $1,000 can invest in the product, for fees of about 3% — much cheaper than the largest BDCs.

These Ponzi schemes rely on unsophisticated investors and new capital coming in. As (con)fidence erodes, the new money dries up and problems are exposed. While Cliffwater says it will not have to sell assets this year, I can all but guarantee their lenders will disagree. When in Fintech, I remember participating in meetings with some of these companies like Blue Owl. I was so shocked they would take some made-up 3-year projection for software subscription fees as justification to lend money. The SAAS founders and lenders thought they were geniuses. Think WeWork. I just received my $10 payout from one of these SAAS companies who defaulted on its debt and had to do a strategic asset sale. My payout won’t even get me lunch at Five Guys. I can’t emphasize enough just how much money was being thrown around in tech in 2021 and 2022.

Is private credit our gray rhino? If you are unfamiliar with the concept, author Michele Wucker wrote an excellent book that argued that black swan events are never really black swans. They are typically the size of a rhino, and you can see these events coming from a mile away if you are looking. Private credit could be our gray rhino based on its exposure to not only software, but commercial real estate as well. With treasury yields moving higher, borrowing costs will not be improving and refinancing will not be an attractive option if available at all. Just know that all this extending and pretending means that we have not even started the liquidation process of these toxic assets. This thing is just getting started.

Risks abound everywhere you turn. Dow announced it was doubling plastic prices.

This means that many of the goods you purchase will also increase in price. That is of course until consumers reject those prices because they simply cannot afford them. In East TN, gas is a full dollar higher now. Discretionary spending will be crushed, and the willingness to make a large purchase like a home will dissipate. The big question is how stubborn sellers will respond?

Sellers outnumbered buyers by 630,000 in February. Last week we received new home sales for January with sales down -14.29% YoY and -12.73% MoM. Revisions to December were to the downside. If these results are not revised, that print could be the real turning point of this cycle. The YoY median sales price was also down -6.77% YoY and -4.46% MoM with 9.7 months of supply, non-seasonally adjusted. That is higher than any month in 2025 with the exception of October at 10.3 months of supply. The builders cannot afford to remain stubborn. They have to move that inventory.

As mentioned in my last post the hammers are still swinging which I saw during my Spring Break trip down I-95. The signs for these new build communities are everywhere. When chatting with Jon Brooks in Jacksonville, he told me of several projects in progress that make no sense as there are empty subdivisions and multifamily in close proximity. His update mirrors what I’ve seen all across the country where there was land available to build. Inevitably someone will mention the Northeast here, but there are pockets of the over-building there as well. The Northeast’s issue, though, will primarily be their demographics. Speaking of - with the publication of updated Census numbers last week, a dent in the Northeast’s armor appeared.

Low owner occupancy means that many of those cities will be particularly impacted by the silver tsunami over the next twenty years.

Speaking of the inventory shortage myth, Michael Burry of Big Short fame published a piece last week arguing that indeed we do not have a housing shortage. He also wrote in support of the Initial Public Offering (IPO) for the GSEs. For today’s post, I will discuss my thoughts on his take as well as other news from agency land.

Crypto Mortgages? The mortgage company who is leading the charge here and partnering with Coinbase has quite a history. I was unpleasantly surprised to see who, so I will detail why below. Finally, I will share summary regional information for February for sales, price, inventory and days on market. Sales in our price-stubborn regions were down the most, and it looks like we have added another region to our housing correction. For those who are waiting for lower home prices, we got some very interesting data in the results for the February M3 series which tracks 85 cities. In fact, I almost can’t believe it myself.

Let’s begin…

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Hello everyone! I’m taking a much-needed vacation this week and am on Spring Break. Never fear, though, I will be sleuthing while here. I wanted to send a quick note about existing home sales and the Chase writedowns in private credit. Now that the National Association of Realtors has decided to publish earlier in the month, the results are quite questionable. In fact, they just used the number from last year - 257,000 - for February (non-seasonally adjusted). The average number of sales for February since 1999 is 311,815. NAR revised the median sales price down from last month but showed a modest increase in the median sales price month-over-month (MoM). If this is your first spring selling season with me, you might not know that even in the depths of the last crisis home prices rose during the season. The most important thing to watch is how much they are rising YoY. The 0.30% increase is lower than the YoY increase last month and the trajectory is down.

As I’ve said many times in these pages, turning housing is like turning the Titanic. It takes a long time…longer than most of us can fathom.

What I’m hearing on the ground here in NE Florida is that sales are down significantly and agents are struggling. Did you know there are companies that advance funds to realtors based on anticipated commission from potential sales? More to come on this in a later post, but those requests are increasing. Deals are being cancelled due to sellers refusing to address needed repairs and/or reduce the price. And, of course, the builders still haven’t stopped building. Some projects have stalled but the hammers keep on knocking despite new build subdivisions sitting empty. Which brings me to liquidity.

So much is happening it is hard to keep track of the most important stories. What Chase did last week however is significant and just sped up the timeline. You may be asking yourself why, so let’s dive in…

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Edwin Starr, 1970

Pre-spring chaos has arrived with a roar and a’ rumble as the Ides of March near. Just when you think your ability to be shocked is waning, yet another jolt arrives to bring you off your seat. This is reality in the year of our Lord, 2026. No amount of denial and distraction can change the facts we do know. What do we know?

The Strait of Hormuz is effectively closed, and bombs are being dropped all over the place. Iran recently clarified that friends will be allowed to pass, but the risks remain. If you are unfamiliar with the fog of war concept I encourage you to familiarize yourself with it because it is a thing-thing. A poignant depiction of the fog and fervent chaos during Vietnam can be found in Michael Herr’s book, Dispatches. I believe this is where I first learned about American Psyops after having studied the Soviet propaganda machine in undergraduate studies. What does war have to do with the economy and housing? Well, lots. We won’t be able to cover all of it today but at a minimum gas prices have already jumped higher.

According to AAA, gas prices have risen on average by 27 cents across the country. In East TN that number is 40 Cents. There is much debate about whether the administration foresaw this downstream implication, but I can’t imagine that deep within the bowels of the military industrial complex they were completely oblivious to this potential outcome. Again, the outcome is more important at this moment than the rabbit hole. If you don’t remember 2022 when gas prices rose due to the Ukraine/Russia conflict, let me remind you. I personally witnessed several meltdowns at gas stations where people were downright hysterical. You could feel the desperation. The only wiggle room the bottom and middle of the K have had has been lower gas prices. With that ever-so-scarce wiggle room evaporating, get ready for our economic metrics to get worse:

The biggest loser for retail sales outside of spending at department stores (-9.8%)? Spending at Furniture and Home Furniture Stores at -3.5%. You know what isn’t decreasing when the housing market is hot? Spending at furniture stores.

War is not only a problem for gas prices. It is a big ol’ problem for mortgage rates. Just when we thought the Spring would get a boost with rates under 6.00% Big Daddy War came in and squashed the industry’s dreams. There were lots of folks calling for the 10-year to fall and with it mortgage rates, but that was not the highest probability in my view. When the U.S. decided to seize Russian assets due to its conflict with Ukraine, long-term U.S. debt buyers were forced to think twice about those purchases even if they needed some portion of those assets to play in the global monetary system. Secondly, I remember what happened in the months after that conflict started.

The conflict started on February 24, 2022. Although the 10-year moved down slightly in the first few days, the yield then marched steadily higher. By the time the Fed raised rates in March, the 10-year treasury yield was already over the 2-handle. On May 5, 2022, yields breached 3.0% for the first time since November 2018.

On April 24, 2024, President Biden signed into law H.R. 815, a consolidated $95.2 billion supplemental appropriations package providing security assistance and foreign aid to Ukraine, Israel, and the Indo-Pacific region. In addition to appropriations, this legislation includes provisions that permit the federal government to use seized Russian sovereign assets to support humanitarian causes in Ukraine.

There are lots of feelings about the Fed and the bond market. There are also lots of feelings about whether or not China is “really” selling U.S. debt or just rerouting purchases through the Cayman Islands. Again, the “what” and “why” are a bit hazy, like everything else, but the result is clear: the 10-year treasury went back over 4.00% on March 2nd and mortgage rates went from 5.98% on 2/26/26 to 6.14% as of this writing.

Something I’ve learned over the past several years is to not stay wedded to any narrative. Instead, be open to what the data we do have is telling you. The real story will take many years to fully flush out due to lagging data. Look at all sides of the arguments and be ready to pivot as soon as the triangulated data starts telling you something else. I recommend considering this approach. Being flexible in times like this will mean that you can seize opportunities versus being stuck in the mud.

In other news yesterday, employment surprised to the downside to the tune of -92K. Guess which category got hit? Healthcare. After an outsized increase in January, “health care employment declined by 28,000 in February.” The BLS is blaming this reduction in healthcare on the nurses’ strikes in New York. Regardless, other sectors don’t look so hot either.

Take a look at construction above which shed jobs in February. Here’s another view of the YoY change in construction employment courtesy of :

Lots and lots of folks look at construction employment as THE SIGN that the business cycle is turning. Although construction employment is still slightly YoY positive (+0.51%), the deceleration in growth is clear and at levels we’ve seen just prior to previous recessions.

According to Challenger, layoffs in February were not nearly as brutal as January (48,307 down from 108,435) but plans to hire YTD are down significantly: “so far this year, employers have announced plans to hire 18,061, down 56% from 40,669 new hires during the same period in 2025.”

Looking at the January-February YTD totals in the above chart shows that since 2023 we have been trending higher than every year since 2009.

So, everything is splendid, right? Before getting to today’s meat and potatoes let’s make a little stop to check in on Private Credit. Suffice it to say, I’m starting a tracker as I can’t keep up with the accelerating implosions in that sector. If anyone has time to spare, I recommend going through Blue Owl’s list of investments for kicks. I could be wrong of course, but I believe Blue Owl will be a name that will be writ large in history books…one of many, but prominently featured, nonetheless. There are many juicy private credit headlines to choose from including BlackRock’s announcement yesterday that they are gating withdrawals.

The firm’s $26 billion HPS Corporate Lending Fund, one of the industry’s largest non-traded business development companies, said in a statement Friday that shareholders requested 9.3% of their shares, but management decided to cap the repurchases at 5%.

I bet BlackRock is regretting its purchase of HPS which closed in July of 2025. In fact, it reminds me of how Cerberus felt around December 2006 about its purchase of my former company, GMAC ResCap.

Looking at mortgage specifically, last week we found that double pledging didn’t just happen in the auto sector. To remind everyone, double pledging happens when you pledge the same asset to multiple borrowing facilities. Let’s say I have a warehouse line at both Citi and Chase where I pledge assets, and they give me cash. When trouble comes to town someone will get left in the cold if one asset is pledged in two places. This is a great example of the bezzle I often reference (side note: bizarrely this paper by Michael Pettis has been removed from the Carnegie website). The recent failure of Market Financial Solutions (MFS) in the UK, a mortgage company providing short-term financing on property deals, dinged big names such as Apollo, Barclays, Jefferies and Castlelake. Remember Jefferies got beat up pretty good in the First Brands debacle as well. Western Alliance’s announcement yesterday that they charged off a $126M loan due linked to First Brands kicked their stock price to the curb. They also announced they are suing Jefferies.

Is your head spinning? The private credit headlines are coming just so fast and furious now. The Wall Street Journal published an article yesterday stating that MFS was the latest black eye for private credit:

It was the latest when the WSJ hit publish anyway. Never fear. I’m working on a tracker and tentacle pictograph.

Phew. Who’s ready for the Spring Selling Season? I will tell you who is ready: sellers. This we can surmise because as mentioned here previously listings for sale are exploding. Realtor just confirmed what I’ve been talking about for three weeks.

Most analysts look at the data monthly. I’m old school and watch my 85 markets weekly which is why I could tell you before everyone else what was happening. If you recall, I thought perhaps the crypto rout or wobbliness in the stock market was the trigger. We can’t know for sure but in San Jose specifically, which increased listings by sale by 22.98% MoM for the week ending 3/1, layoffs at eBay and Western Digital could be the culprit. By the by, San Jose also came in as #1 for decrease in YoY sales prices (-10.68%) in January for markets with over 500K in population.

And what of the storm-struck Northeast? They also have now seen listings increase, up 7.16% MoM and 2.21% WoW. For perspective, listings for sale typically bottom in February. On average since 2017, sales decrease -3.11% from January to February with a modest increase of 1.11% from February to March. Typically, by this point in the month FRED publishes Realtor.com data for listings for sale. Oddly, the next scheduled release date for this series is April 2nd. Hmmm.

We know Realtor has the data because they wrote about it. Guess what else won’t be updated until April 2nd? The median list price, which went under $400K in December for the first time since 2022 and has been YoY negative since November. The data providers can pull whatever tricks they want but you will be able to see it in your market either by looking around when driving or by checking the listing sites each week.

In today’s post I will review the Top 5/Bottom 5 market summaries for sales, price, days on market and inventory for the markets I track. Much can be gleaned by looking at who is consistently showing up in the top and bottom 5. Additionally, I will share lists of cities where we are seeing motivated, distressed and depressed selling. 43 of the 85 markets I track had negative YoY sales prices in January compared to 16 in 2025. Contagion is most certainly spreading. Finally, I will share my deep dive into Reno.

Before we hop over to the main event, a quick announcement. My pal is giving me 10 free tickets to his upcoming investment conference, scheduled for March 11th. The first 10 folks who purchase an annual subscription to my Substack will receive one complimentary ticket to what will most certainly be an exciting and informative event with actionable intel from well-known portfolio managers, traders, investors and analysts. Each of the 15 presenters will share one, compelling stock idea. For details, check out this link.

Ok - now it’s time for those meat and potatoes…

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Powell vs Trump, Dimon vs Lipschultz, Good Guys vs Bad Guys…when are we going to wake up and say enough is enough? The kayfabe serves as distraction as those in power obfuscate in hopes they can drain just a little more from the system, from us. How have you coped through the last several months? Did you spend a little more than you should, did you fly off to warmer temps in an attempt to drown out the noise, did you rail on social media in righteous indignation, or did you find yourself hiding under the covers? The deception we are subjected to on a daily basis would be enough to rattle Mother Theresa. That, my friends, is not going to change. The only thing we can change is how we deal with it. When the truth is ever-fleeting and reality unrecognizable, we have to focus and use our gifts to bring as much sanity to the world as we can. You have gifts I don’t and vice versa. For my part, when the excrement hits the fan the only thing that keeps me sane is heavy, productive pursuit of what I can know. While I may not be able to put the puzzle fully together, I can frame the edges through observation and the triangulation of the existing data. Truly that is what I try to do here…to give you clues so you are armed with more insight than you could gain on your own at the current moment so that you can make the best decisions possible for you and your family cuz those in power ain’t worried about us. In their minds, we are steppingstones to some vision of life most of us absolutely do not share.

Remember last week when I said that during the last crisis, each company’s borrowing schedules looked like the Who’s Who of High Finance? That we felt like we were part of a team, in it together to save the financial system? Most of us believed, needed to believe, that lessons had been learned despite no one ever being held accountable. Lessons were learned - just not the ones most of us thought. The architects of our last crisis just learned how to do it faster, better, stronger. But, as always, as history instructs, they got too greedy, they flew too close to the sun, and they believed their own BS. As before, the tentacles of this hyperfinancialization monster can be found on balance sheets around the system as it robs Peter to pay Paul. The names on the list of Who’s Who may be a little different, but yet again they repeat everywhere. What you are witnessing are these actors blustering about as they desperately try to deny that you and I are not just steppingstones.

Case in point? As tech titans run around pledging monopoly money to each other, desperately trying to push valuations ever higher, Forgotten Americans all over the country are rising up against data centers.

Amen to that. If you haven’t seen the video of the moments after the community learned that the data center would be cancelled, I encourage you to watch it. Of course, even in a story like this cynicism can be found. Nonetheless I encourage you to take from it the lesson that when people come together with purpose, sometimes just sometimes we win. In a post I wrote last year called Make it Happen I discussed this with respect to housing. By choice or not Americans have said no to ridiculously high home prices they cannot afford despite mainstream media working overtime to convince us that going into debt slavery is the only way. Even the feat of reading this (really long) Substack is a small act of rebellion as I often chronicle the falsehoods that get lobbed like bombs at us each day. A little bit later, I will discuss the new home sales data we just received for November and December which fits squarely in that category.

Before going there, let’s chat a little about two stories from High Finance this past week. First up, when the Co-CEO of Blue Owl, Marc Lipschultz, pounded his chest and threw shade (deserved or not) at Dimon in October, the following phrase came to mind: methinks he doth protest too much.

Indeed, that was the case, and it only took a few short months for reality to surface. For an excellent write-up of exactly what transpired, I recommend ’s deep dive into the details. What I find interesting about this story is that when you understand the timeline, we can see why Blue Owl badly needed to get everyone off the private credit trail. When reading the below details from the legal complaint filed by Goldman against Blue Owl which “alleges scienter, that is, knowing or reckless disregard for the truth — based on the executives’ direct access to BDC performance data, redemption figures, and liquidity metrics, as well as their control over SEC filings and earnings call messaging,” keep in focus when Lipschultz made his comments about Chase:

Q1–Q3 2025: According to the lawsuit complaint, OBDC II investors withdrew approximately $150 million over the first nine months of 2025 — a roughly 20% increase versus the same period in 2024. Redemption requests in August–September 2025 nearly doubled year over year. Third-quarter redemptions reached approximately $60 million, equal to 6% of net asset value. Tender requests exceeded the 5% quarterly cap in multiple periods, forcing the fund to prorate redemptions. Blue Owl’s Q1 and Q2 2025 10-Qs each reiterate that there is “no meaningful pressure” on its asset base…

October 21, 2025: Blue Owl and Meta announce the Hyperion joint venture — at the time described as the largest private-credit transaction ever executed.

Lipschultz’s comments came four days before this historic deal with Meta was announced. The con(fidence) game requires confidence. Clearly at the time Blue Owl was under significant pressure. The predominant lesson from the GFC? Don’t blink. The lesson those in power learned post the crisis and throughout our Silent Depression? Say it loud enough with enough conviction and many, many will believe, even if the facts contradict. You may not exactly understand the Blue Owl story because the concepts are foreign. There is no need. The key takeaway is that they did a lot of “fronting” to hide stress to make sure the Meta deal got done. What else is this sector hiding?

In looking at Blue Owl’s list of investments, the company we will next discuss, Klarna, appears. Blue Owl owns $65M of Klarna’s subordinated floating rate notes, maturing in 2034.

Anyone who has been in the credit game through a down cycle could tell you that distress at Klarna was just a matter of time. Private Buy Now Pay Later firms can claim low delinquency without having to really prove it. I have a feeling the private BNPL firms are doing some fancy footwork around non-accruals. When you are a public company, though, you have to work harder to hide the cockroaches as the scrutiny is much more intense and the definitions clearer. Accordingly, Klarna did what public credit companies have to do - they took provision for loan loss which put them in the red. From their earnings release:

Transaction margin dollars came in at $372 million, below our $390-400 million guidance, primarily driven by the faster-than-anticipated adoption of our expanded banking offerings. As our banking service adoption accelerates at a rapid pace, we provision upfront for future expected credit losses on new cohorts while revenue is recognized over time. When growth outpaces expectations, those day-one provisions temporarily weigh on margins— even when credit quality remains strong and lifetime economics are attractive. This is value creation that is deferred.

Ummmm. Day one provision? Yes, as a public company you do have to abide by generally accepted accounting principles, but you only have to take provision if you have facts that tell you based on historical performance, industry benchmarks or market fundamentals that you will need it. We are growing faster than expected so we have to take more provision as an excuse is quite the spin.

Click that button and the world becomes your oyster. So, Klarna, you didn’t think this campaign would be a raging success with our younger cohorts who are capital constrained and addicted to consumption? But, also, have you never heard of hedging? Could you have slowed your growth to deliver on your promises, or is getting over your skis already the look you are going for? Deferred value creation? Where have I heard that one before? Cough. AI. Cough. Cough. Based on rising delinquencies across all asset classes, I think it’s safe to say Klarna has some rough waters ahead.

Blue Owl + Klarna sitting in a tree, k i s s i n g. What could go wrong? Can I throw in another tentacle - this one real estate related - for good measure? Sure thing. Will do so below as even I had a hard time believing what I found but now understand even more why we cannot rely on any industry participant to provide reliable data. Additionally, for today’s post we will review those delayed results for new home sales received on Friday as well as the high-level January summary for the cities I track. Can we believe these new home results and what does it mean for Spring? In January of last year 16 cities of the 85 I track had YoY price declines. Guess how many this year? And, based on regional results for January, there are yet again strong signals as to which region will next fall. Finally, I will share a list of links to each of the city deep dives I did last year and reveal which city we will stop in next.

The latest tentacle uncovered in one, two, three…

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The effect? At a minimum, additional uncertainty has been injected while liquidity is challenged. With respect to housing in particular, one state saw a month-over-month explosion in listings for sale (and no it was not FL or TX) that far exceeds their historical average which I will share below, portending a very interesting Spring. In the markets, an uneasy calm seems to be the order of the day as of this writing (though the market is getting a little spicy just as I am about to hit publish). The market hit snooze on a less than rosy Retail Sales report and negative benchmark revisions for employment. Did someone say Rosy?

You know what happens in December, right? Typically, a lot of spending to ensure the kiddos have plenty to do on Christmas morn. Since 1992, Retail Sales have registered a negative month-over-month print from November to December nine times, seasonally adjusted:

Source: United States Census

The average Year-over-Year (YoY) increase in Retail Sales since 1992 is 4.65%. Remember…our economy has to grow, not just maintain. This year the number came in at 2.43%, just shy of December 2007’s increase of 2.86%.

And how are those credit card balances David Rosenberg mentions faring from a credit quality perspective?

Well, that doesn’t look good. Of course, if folks are gainfully employed and the labor market is “stabilizing”, as Jerome Powell claimed last month, then delinquency should stop climbing. While yesterday’s Jobs Report aka Non-Farm Payroll (NFP) came in hotter than consensus expectations at 130,000 jobs added, following a chilly December where per revisions only 48,000 jobs were added, the report also included benchmark revisions for 2025.

For those that have been long-time subscribers, these revisions will not come as a shock to you. However, if you are new to these pages take a moment to digest this data. Preliminary data received throughout last year showed 584,000 jobs gained. The number ended up being far less at 181,000, the weakest since 2020, compared to 1.46M jobs gained in 2024.

H/T: @MauiBoyMacro

College graduates who have been pounding the pavement to no avail won’t be surprised by these numbers, but those who last year believed the economy was strong and resilient based on previously reported numbers may be. What I coach here is that you have to use both the official data and what you see in front of your very eyes to assess the true reality of the situation. If the economy is firing on all cylinders, why do we have the highest % of jobholders who are working two part-time jobs to make ends meet?

Source: BLS via FRED

Additionally, before everyone gets excited about this rebound in hiring, consider that the largest growth in hiring came from our good friend, Private Education and Health Services, with 137,000 jobs added. While jobs were shaved from Information and Financial Services, this category as per usual saved the day. Frequent readers of course will not be surprised by this. We have seen it over and over in cities across the country. The Medicaid cuts will take time to flow through the system. Additionally, municipalities are running out of money to fund the public/private partnership programs that house many of these jobs. Adding insult to injury, as my colleague @craigshapiro pointed out on xTwitter, the (in)famous Birth/Death model struck again in an outsized way in the January 2026 report with an abnormal increase specifically in Private Education and Health Services. Once you start digging, you realize that nothing is as it seems.

Take this recent headline regarding private credit’s foray into real estate lending.

H/T: @kristenshaughnessy

Traditional hard money lenders demanded 40% down payments and charged rates above 12%, reflecting intimate knowledge of local markets and borrowers. Their caution was existential because these were often principals lending their own capital in hyperlocal geographies. But as firms like KKR-backed Toorak Capital Partners standardized the business, loan-to-value ratios climbed to 90%, and rates dropped to the high single digits. Approval processes favored speed over relationship-based due diligence.

Private lenders originated over $145 billion in residential construction and rental loans in 2025 alone, while simultaneously expanding into office conversions, ground-up multifamily development, and transitional commercial properties. The playbook is identical across asset classes. Underwrite to stabilized value, charge a premium to conventional debt, and rely on equity cushions that only exist if projections materialize. In stable or appreciating markets, this works. In correction scenarios, the math unravels quickly.

Again, if you are a frequent reader of this column then you will not be surprised. I have been emphasizing this private credit space for some time. What I’ve heard from some of these private credit actors is that they relied on those inflated credit scores and now it is coming back to bite them. Importantly, these private actors will need to be more aggressive than the government-sponsored entities (GSEs) and other government agencies to offload these distressed properties which could accelerate price discovery. This is particularly true in commercial real estate where these companies provide 20-25% of recent funding.

Commercial real estate, you say? Didn’t we just hear that Trepp reported the highest delinquency for Office on record? We sure did.

Additionally, delinquency in the multifamily (think apartments) sector also increased to 6.94%. Funnily, a Bloomberg article yesterday blamed a decline in real estate services stocks on the AI trade.

The selloff delivers another jolt through a commercial real estate industry that has struggled to regain its footing since the pandemic upended office demand and higher interest rates crushed deal volumes. While the boom in AI has fueled pockets of strength — particularly in data centers and high-end office leasing — investors are weighing whether advances in AI could ultimately pressure parts of the business by automating tasks and streamlining deal processes.

Okey doke. Could it have been a contributor? Maybe? These stocks should be in the gutter. What are we going to blame “AI” for next?

Why am I talking about retail sales, employment, private credit, commercial real estate, AI mania, etc.? Don’t you just want to know when home prices are going to make a move? What I’m trying to illustrate is the stress across the whole system. The idea of a strong labor market and that private credit lending which happened due to misconceptions about credit scores and labor, buoyed home prices even as fundamentals were seriously degrading. When it comes to the data, we are regrettably handicapped, so we have to put the puzzle pieces together. Nothing seems to matter until it does. Be forewarned, though, the Ides of March near. March in Finance has a really nasty reputation: Bear Stearns, Covid meltdown, Archegos, SVB, etc.

Speaking of Bear Stearns and the Great/Global Financial Crisis (take your pick), I got a serious case of the heebie jeebies when I saw this recent headline:

Oh, for heaven’s sake. We have seen this movie before which is how my former company, GMAC, got the TARP bailout last time only to put its mortgage arm into Bankruptcy in 2012 and manifest the purple monster, Ally. I was in the courtroom in NYC to provide subject-matter support for Day 1 Motions which I helped draft…twice. I wrote a lot about that history here, but seeing this headline invoked feelings that must be similar to what a war vet experiences when watching the exact thing they lost so much to stop was happening a l l o v e r a g a i n. I’ve felt some version of that emotion since going out on the road in 2023 almost every day. This headline, however, dealt a final death blow to my forever-incredulity and my feeling that I was part of something noble. I’ve often described how my team thought we were helping to save the entire financial system. At the time, everyone I knew in Finance was an avid Battlestar Galactica watcher. High Finance was a relatively small, interconnected community. Everyone was borrowing from each other and your borrowings schedules looked like the Who’s Who of Finance. Thus, the middle managers felt like we were in it together. For those who worked outside of High Finance, you probably thought all the madness ended in 2010 or 2011. I would say we (the useful idiots, not the big bad baddies) spent almost six solid years fighting for our lives. If only we’d been building high-speed rail or doing something remotely productive to improve the lives of the Forgotten Americans. What a waste of time and talent.

For today’s post there is much to review. Firstly, that surprising jump in listings for sale in the last two weeks is critical for understanding what’s next. We will discuss the key, unexpected areas where this is occurring. Secondly, FHA delinquency is in for January, and the drumbeats are getting louder. The Fed also highlighted an alarming trend for all mortgages in its most recent Household Debt and Credit Report which we will discuss. From the Black Knight/ICE delinquency series, non-Covid forbearances are on the rise and will impact timing on foreclosures hitting the market. We also received existing home sales for January and wowzer, they were bad. Which regions experienced the worst sales? What are they telling us about what to expect for the Spring selling season? And, finally, remember Sub To and the shadow real estate markets? The mortgage market is starting to wake up to the issue, and you will want to hear the latest.

Let’s begin…

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As I wrote in a recent post, we are firmly in campaign mode now with the midterms marching ever closer. The battle lines are being drawn, and the campaign promises are being A/B tested. If you are not familiar with the concept, it’s where you take two versions of something and shoot it out to the media sphere and see which one gets more traction. As much as I would like to never talk about politics again after having worked far too closely to that particular den of thieves, we do have to understand how politics can impact our families and financial future.

I don’t want to drive housing prices down. I want to drive housing prices up for people that own their homes. And they can be sure that’s what’s going to happen (my emphasis).

Clears throat dramatically. If there is one thing for sure, there is nothing for sure. In fact, as I shared last week, 41 of the 85 cities I track had negative year-over-year (YOY) median sales prices compared to 15 last year. The median list price in December as reported by FRED/Realtor just went below $400K for the first time since 2022. While Case Shiller showed an uptick month-over-month seasonally adjusted for November (slightly down non-seasonally adjusted), the Freddie Mac Home Price Index, which is not as lagged, reported its lowest year-over-year increase (+.70% YOY) in December since we were crawling out of the depths of the last housing correction. This was a similar result to that very small YOY increase we saw in the NAR series in December (+.42%).

Plausible deniability. This phrase is key to understanding politics. As humans, we all make promises, resolutions, goals, etc. We also innately understand that inevitably something comes along the way that derails us. We may reach our goal eventually but on a different timeline. Often politicians make promises they know they cannot keep. As long as they have a plausible reason as to why it didn’t happen, they are largely forgiven. Think about the runup to a wrestling or UFC match where opponents make promises and outlandish claims. It’s with this understanding that I view the drama, or kayfabe, between the Fed Chair and our sitting President. Both are on the hook for economic outcomes, and both need cover. They can point to one other when things go awry. Thinking of our current political sphere as a performative wrestling match may just save your sanity. It has mine.

No matter your political or ideological bent there has been a breaking news story across the narrative spectrum with an all-consuming shiny object just for you. Believe Civil War is imminent? Look no further than Minneapolis. Convinced AGI is at hand, and the robot overlords will destroy humanity? A self-organizing AI social network should do the trick. Of the opinion that the latest mooning in metals signals the end of our current world order as a central bank digital currency gets secretly ushered in? Or that a “stated” Fed pick could bring down the metals market? Here ya go. Worried that we are putting America’s interest behind our own despite campaign promises? The build-up of a “massive armada” near Iran should resonate. And of course, we can’t forget the payload of over 3M pages from the mothership of all motherships which details all sorts of political and financial shenanigans.

While there are aspects of each of these stories that are important, we are getting absolutely blitzed which is telling. Why so much noise right now? In my humble opinion, it’s the economy. Between Amazon, UPS and Home Depot, almost 50K layoffs were announced last week. This on the heels of 2025 which had the highest Q4 layoffs since 2008.

The ability of the AI narrative to drive unchecked enthusiasm and stock buying and paper over the woes in the real economy is petering out. We’ve become accustomed to watching stocks slide, only to rebound as some rando tech company announces a monetary commitment to another rando tech company. On Friday, Huang walked back its latest headline “commitment” saying it was never really a real commitment (plausible deniability). While many of us (myself included) scramble down the rabbit hole, chasing answers we all deserve, corporate insiders, aka the oligarchs, are busily getting their houses in order.

Almost 1000 executives at roughly 6,000 US-listed firms have unloaded shares this month, compared with 207 who added, resulting in the highest sell-to-buy ratio in five years, data compiled by the Washington Service show.

And in case you missed it amidst the deafening media roar, a small bank failed on Friday which is pretty much right on schedule if you have been paying attention.

State regulators closed Metropolitan Capital Bank & Trust, headquartered in Chicago, on Friday. The FDIC was “named receiver and brokered the sale of most of the bank’s $261 million in assets to First Independence Bank in Detroit, including all deposits.” Thus far, details are scarce, with the press release pointing to “unsafe and unsound conditions and an impaired capital position.” We will learn more about those unsafe and unsound practices in the coming days but likely a cockroach will be revealed.

Speaking of cockroaches of which we have a cadre, you may have also missed that BlackRock, the world’s largest asset manager, recently announced a 19% decline in the net asset value of its business development company BlackRock TCO capital which resulted in an $140M loss. The investments had been marked at full value as recently as November. I remember how my life changed from November of 2006 to December of 2006. I have detailed here how my former company went from celebrating its best year ever to writing down millions and millions of dollars seemingly overnight. There were signs at BlackRock in 2024 that all was not well (including one of its loans to Renova, a home repair company) but by moving things around and firing their rating agency they were able to convince any - and there are so few - handwringers that all was fine and dandy. That is of course until oopsie!

BlackRock’s disclosure underscores the risks investors face inside the opaque private-credit world. It can be difficult to know what investments are worth at any given time, given that they hardly ever trade and instead are valued by fund managers using a mix of internal analysis and third-party pricing services. The way private funds mark their holdings determines the fees they charge clients.

We have often discussed here the risk of private credit. The world of hyperfinancialization is so complicated it can make the eyes of even the most studious glaze over. To put it simply, the banks pulled back lending to Main Street after the GFC due to various regulatory requirements. Instead, they lent to or facilitated the lending to companies like BlackRock who then went off and did the risky business. Often, the banks would then sell off that risk into the derivative market making it almost impossible to know who will ultimately lose this game of musical chairs. For perspective, some believe the shadow banking sector is now 2-2.5x bigger than it was in 2008. If interested, I’ve recently been researching and writing about these transactions in the commercial real estate sector at .

This is a long way of saying that 2026 is off to one heck of a start. Trying to keep up will be impossible as the noise will get louder. Nonetheless, my commitment to you is to study the stories for what they could potentially mean for your financial future, especially as it relates to housing. Below I will share the Top 5 city summaries for December sales, price, inventory and days on market as well as lists of cities where there is motivated, distressed and depressed selling. You will absolutely be surprised about where these cities are located with the Northeast and Midwest most assuredly joining the party. Additionally, I will provide the list of cities where there is “low inventory” but YOY price declines yet again debunking that particular myth. In honor of Florida’s frigid weekend, we will stop in Tampa where believe it or not, snow flurries were spotted yesterday. Going back to the 1800s, measurable snowfall has only been recorded twice there: 1899 and 1977.

As there was no accumulation yesterday, January 2026 won’t be added to that list. However, the weather is not the only chilly thing in Tampa.

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The information thus far published in December is full of clues about what we can expect in 2026, and the path housing will take. So far this month we have received December Existing Home Sales and New Home Sales data for September and October. Although we are still missing two months of new home sales data, it’s safe to say that 2025, from a combined sales (new + existing) perspective, will likely be lower than any year besides 2008, 2009, 2010 and 2011.

The yearly average for combined sales since 1999 is 5.9M. Using historical averages for new home sales, I’m estimating 4.7M combined sales in 2025, which will be the worst of this cycle. For comparison, sales averaged 4.6M from 2008-2011. Since 2008, we have increased population by 12.32%. At the same time, we’ve seen the median sales price, according to the National Association of Realtors (NAR), continue to increase, albeit at a decelerating pace. While we saw significant YOY deceleration during the Spring selling season last year, existing home sales prices over the late summer and fall wobbled back and forth…that is until December.

The 0.42% YOY increase in the median sales price reported in December is markedly lower than the 5.85% YOY increase we saw in December of 2024.

New Home median sales prices on the other hand are already down -14.77% from their 2022 (revised) peak.

Where will we go from here? The answer lies in the details I painstakingly review each month. Below we will review regional market metrics for both new and existing sales such as sales, prices, days on market (DOM) and inventory. You will not believe which region just went YOY negative for median sales price in the M3 series. This is a significant reversal that means that next month we may no longer be simply talking about regional declines. September and October results for the builders are telling an important tale, while yet another series that I follow closely provides further evidence a YOY decline in the NAR series is just around the corner. Also, guess which October had the exact number of new home sales as 2025? For the data curious, I will share below.

As I often say, we have to triangulate the data to understand the whole picture versus the prime-time talking points we hear in financial media. FHA delinquency for December is in, and the story there is certainly getting interesting as we knew it would. Finally, I will share my thoughts on the 401(K) chatter we are hearing from the administration and what impact that might have on all things housing.

Let’s discuss what lies beneath these headline results…

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In January of 2023, I did a Twitter spaces with Michael Gayed where I said that I believe that ultimately the government would have to get in the business of owning homes or owning them by proxy through a nonprofit. While most were arguing that we had an inventory shortage I was looking at the whole picture, not just what was currently listed on the multiple listing services (MLS). Those “all cash” sales meant that many of these homes would not be found on the balance sheet of banks and nonbanks and thus, not serviced in the traditional sense. You see, when you play in the securitization game, there are many rules that must be followed. As an owner of the right to service that loan for a fee, when a loan becomes delinquent, you are responsible for mowing the grass, mold removal, winterizing the property and paying property tax and insurance and vacant property registration fees if applicable. Your job is to keep the asset in pristine condition to maintain value of not only the property but of the market itself by ensuring that blight does not bring down the whole game. Remember, the house is the collateral backing the loan. If you are unable to sell that home for the loan amount, then the security issuer takes a hit. The lion share (approx 85%) of mortgage securitizations is issued by the agencies which are either implicitly or explicitly backed by the government. So, when losses happen at scale and reserves are depleted, the taxpayer takes it on the chin.

Trump’s tag phrase “people live in homes, not corporations” had a familiar ring to it. Indeed, in 2016 another leader stated something very similar. Care to guess where?

"Houses are for living, not for speculation" (Chinese: 房子是用来住的，不是用来炒的; pinyin: Fángzǐ shì yònglái zhùde, bùshì yònglái chǎode) is a Chinese political slogan to curb excessive speculation in the real estate market. The phrase was first coined by Xi Jinping, the general secretary of the Chinese Communist Party (CCP), in December 2016, and later became the guiding policy of the Chinese government towards the real estate sector.

Remember, it was at the behest of our agencies that the institutional investors waded into the market. In yet another example of the “smartest guys in the room syndrome,” everyone thought this was THE solution to stem the flow of foreclosure sales that were sweeping the nation post 2008. The state AGs did their best by placing moratoriums all over the country on foreclosure sales, but the market needed a buyer and there was none. The institutionals complied and made a pretty penny renting those homes out to displaced, former owners before rates rose in 2022 along with insurance and property taxes.

Playing up the narrative that corporations are buying up all the homes so that young Americans can’t have them tested well when this idea was floated before the election. I remember getting asked by Fox to come on and discuss this insult to the American people. I politely responded that this issue wasn’t what they thought it was and that it was political theater. Of course, political theater is the bread and butter of mainstream media. Let’s start with the facts. Institutional ownership is absolutely a problem, especially in cities where there is a bunch of it like Atlanta and San Antonio. The below table from ResiClub highlights where the third largest institutional investor, Blackstone, owns the most single-family homes.

Last year, I filmed outside of a home owned by First Key in San Antonio, where I discussed the drastic price cuts on the home due to the investor needing to offload as a result of a whopper of a property tax bill. The institutional investors do not get the homestead exemption. By slashing prices, the institutionals drastically impact the comps in the neighborhood, lowering zestimates for you and me if we happen to be living next door.

Because many of the players in this space are privately held, stories about these distressed sales are very hard to find. It takes combing through county records - which you sometimes have to do in person - to discover who actually owns the property. Often it is a maze of trusts and LLCs. Significant effort is required to sift through this data to identify the true owner. This is partly why many in the industry do not understand the role speculation has played.

While institutionals are a problem, they are not the problem in my opinion.

We of course have to take the above chart with a grain of salt due to just how hard it is to discern owner, but as we often discuss here, the housing market has not been about Joe and Jane for a very, very long time. Landlording is an American pastime.

HGTV and real estate influencers worked double-time to convince everyone that this was the passive income play. The problem? Being a landlord is not passive. It takes a lot of work and money. Housing as investment is a mentality that was fostered not only by the above-mentioned players, but by our monetary demigods and the Bureau of Labor Statistics who defines it as such in the CPI. One can argue that the Zesteffect is what has kept our economy rolling since the Covid lockdown.

So, what is this announcement really about? I will discuss below, but before doing so I want to make a couple of stops to discuss some recent headlines and pieces of data. Realtor.com, who shares a parent with the WSJ, recently published an article discussing what it would take to cure our affordability problems.

I find this rich coming from the same organization that has been restating median listing prices so that they do not show YOY declines. But, hey, maybe they finally realize that if they want to improve volume of sales to something that resembles the average since 1999 versus the lows, they may have to properly acknowledge the elephant in the room. According to Realtor, the below would have to occur to restore affordability:

I vote for #2! Unfortunately, that does not look to be currently in the cards. I question #1 because of just how high rejections are for purchases and refinance applications. Many who may want to buy can no longer qualify largely due to those gnarly student loans, layoffs or other leverage. Additionally, as I’ve been told by Boomers from across the country who have rates below 3%, where would they go since they could no longer afford a like home if they sold due to higher home prices? They would need to deploy their “earned” equity, thereby losing it, to buy a similar home unless they moved to a more affordable area which many of them don’t want to do. Our youngest Boomers are 62. Can you imagine taking on a 30-year mortgage at that age especially if you want to leave your home free and clear for your children? Reverse mortgages only make sense when you have a lot of equity and don’t make a lot of sense if you do want to bequeath your home. So, where does that leave us? That’s of course a rhetorical question.

In other news, you may have seen headlines touting our robust Gross Domestic Product (GDP) as evidence that the economy is roaring along just fine. If you don’t know, GDP is meant to signal our overall economic health. Some have argued that last year’s strength was driven primarily by AI investments while they also question the accuracy of the number due to data limitations during the government shutdown. Although, we won’t get into the dirty details today (more to come), would the below be true if the economy was doing just dandy?

We had more workers working a full-time and part-time job in November to make ends meet than we did in November 2008. While population has increased by 12.32% since 2008, the number of individuals working both a full-time and part-time job has increased by 30.00%.

Full of good news you are Melody, as per usual. Although it is not good news, it is a more complete picture which will likely help many of you who are feeling a bit crazy as what’s circulating in headlines does not match your reality. My goal here is to arm you with as many facts and figures as possible to help you when important financial decisions need to be made. Below I will give you my take on what’s really driving this recent announcement regarding institutional ownership by the administration and what it could portend. Just as I was going to hit publish, Trump announced that he was going to direct Fannie and Freddie to buy mortgage-backed securities (MBS). The catch? Well, as I wrote about in this post a few weeks ago, they have already been buying, and the results are pretty abysmal. Below, I will do the math as to how that additional $200B may impact the market. Finally, I will dive into San Francisco which took first place in last week’s survey, thus making it the next stop on our city tour. For months I have been curious about the activity I saw there. Having the time to focus, I now have some questions answered.

Let’s begin…

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Source: BLS

Since February 2020, prior to the lockdown, nonfarm payrolls have increased from 152,292,000 to 159,552,000 or by 4.77%. Education and Health Services on the other hand has increased by 12.41% from 24,573,000 to 27,623,000. The only other category to see double-digit gains is Transportation and Warehousing. Think of all those Amazon deliveries you received during Covid. However, that category peaked in February 2025 and is now down -1.16% from the peak while jobs in Education and Health Services have increased by 2.09% during the same time period.

So what, you might be asking. Unless you have been on a mission to Mars you have likely heard something about the systemic fraud and abuse uncovered in Minnesota which was detailed in this incredible article in County Highway. While mainstream media plays partisan politics with the story and focuses on a specific group, I encourage you not to lose sight of this story’s importance. Because it’s not just in Minnesota. I have seen evidence of this fraud in my research and travels all over the country in both blue and red states. These public-private partnerships where the government gives money to an organization to provide some type of social service, be it housing assistance or daycare services, are breeding grounds for at best ineffective ministrations or at worst fraudulent activities to finance Lambo purchases.

My travel buddy and I did everything we could to get inside of O Lot. Unfortunately, we were not allowed in even with our press passes. There was also a no-fly zone over the encampment so we could not get aerial footage. However, we were able to interview Anthony as he was leaving the camp. O Lot was created to move the homeless from the underpasses and get them off the streets. Anthony described a program where he felt relatively safe in his tent. What the program did not provide was any means or assistance to find a job or permanent shelter. By the by, there are also still plenty of folks living under underpasses in San Diego. Like the Otay Mesa detention center we would also visit in San Diego, owned by CoreCivic, headcount is of upmost importance for requests for funding. When speaking to a former inmate from Truesdale here in TN, run by CoreCivic, which is under federal investigation, I was told that on his day of release he had to wait until the count had been done. He also detailed stories of how federally mandated provisions were routinely withheld. No milk for prisoners at Truesdale! That of course was not the worst of what he experienced there. Days after he was released the inmates took over the prison which was de facto run by them anyway.

I’m working on a longer version of the Truesdale story, but in the meantime, it is important to understand that the grift stretches from sea to shining sea, and is no way limited to Minnesota and a particular ethnic group. In fact, in a recent America This Week, Kirn and Taibbi conjecture that perhaps this behavior was learned from observing the military grift that can be found overseas in war-torn areas where American forces are present. Think $20 bottles of water. This, by the way, is the same grift I have witnessed over the past year in disaster areas here in the United States. For some hair-raising details about yet more unintended consequences and various forms of grift and money-making schemes which followed our military home from our forever wars, I recommend The Fort Bragg Cartel: Drug Trafficking and Murder in the Special Forces, by Seth Harp.

As we have often discussed here, local municipalities spent money like drunken sailors with very little, if any oversight. Now budgets across the country are getting crushed as they overestimated their population gains and believed the dollars would keep coming. In this Substack, we have detailed specifically housing programs that can be found in Chicago, Portland, Boston, Rochester, etc. to name just a few. While well-intended, an entire cottage industry sprung up to help folks that are not qualified as a nonprofit to get in on the grift. For instance, let’s take some of those nonperforming loan sales that the agencies did which were intended for nonprofits focused on affordable housing. Often what would happen is that a hedge fund would find a willing nonprofit partner who could qualify to then effect a way to profit. When I worked on these sales in the industry in 2015, there were strict reporting requirements about loss mitigation and dispositions. What I have come to understand working with private note buyers is that those reports are no longer required, or if required, not scrutinized.

Get to the point, you might be saying. What if many of the jobs that we think exist out there rolling up under Education and Health Services are actually fraudulent? What does that mean for the state of our economy? That would mean that the category that was one of the only categories to see a positive gain year-over-year (YOY), and the only category to see a gain of more than 1%, might not represent what we think. If you exclude Education and Health Services, the average for the remaining categories combined is a -.49% decline in payrolls YOY.

The noise out there is deafening on all fronts. It can be easy to tune out or shutdown - we cannot. We can ignore the algos working to divide us, but importantly, anyone considering a large purchase based on a rosy view of the economy could find themselves on the side of a losing trade. Home sales have been abysmal this year, like they have been since 2023. Despite that I see news articles from every industry publication touting how 2026 is the year it is all going to turn around. What do they point to? Rates. Rates they do not even understand. You can always refi turned to date the rate in this cycle. The advice from those in the industry was based on what has been not what is. Even with Fannie and Freddie stepping in to buy mortgage-backed securities (MBS), rates still have not reached the lowest level we saw last year.

Could rates go lower as trouble intensifies? It is a possibility, but right now the bond market is being stubborn. Due to what’s happening globally I don’t think rates will go as low as needed to truly improve affordability and turn the housing market around. They may go low enough to generate much-needed activity but not enough to make buying a home make sense for most Americans. In the meantime, many of us do not fully understand that this “resilient” economy has been built upon sand and bezzle which is why we have had any buyers at all. As the winds gain speed, our illusions will become more and more obvious with each passing day.

Speaking of headwinds, as discussed in recent posts, guardrails have been put on the overly generous FHA program, and delinquency is on the rise. That’s not the only reason delinquency is rising, however. For today’s post, we will focus on the latest delinquency data from ICE/Black Knight. Additionally, I will share an interesting read that hit home which offers a compelling theory about what’s really driving the erosion of our middle class. And, finally, I will share top 5 city summaries for sales, price, days on market (DOM) and inventory to highlight regional performance as well as lists for cities where motivated, distressed and depressed selling occurred in November. Several cities in the Midwest showed surprising results, and I believe it is a sign of what’s to come there.

A couple of show notes:

1. Below, you will find a quick survey to help me gage which cities I should dive into next. There are many requests and some in queue already, but I want to prioritize based on your interest.

2. Once December results are received for both new and existing home sales, I will provide a final review of 2025 - what I got right, what I got wrong - as well as my tentative forecast for 2026. Without December and all those missing months of new home sale data, we are lacking adequate information to try and attempt that now.

Now to the meat and potatoes…or perhaps more fitting (for Southerners at least), to the collards and black-eyed peas…

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By 2008, their combined holdings swelled to more than $1.5 trillion, and the portfolios had become Fannie and Freddie’s primary profit engines…when the housing market buckled during the financial crisis, those positions — and the leverage behind them — delivered heavy losses that helped push Fannie and Freddie into conservatorship.

After the crisis, the Treasury imposed a cap as to just how large those portfolios could get. Bloomberg reports that they are $200B below their cap meaning that the agencies have plenty of runway. By stepping in as a large buyer, the agencies maintain demand in the market, reducing the spread between the 30-Year Mortgage Rate and the 10-Year Treasury, effectively lowering mortgage rates. Before we discuss the future implications let’s review historical patterns and what has been accomplished thus far.

Zoomed out:

Source: FRED

Since 1971, the average spread between the 30-Year Mortgage rate and 10-Year Treasury is 1.76%. In June of 2023 the spread reached the highest levels we’ve seen since the eighties, even slightly higher than observed during the GFC. Bessent made it clear earlier this year that they were focused on lowering the long end of the curve, but the bond market had other ideas. Every time the Fed has cut, the 10-year and mortgage rates have risen. As I have traveled across the country, interviewing Uber drivers and folks on the street I have learned that your average Joe is much more knowledgeable than most realize about why housing prices reached nosebleed levels. They will tell you plainly that the Fed caused it by buying mortgage-backed securities. The Fed is currently performing “lessons learned” choosing to reinvest MBS principal payments into Treasury bills. Meanwhile, the agencies quietly stepped in to take the charge in reducing spreads and lowering mortgage rates. The result?

Zooming in:

Source: FRED

The spread has tightened and mortgage rates have indeed gone down but have sales rebounded? Combined sales of around 2.9M from May to November are running 18.5K ahead of the same period last year but are -22.24% lower than the 26-year average for that time period.

It’s interesting (and sad) to watch the desperate officials do whatever it takes to either gaslight us or take last resort measures. In one way you can’t blame the administration for trying to address the affordability crisis by using any tool in the toolkit, but when the agencies increase their exposure in this manner, they become an ouroboros. Securitization is a dangerous drug, and the addiction runs deep. Some argue that this move is meant to help increase value for a potential IPO. At the moment with what I see ahead, I just cannot take that talk seriously. The minute I see meaningful action I promise to let you know. In a recent post I wrote for I dove into a Freddie securitization, and what I saw was concerning. Due to modifications and extend and pretend things look much rosier on the surface. In the latest performance report, the deal has a 0% delinquency and a 0% loss rate. Recently, two of the underlying assisted living properties in that securitization sold for a $36M loss and combined 89% haircut. That loss was absorbed by Blackstone (and likely whoever bought a credit risk transfer derivative) who satisfied the Freddie loan, but soon the agencies will start to see these losses mount as those with smaller wallets are unable to make Freddie whole. Zero delinquency in the deal, but 56% of the assets in that securitization are on the watchlist. The weight behind the dam is building.

In other news from the agencies, Fannie and Freddie are limiting information they have historically made publicly available.

So lame. Almost as lame as the Consumer Price Index (CPI) data we received on Thursday which reflected full November results while showing gaping holes where collected data should be for October.

While some in the administration took a victory lap, most reporting outlets quickly pointed to the missing data as well as the likelihood that data was skewed due to starting collection later in the month. There was much noise about the shelter component, but as I have been coaching, we have to triangulate the data with other sources as well as look at what is in front of our eyes. When it comes to shelter both Apartment List and CoStar reported dropping rents in November.

Apartment List reported that the national median rent dropped by -1.0% month-over-month (MOM) in November, the 4th consecutive month showing a MOM decline. Additionally, rents are down -1.1% compared to one year ago. At the same time, as I have been warning here, vacancy has increased to 7.2%, the highest that Apartment List has seen since it started its index in 2017.

The Covid boom meant everyone went gangbusters building a range of housing options, often luxury, which should not be viewed in isolation: townhomes, Built-for-Rent, spec new homes, tiny homes, multifamily, etc. Due to affordability constraints what happens in the rental market will impact the new and existing home markets and vice versa. With multifamily and Built-for-Rent still coming online fast and furious in the single-family rental market, we will see vacancy march steadily higher, becoming chronic. I had several followers report this week from places like Wisconsin and Illinois on unchecked building with no demand in sight. An example of the ridiculousness can be found in this video, giving pointers on how to market vacant, new townhomes in Cincinnati. It’s hard to fathom but the hammers have yet to stop knocking even as “sophisticated,” smart money investors in multifamily for instance come under stress.

Based on their participation in the last housing cycle, PIMCO should really know better. That they don’t is telling.

I believe what we are seeing in some markets such as San Francisco where rents are more resilient is transition as motivated sellers opt to rent instead. Sales slowed significantly in San Fran this month after being quite strong recently. What I hear on the ground is that tech workers who were laid off last year are offloading properties to new Nvidia millionaires. I will be diving into San Fran soon to test this hypothesis.

Home prices say “hold my beer” to declining rents and are also on their way down despite what the largest lobbying firm in DC by spend says. CNBC reported last week that YOY prices “have gone negative”.

What’s fascinating about this article is that it doesn’t flat out state the actual YOY decline. It says instead that prices are down “less than 1%”. The data provider mentioned in this article is one that I worked with early in my days on social media. I know a little something about their methodology, and they would likely have a better idea than NAR as well as they are looking at both new and existing sales prices which we should all be doing unlike those in the industry who tell you otherwise. To that point, as we still don’t have new home sales data, I have used the historical correlation of new home median sales price to Lennar’s reported average price to calculate an estimate for the new home median sales price which I will share below.

CNBC is about as mainstream as you can get. With Newsweek and CNBC running big stories pointing to national decline I believe we are witnessing a shift in the mainstream national narrative. No longer is it just about certain markets or a topic of discussion among housing geeks like us. In so doing, when a survey respondent gets their next call from the BLS inquiring what they think they can rent their house for, homeowners may start to let a little reality creep into their answer. There is always a significant lag to changes in the shelter component of the CPI as illustrated below. Whether or not you are willing to hang your hat on November’s shelter number, there is nothing on the horizon currently which will reverse this trend.

Denial is still very strong in many areas, but I have multiple data points from November results which we will discuss below that will challenge even the strongest deniers.

Before we get into the dirty details found in November Redfin and existing home results, we should talk a little about the jobs report. The U-3 unemployment rate rose to 4.6% and showed 105,000 jobs lost in October and just 64,000 jobs added in November. In looking at the YOY % change, we are seeing levels last seen during the onset of Covid and the GFC.

The only sector that continues to hold up is of course Private Education and Health Services. Nonetheless, as often discussed here in our city deep dives, many of the jobs that fall into that category have or will soon lose funding due to cuts in Medicaid and city budgets as the American Rescue Act money finally runs out. There looks to be serious froth in the healthcare sector, and despite typically being recession-proof, we may soon see serious slowing or outright declines there as well. For a detailed analysis on November’s report, check out latest.

Much has happened since we last spoke including a number of articles questioning AI mania and debt-fueled data center spending. More and more it feels as if major publications have taken to CYA articles talking about things that have been covered here for two years to protect from the inevitable egg on face. More and more articles are also hitting mainstream about AI hype versus reality. This was my favorite from the week:

While some may argue that these are the inevitable growing pains for any new technology, there are recent academic studies and reports that challenge the over optimistic claims in the space, including whether the models can truly yet play a pivotal role in scientific discovery. You can believe in the potential of the technology without falling for the hype. Just as housing mania drove the builders large and small to build way too much, so will be the case here, if it isn’t already. Importantly, I think regular Americans have already woken up to the fact that they don’t want their electricity bills going up to support AI chatbots that would make Narcissus blush. If only the elites and technocultocracy could get their heads out of their you-know-what so we could have rational discussions about the path ahead for AI. If only…but they won’t, so we need to make it happen. We need to progress the fight by either voting with our dollars or showing up to city council meetings.

Housing plays a critical role in our economy and intersects in meaningful ways with these macro themes. Without AI mania we would have seen housing continue its correction in 2023. The madness and stock market highs gave credence to soft landing hopium for just a bit longer. It’s important we stay abreast of these topics to understand the larger picture while also grasping local dynamics that will determine the speed and depth of the correction I see coming.

On Friday, we received existing home sales results and there is much to dissect. You will not believe which region showed the sharpest deceleration in YOY existing home sales prices. We will also review Redfin sales and price results for clues as to what’s next. Subtle shifts in price cut percentages may be pointing to sellers getting a little more realistic. Additionally, while I was traveling to NYC to digest the latest actions by the Fed with colleagues, published FHA delinquency results for November. They were informative. Speaking of the Fed, for more about the Fed’s decision to start Reserve Market Purchases, I recommend ’s article on the subject. In builder news, Lennar reported weak results, offering insight into what those new home results might look like if we had received them. And, finally, you will not believe which industry price series finally went YOY negative in November.

Let’s dig in…

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The Chinese went bigly, developing properties all over China as a way to stimulate the economy. Projects included this 128-story now abandoned skyscraper, which featured luxury residences and was planned as an eat-live-play development.

As I stood outside of an empty multifamily development in the outskirts of Nashville in January 2023 all I could think about was China. For months the news media had been portraying what happened to Evergrande and the Chinese real estate sector as somehow completely foreign to anything that could happen in the United States. Yet with each mile clocked across the United States I would see our own bridges to nowhere: farms of empty multifamily, complete playgrounds in subdivisions with no houses (and no current construction), subdivision after subdivision full of empty houses and cranes swinging from newfangled high rises right next to abandoned commercial real estate of the same size.

China, who the media painted as our foil, was more of a mirror, albeit at a larger scale, than anything else. Mutterings of China’s woes in the property sector died down just as the issues confronting U.S. builders disappeared from our media post SVB bailout and Nvidia mania. Instead, journalists like Conor Sen, wrote articles touting the “deal” would-be-homebuyers could get with a new home due to low supply of existing homes.

This article was not a piece of journalism - it was an advertisement. Ask all the folks who bought those overpriced homes now how they feel about it as their values have significantly declined.

Remember the new home price peak was MUCH higher ($36K) than what is represented above, so the loss is also greater. In 2024 (a year after Conor Sen wrote the article above) the Census took a machete to almost four years of data and revised the previous peak down from $496,800 to $460,300, despite major builders reporting prices around that $496K mark in their earnings for that period.

At the time, I screamed from the rooftops, warning of the danger of buying in a subdivision which might never be fully occupied or would at least see serious depreciation due to all the other subdivisions being built just next door. There are whole Facebook groups dedicated to buyers’ remorse and shoddy construction. I also warned that some of the new homes or subdivisions could be sold for rentals as they already had been meaning that you could suddenly find yourself in a single-family rental neighborhood versus a neighborhood of owners. The degradation I have seen in new build communities across the country that were built for ownership but sold to someone like American Homes For Rent is shocking.

The Chinese real estate sector is recently back in the news. Vanke, “one of China’s biggest real-estate companies” had thus far escaped the troubles that plagued Evergrande and other developers - that is until they announced a proposal on November 26th to delay a bond payment which reignited fears about the troubled real estate sector in China and caused a selloff in shares across Chinese developers. Interestingly, a few days later, we get this headline:

H/T: Tracy Shuchart

After two months without new home statistics from the U.S. Census (which relies on the builders to fill out a survey), I could not help but to remark on social media that the situation in China seemed “vaguely familiar.” Of course our entire government was shut down but the result is the same - folks that rely on the data to understand the health of the economy or use it for modeling price targets on the sector are flying blind in both the United States and China.

Just as Chinese developers are back in the news, I noted here three weeks ago that after years of mostly silence on the burgeoning overbuild crisis, the builders in the United States are also back in the headlines with stories about their current state in both Bloomberg and the Wall Street Journal in early November. Additionally, the American Enterprise Institute recently published an article questioning the practice of permanent buydowns and their exclusion from seller concessions. As I’ve often noted here, if the concessions were properly accounted for, we would see approximately $50K shaved off the median sales price. That would mean the new home median sales price would be tracking around $350K or less…a far cry from the $415K the National Association of Realtors just published for the existing home median sales price in October. Suddenly the media is also waking up to what I’ve been pointing out here for at least eighteen months - we are in an unprecedented situation where new home sales prices have been consistently lower than existing home sales prices for a sustained period. Prior to 2024, the only time I’ve seen this phenomenon of used homes being more expensive than new ones in the data going back to 1999 was in June 2005 and in June 2021. Although we’ve seen some flip-flopping since 2024, I bet if we had the most recent new home results, the median sales price would be below the median existing home sale price.

From the National Association of Home Builders November Housing Market Index report:

In a further sign of ongoing challenges for the housing market, the latest HMI survey also revealed that 41% of builders reported cutting prices in November, a record high in the post-Covid period and the first time this measure has passed 40%(my emphasis).

I love how this is worded. By stating this is a “record high in the post-Covid period” one might think that maybe we are just returning to norms. The NAHB has been doing this survey since 1985. Did they ask this question all the way back in 1985? I have not been able to verify either way, but I would imagine so.

Tricksy wording and revisions are the order of the day. Lest you think it is only the builders, in reviewing historical list price information for my price tracker (pasted below), I realized that Realtor/FRED had done it again!

Speaking of China, aren’t they known for monkeying around with their stats?

Anyhoo, after spending days fighting the furor over a news story where I was featured and misquoted for clicks, my blood boiled when I caught them red-handed AGAIN! While the anonymous trolls throw excrement at me claiming that I’m engagement farming by making ridiculous claims, the real estate industry is tirelessly working to ensure that no one else sees what I’m seeing. Although most told me to be happy the media outlets spelled my name correctly and that there is no such thing as “bad publicity”, I couldn’t help but feel dismayed at what felt like a hit to my credibility.

I’m over my pity party now thanks to many of you who supported and adamantly defended me, spending precious time to do so, through the ordeal. I also have a conversation with my colleague Jon Brooks to thank where he reminded me that I am battling the largest lobbying group by spend as well as the elites who are highly vested in keeping home prices from correcting. He also reminded me that I am advocating for the consumer, the little guy, the Forgotten American.

Despite the shenanigans and constant moving of the goal post, you can put the puzzle pieces together by triangulating multiple points of data which is what I try to do here. Take for instance recent results from Home Depot and Lowe’s - “two of the 10 largest U.S. retailers by sales”- which dissects in a recent post:

Traffic trends for the large home improvement retailers Home Depot and Lowe’s—two of the 10 largest U.S. retailers by sales—are striking and say much not only about the housing market but also about the so-called K-shaped economy and discretionary spending. Many have written about the worsening financial condition of low-income Americans, but the problem is far more widespread.

According to Numerator, a consumer data company, 80% of Home Depot’s and Lowe’s customers are middle- and high-income households. In other words, these retailers aren’t overly exposed to low-income households. Yet their traffic trends over the past four and a half years have been historically weak (my emphasis).

Housing mania peaked in October 2022, and the media, the government and the industry have done their level best to convince you it is not so. Unfortunately, that means many sellers are about to get burned. While the extend and pretend has lasted much longer than I believed was possible, options are now limited if societal order is to be maintained. Anger over lack of affordable housing is growing.

Speaking of extending and pretending, the New York Fed published its Survey of Consumer Expectations (SCE) Credit Access Survey and that mortgage refinance rejection rate is even worse than what we saw in February (a series high).

The door to credit is being slammed shut meaning that many of our investors will have to list those properties just as delinquency increases due to layoffs and limitations being placed on overly generous FHA loss mitigation programs.

U.S.-based employers announced 71,321 job cuts in November, up 24% from the 57,727 job cuts announced in the same month last year…Through November, employers have announced 1,170,821 job cuts, an increase of 54% from the 761,358 announced in the first eleven months of last year

While layoff plans are down from the October stratosphere where 153,074 cuts were announced, “job cuts in November have risen above 70,000 only twice since 2008: in 2022 and in 2008.” Importantly, announced hiring plans tracked by Challenger in November are the lowest since they began tracking hiring plans in 2012. December did not get off to a great start with Omnicom, in addition to several other companies, announcing 4,000 layoffs.

With labor prospects in the toilet, what of our cockroaches and friends in private equity? Did someone say toilet?

Private Equity and Port-o-Potties…that was indeed not on my 2025 bingo card!

My favorite response to the post I did about the Realtor/FRED sleight of hand brought me back to my undergraduate days when I studied Russian literature:

I’ve noted here before how I have often felt since 2015 that I am living in a Soviet-era fiction novel, especially when working in Corporate America. The noise is indeed unbearable, but the signal can be found if you look hard enough. No matter how much nonsense gets spewed, reality will come home to roost. The more courage we have, the louder that we are, the less power the lobbying firms have. Voting with our dollars is paramount.

For today’s post, we will focus on yet another factoid that NAR does not want you to uncover. As promised, I will also complete my deep dive into the DC area. Additionally, I will share observations and trends for cities where sales are increasing and decreasing. Sales definitely accelerated month-over-month non-seasonally in key areas in October while foreclosure sales also increased which equals motivated selling. Lastly, I will share the top 5 summaries for October sales, price, inventory and days on market for the 85 cities I track. Which two former Boomtowns made the top 5 for decrease in YOY median sales price in October?

Inquiring minds want to know…

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For instance, moving my mother in with me was nothing I would have contemplated even two short years ago as the rift seemed just too large. However, as I dug deeper and deeper into our macroeconomic landscape certain realities began to emerge that I could not ignore. Buying us both a house when home prices, property tax, insurance, replacement costs and general inflation were increasing made zero sense no matter how much I didn’t want it to be so.

What I’ve learned about myself over the years is that I’m better at living in the gray than some and more willing to accept hard truths sooner. This likely comes from years of having to survive some very dangerous situations in which ignoring reality could have meant life or death. For those that are new here - and there are many thanks to Big A who graciously had me on his channel - after my family lost our home to foreclosure when I was nine years old, my childhood became darker as poverty, and that which inevitably follows when adults despair, directed the dangerous play that became my life.

Vowing to escape that life, I took advantage of any advantage I could find. Incapable of asking for help due to “poor pride”, I instead started working and paying taxes at the ripe old age of 12 years old, barely stopping since. It meant that I found myself working in several industries becoming somewhat of a jack-of-all trades. Typically, I would learn one trade, or industry and move on. Growing up the way I did you are intimately aware that being able to pivot in times of stress is your most important asset, above wealth and your Rolodex which I guess is now known just as your contact list.

When I fell into mortgage in 2006, I figured I would only be there for a couple of years. It’s hard to believe that next year will mark almost 20 years in the housing industry. I, for one, would have never believed I could do something so boring. But, of course, 2006 was not a normal year in mortgage. It was the year that those who were paying attention started to wake up to the fact that the music in housing was slowing. That by the way, was not the management team at the company where I worked. Only a few of us could see what was really happening because we were skeptical by nature and also, quite frankly, because we had less to lose being younger than those at the helm.

The crisis became my life, and it was indeed a real crisis. I’ve shared this before, but we totally believed we were part of an effort to save the entire financial system, and I think most of us who fought that fight, sacrificing much, didn’t get rich doing it. What it took many years for me to realize is just how ridiculously fat the fat got, on the back of our sacrifice, as a result of the actions taken following the financial crisis. For those that are new to these concepts or want to learn more, I would recommend ’s brilliant book Fed Up. In 2020 when I realized something was deeply amiss as the stock market soared during an economic shutdown, I embarked on a mission to understand what was happening. I found Danielle and joined xTwitter to learn more. In so doing I would have to revise my own history and understanding of what had happened.

Which brings us to today and our turbulent time when nothing is as it seems. With so much noise coming our way it can be difficult to discern the signal and appropriately train our focus. What I try to do here is not only provide you important information about what’s happening in the economy and housing but to also provide tools and resources so that you can become the best Swiss-Army-Knife version of yourself that you can possibly be. When times get tough, it will be important to know how to pivot quickly, to take actions that perhaps were previously unthinkable to protect your future and the future of our collective children.

Much has transpired since we last spoke as has been the case for every day this year. The game that is the financial markets relies on a never-ceasing stream of capital and hype. When that slows, accounting tricks like mark-to-model versus mark-to-market and outright fraud (think accusations lobbed at First Brands) can forestall the final bill, but if the next big thing doesn’t arrive to keep the party going then we get to see who is swimming naked.

Remember the ending of The Big Short and its mention of CLOs, or collateralized loan obligations? Yep.

Oh BlackRock. How I remember the midnight conversations with your junior analysts, assigned to help with our distressed asset sales, who could not believe me when I said that $27M trading security was worth nada, nothing, zip. One of the most distressing things about our current cycle is that somehow individuals and companies who should have gone bye-bye due to their greed and stupidity in prior cycles are now front and center again.

Speaking of, which is likely considered old news now but important for context, Burry sent more shockwaves through financial media after sharing a chart showing how our leather-jacket-wearing Tech Bros have turned to funny accounting to keep the confetti streaming.

Did someone say Oracle?

In case you have a life and didn’t realize, Nvidia announced earnings this past week which topped consensus expectations due to sales that were “off the charts”, according to Huang. On FinTwit the bears quickly pointed out that inventories were piling up which is odd if sales are off the charts but that did not stop the stock from rallying the next morning. Is this the reason the stock faltered and fell before day’s end? Likely not. As much as I’d like to score one for the bears, it is more likely we have just reached the point where the hype can no longer sustain the valuation, or that entities such as SoftBank, who unloaded $5.8B in Nvidia stock, need cash to cover other risky bets.

While more sophisticated folks like provide detailed and in-depth analysis as to where we are with global liquidity, for the past year or so I have used Bitcoin, which is having a really tough time indeed, as a daily quick-and-dirty weathervane. While those of us that watch markets religiously know better than to count the Santa Rally out, this is the first year where I’m not so sure the market has the chops to make it so. We cannot underestimate Wall Street’s voracity for that year-end bonus, but this fall is turning out funkier than even I expected.

One thing I did expect coming into 2025 was home sales to be up a smidge year-over-year due to just how strong last December was. The Tariff Tantrum and rising rates arrested sales at the beginning of the year but they have started to accelerate non-seasonally as evidenced by October existing home sales which we received on Thursday, putting us slightly ahead of where we were this time last year. For today’s post I will deep dive into October existing home sales and Redfin results for the 85 markets I track to illustrate the subtle shifts which are growing in strength, nudging our national housing market into full-blown correction mode. This past week Zillow, who isn’t known for being doomy, published a study showing that 53% of homes across the country have dropped in value last year on average by 9.7%, the most since 2012.

For those who don’t know, 2012 is when home prices hit their bottom of the last cycle, saved from further decline due to the “beneficence” of our institutional investors who bought those homes up at the invitation of the government sponsored enterprises (GSEs) and FHA. In thinking about it, I wonder if that is how Invitation Homes, a Blackstone company, which was founded in 2012, got its name. These companies are known for being clever in that way…even if that’s the limit to their cleverness.

The Zillow press release went on to assure everyone that homes weren’t yet selling at those reduced prices. Rather, that is the reduction in their Zestimate, or estimated value. Until we can get home sales off their 1995 floor which is where they were last year, being the lowest since that period in our history despite population increasing, we will not see the median home sales price nationally decline. Nonetheless, we are seeing it in M3 cities all across the country at twice the levels observed last year. Below, we will discuss sales, price, price reductions, inventory and days-on-market by region. Additionally, I will share the cities where we have motivated, distressed and depressed selling in October.

Before we begin and you set off to enjoy Turkey Day, I want to share two excellent reads from this past week. For a historical perspective on our propensity to try to build our way out of economic downturns, check out ’s latest, where you will find this quote from Daniel Oliver:

Sound a little like our Commercial Real Estate and new build crisis?

For an electrifying call-to-action, check out ’s piece, entitled Are You an American?, which details how he plans to do his part in finding a politician with actual solutions who is prepared to implement them, no matter if they are not politically palatable.

Without further ado…

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That being said there has been a noticeable shift in our multiple, spinning narratives. Let’s start with the builders. I vividly remember being contacted in February of 2023 by a Fortune reporter who had seen my Tweets while on my trip to visit new build sites across the Sunbelt states. As I stopped in each city, I described what I saw: empty subdivisions being built up into the hills of Austin, in the middle of cow pastures outside of Nashville and in swamp land in Florida.

Like me, the reporter did not believe the inventory shortage myth. We talked about doing a story together on what we thought at the time to be builder obfuscation. You see, the numbers that were being published for what was available for sale or permitted in no way matched what I was seeing on the road. We also had heard from an anonymous xTwitter account who claimed to be in new home sales that the builders were urging sales folks to get the initial contract signed even if they knew the borrowers would not qualify. In builder world, sales are tracked by that initial contract signing versus a closed sale. Shockingly as well, those at the Census who gather the information in the Survey of Construction don’t go back and revise those numbers for cancellations. The reason? Too hard to independently verify. Just as FRED relies on Realtor.com to provide listings for sale for its data series, the Census relies on industry insiders to tell them the state of things in the new home market.

It’s hard to believe that it has been almost three years since I took that first trip. At the time I was still very much industry adjacent, so I reached out to experts in the field to ask them if they were seeing what I was seeing. The same folks who then told me I was nuts now acknowledge the over-building in many areas. Until very recently, hardly anyone has acknowledged though the serious trouble builders are facing.

What happened to that reporter and to the story? Silicon Valley Bank. The banking crisis became all-consuming. His editors had never really been all that interested any way. They seemed to want me to do all the legwork. I started this Substack instead and began traveling with my buddy Travis and his drone we lovingly refer to as Lil’ Trav.

So, color me shocked this week when both Bloomberg and the WSJ had front page stories about the builders. The Bloomberg story reads more like an advertisement, but hints of desperation are peppered across both. Yes, we have seen degradation in earnings which my colleague has detailed but it still seemed odd that after almost three years of total BS in the media, the moment had arrived to acknowledge what was completely evident in 2023.

But that was not the only narrative busting in play since my last post. Michael Burry of Big Short fame published his first tweet since 2023 the day before Halloween.

In January of 2023, the month before my first trip, Burry had tweeted “Sell”. Since then, the S&P 500 has climbed 76%. We then learned that Burry had recently taken short positions in Nvidia and Palantir which seemed to contradict his statement that “sometimes the only winning move is not to play.” However, that could be his explanation for his absence the last couple of years, or it could just mean that he feels it is safe enough to play now. Known for being cryptic, we certainly can’t know exactly what he means, but it rattled the market as well one of the most ridiculous characters we’ve had to suffer this cycle.

I remember clearly in 2023 when one of my followers presciently asked “is Nvidia going to single-handedly save the market?” Well, I think the AI narrative, which I believe is just our Mechanical Turk, has certainly done just that. If you think three years is a long time, the scam that was the Mechanical Turk lasted 84 years. Imagine for a moment if none of the AI hype is real. The other thing I have seen on my trips across the country? Empty data centers. When I posted this on xTwitter many doubters challenged me and provided an array of plausible deniability excuses. Some said they were old server farms no longer needed due to migration to the Cloud, but a lot of what I saw was recent construction. Bizarrely when I left my mortgage proper job (with no backup plan) prior to joining my first FinTech company, I temped at a company whose sole focus was data centers. My job at the time was creating a directory of these data centers across the world with a list of their features and specifications. Can I be certain every single one I saw in my travels was truly empty or that it was not just an old server farm? Of course not, but I more than most know what these things look like when operating. I had to include photos in the directory we were creating which was often recent satellite photos and became very familiar with how they functioned. Additionally, the For Sale and For Lease signs were also a clue.

In a later tweet, Burry also posted these three charts:

The first chart shows that Cloud Segment YOY growth for the tech giants Amazon, Alphabet and Microsoft was actually on average higher in the 2018-2022 period versus the 2023-2025 period. What fascinated me most in the coverage that came out post Amazon earnings was the discussion about cloud growth being the highest since 2022 and the lack of discussion around the massive 15-hour AWS outage on October 20th. The list of companies impacted was ginormous. Mortgage was significantly impacted as well as some airlines. Surely many companies will either seek compensation or start to rethink their Cloud strategy. As most companies are required to have Business Continuity Plans, backup strategies will be required. And, by the by, what did Amazon blame the outage on? Well faulty automation of course.

According to Amazon, this triggered a “latent race condition” - or in other words unearthed a dormant bug that could occur in an unlikely sequence of events.

The delay in one process, which Amazon said occurred in the early hours of Monday morning, had a knock-on effect which caused its systems to stop working properly.

Much of this process is automated, meaning it is done without human involvement (my emphasis).

It’s astonishing to me that barely anyone thought this topic worthy of discussion in coverage about Amazon’s Earnings. Of course, these issues tend to take a long time to resolve. Take for instance the Flagstar breach which occurred in 2021. They have just agreed, four years later, to pay $31.5M to settle two class-action suits related to the breach. An outage is not the same as a breach, of course, but revenue was lost and impacted companies will come calling, looking to be made whole. Perhaps the fact that our attention spans are gnat-like means that we just can’t concern ourselves with such things until the bill finally comes due. Or perhaps the mania is just too strong.

The second chart in Burry’s tweet compares current US Tech Capex Growth versus the tech bubble of 1999-2000. In 1999, I was working at the Wall Street Journal and watched as Paul Steiger excitedly distributed Dow 10,000 hats to the reporters in the newsroom. I found the glee and euphoria strange back then as I do now. It felt to be idolatrous, like worshipping money without purpose, or more accurately, the game. The third chart from Burry’s tweet is one I’ve been referencing in recent appearances which highlights just how incestuous this AI investing is. Speaking of times past, did you know that Nvidia replaced Enron on the S&P 500 in November 2001 after Enron’s collapse? Happy Anniversary Enron and Nvidia!

As the drawdown began in earnest last week, the WSJ sent a “breaking news” notification for a story about investors starting to question whether AI spending had gotten out of control. In the moment it felt a bit like CYA. As mentioned, my buddy Jack has been pounding the table for over two years on the issues with several of these AI-adjacent companies. What is just so critical to understand is that the funding schemes underpinning the AI boom are not only similar to the ones we are seeing exposed in the First Brands debacle but also often perpetuated by the same players.

Gordon Johnson highlighted the above article in a thread on xTwitter which also pointed out recent price increases for CoreWeave credit default swaps (CDS). What does this mean exactly?

Credit risk repricing: A 510 bps spread implies markets now demand > 5 % annual protection cost against CoreWeave default, roughly double early-fall levels. That’s a major deterioration in perceived credit quality.

Cohen warns in the Bloomberg article linked above that he doesn’t “think there’s any alpha in private credit…our clients are actually asking questions with a level of skepticism.” Is the genie, or Turk, out of the proverbial bottle for both private credit and the AI boom? These next few weeks are unlikely to be boring. Whether or not we see wider awareness, these cracks illustrate yet another chink in the armor, similar to the DeepSeek story.

Turning to yet another narrative challenge, recent layoff announcements as well as the New York Fed’s latest Household Debt and Credit report are calling the strength of the consumer and the economy into question.

For today’s post I will discuss what I see in the latest NY Fed report which includes an increase in transition rates for current mortgage accounts to a 30-60 days late status. Additionally, from a delinquency perspective for overall debt we have reached a level that resembles 2007 more than it does 2006. And, yes, I will address the 50-year mortgage announcement by Trump and my view on the anticipated impact to the housing market. As promised, I will also dive into what’s going on in DC as well as Alexandria, VA (more DC suburbs on deck for next post). Finally, I will share Top 5 summaries for cities with a population of over 500K for September results to show you where sales, prices and days on market are increasing or decreasing to understand where these cities are on our path to a housing market correction. Atlanta and Miami, for instance, are showing up in all the wrong categories.

Without further ado…

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Where to begin? Another rate cut from the Fed has come and gone, and the bond market responded yet again with a yawn, if not a middle finger. The 10-Year floated right on back up to that 4.00% handle during the presser and mortgage rates increased. Yet just today someone told me for the billionth time that the Fed was going to cut rates and save the housing market. Using FRED, we actually ended below the 4.00% level 4 times in October which is the most since September 2024 but certainly nothing to write home about. In fact, every time the Fed actually cuts, the move in mortgage rates is in the opposite direction. For perspective, through September, the 30-year mortgage rate averaged 6.73% this year compared to 6.75% through September 2024. Since September of 2024, the Fed has cut rates 5 times to the tune of 150 basis points (bps). Mortgage rates have come down on average since that time period by 2 bps. Ok then. Even Fannie Mae capitulated at the Mortgage Bankers conference this month and told everyone rates were likely not going much lower for some time. In fact, the Fed’s announcement that it would be buying short-dated treasuries instead of mortgage-backed securities (MBS) when MBS runs off means no help coming from the Fed in the near-term.

The bond market is tricksy, and anyone that tells you that they know for certain where it is headed is either overconfident or lying. At this point in the cycle, I find it prudent to just call the balls and strikes as they occur. In my opinion, we are in for a rocky road ahead, and I do not believe anyone knows where we are headed for sure as there are too many grenades going off across the system, with foreign entities who may need to defend their currency or make a point, holding quite a few cards. Speaking of which, how is our little cockroach problem?

Lenders are suing Broadband Telecom and Bridgevoice, accusing the firms of fabricating accounts receivable in a fraud that the collateral agent’s lawyers call “breathtaking” in scope, according to a filing in a New York state court. BNP Paribas SA helped BlackRock’s private-credit arm, HPS, make the loans…

“Breathtaking” in scope, you say? It looks as if the fraud goes back as far as 2018, so pre-COVID. I wager folks we haven’t seen anything yet. In case you missed it another fraud surfaced since we last spoke in trucking where a family ran a cargo theft ring using fraudulent or legitimate trucking companies to bid on shipping contracts.

Once the Singh Operation won those contracts, they

Took possession of the freight (primarily electronics, appliances, and other high-value consumer goods), they diverted and stole the shipments instead of delivering them. The stolen cargo was later distributed through intermediaries or black-market channels, with an estimated loss in the millions of dollars.

I wonder how much property they own? As mentioned last week we are dealing with the baby cockroaches. We know that banks basically stopped lending to Main Street due to Basel III requirements and started lending to non-depository financial institutions (NDFI) instead. What the heck is a NDFI? As explains, NDFIs can be “broker-dealers, hedge funds, private equity/credit funds, securitization vehicles and subprime auto lenders.” The banks this time are certainly exposed through this lending, but I believe they are setting themselves up to be the Off-White Knights. They have a fall guy (NDFI) to turn to when all of the cockroaches are exposed. The big banks will likely “agree” to play savior like last time, backed by support from the taxpayers, while lapping up distressed assets at pennies on the dollar. That’s my current theory anyway. We are only in the second inning if you count SVB and March of 2023 as the first one.

The game is speeding up though as liquidity in the markets evaporate. How could this be when the stock market is at all-time highs? I’ve mentioned several times the suspicious accounting practices underpinning the AI bubble. It’s a confidence game being buoyed by passive flows and those that need to exit stage left, leaving retail and the ill-positioned holding the bag. Every asset class is exposed. For example, what has Jensen Huang been doing with all that cash from the massive amount of Nvidia stock he has sold? Why buying homes of course.

A little fire in one sector is going to burn in another…and on and on it will go. Where it stops, nobody knows. The fraud is rampant and everywhere at once.

Meanwhile, over on Main Street, the layoff announcements in the past few weeks have been staggering:

Amazon - 14,000

UPS - 34,000

Target - 1,800

Nestle - 16,000

These announcements come on the heels of an already active summer where firms like Intel and Microsoft announced reductions as well. Reductions can hit some communities harder than others. The layoffs at Target, for instance, which largely impact its Minneapolis headquarters, will rock that local market. Nonetheless, the effects will be felt across the economy. Just think about those well-paid folks no longer with a job who bought an Airbnb in Las Vegas during the boom or inherited a long-term rental from their aging parents, which is no longer cash flowing. Layer on top of this the government shutdown and workers who will be unable to pay rent or their mortgage. Pretty soon, decisions will need to be made.

And, if SNAP benefits do not get paid in November to the 42 million Americans (one in eight) who receive food stamps, these layoffs will increase as holiday sales will be down, down. Trump recently indicated the issue would be solved, while a Boston judge said she will likely intervene. No one knows exactly how and when these benefits will get paid and to whom. While the USDA has between $5-6B in its contingency fund, the estimated cost for SNAP in November is $8B. If nothing else, fear and insecurity will likely put a crimp in spending with folks not knowing if December will be paid when there are no more emergency funds to tap.

Desperation is increasing which can be sussed from both September’s existing home sales and delinquency results. As forecasted here in my last post, sales were stronger than anticipated, despite rates not being as low this year as they were last year. We of course did not receive new home sales from the Census due to the government shutdown, but John Burns did its own survey and provided a placeholder result which we will discuss below. Additionally, ICE/Black Knight and other agencies reported delinquency for September, showing stress in cohorts that have thus far looked pristine. Finally, we will dive into NAR and Case Shiller results to show you the subtle shift that is occurring which could be evidence of a trend reversal as well as look at the Top 5 city summaries for homes sold, prices, inventory and median days on market.

Before we do so, a quick show note. I will be scheduling the first of what will be a quarterly conference call with Founding Members in the next six weeks. If you are a founding member (thank you), please be on the lookout for an email with suggested times/dates where you will be able to vote for the time that best suits.

Now on to the main event…

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Colleague scooped the stories right here on Substack

These allegations sound familiar to what I’m hearing from bankruptcy managers at servicers who are having to tell investors they are not in first position on mortgages. Some may be asking, what is “first position”? Essentially when you take out a mortgage or borrow money, a lien is placed on your home or property by recording that lien at the county recorder’s office. When a lender runs title that lien should show up. However, I can tell you that often title companies miss things as the county recorder’s offices - especially those that are considered “mail-in” as opposed to E-record - are a mess. Typically, a lender who sees that you still have a lien on the property would require you to get the lien discharged by the previous lender as a condition to lending. In this case it sounds as if a proper title review was not conducted as Notices of Default on the foreclosed properties should have been recorded. As I have mentioned here, though, there can be serious recording delays at the counties which means that in some cases proper title reviews aren’t immediately possible. During COVID LA County had a year-long recording delay. All kinds of mischief can happen. Those that understand the system could take out several loans on a property if they time it correctly before credit reporting starts. Often if these shenanigans are discovered by a lender, they don’t report it as they are told there is nothing to be done, or they are never called back.

It’s always about the collateral. As this “Queen of Doom” has been trying to report the underlying collateral out there in multiple sectors - be it cars, homes, semiconductors - is not as good as everyone thinks. Double pledging seems to be the order of the day. It’s hard to even imagine this as someone who assisted with thousands of due diligence requests as my former company offloaded assets at the end of the last cycle. It seems though we no longer live in a society where proper due diligence is conducted. As with many things in our society we talk a lot about it and “perform” prudence but in reality, it’s just talk. I saw this at the end of my tenure in FinTech proper. The focus was on putting together investor decks touting AI, not putting the work into the models. Many now want to skip past the hard work straight to the Bentley. Take this case in point:

Jonah’s former tenant was arrested on October 16th for funneling funds into his own pockets meant for homeless housing. As I have been pounding the table here, the American Rescue Act put billions into the hands of shady nonprofits who feast on affordable housing initiatives. We will see many more examples before the cycle ends.

As partnerships devolve, former partners feud, schemes unwind and bankruptcies are filed, the fraud behind the scenes will be fully exposed.

H/T:

Those living large on leverage will soon be disappearing from your country club, if they haven’t already. I am often contacted by people who tell me their neighborhood will never be impacted. Do you actually know the owner occupancy percentage in your zip code? Do you look at county records for tax and owner liens? Government and private credit were handing money out like it was candy. Those who have no issue playing fast and loose with the facts were at the ready with open wallets. We looked around and thought everyone was getting rich…except for us. This is why FOMO is so dangerous; it’s often built on a lie.

Recently reviewing an AZ property for a subscriber, I saw the exact same situation as described above in the Zion and Western Alliance debacle. The owner had pledged the house multiple times to hard money lenders, a mortgage lender and individuals who were likely “private note” investors. The Bankruptcy Trustee handling the property handed it back to the primary lender with a settlement for $50K as the debt was greater than 3x what the property appraised for. Most of the claims in the bankruptcy will see pennies on the dollar, if anything at all. The lender now will also have no other choice than to foreclose to clear title of the outstanding liens.

The week ended with yet another cockroach surfacing. The creditors of PrimaLend, who provides financing to auto dealerships that “cater to subprime borrowers” are working with lawyers from White & Case and Houlihan Lokey to address months of non-payment. Let’s just say I’m familiar with both of these firms and this is not a good sign. According to Bloomberg, the creditors are pushing for bankruptcy. These are the baby cockroaches…just wait until we see the big ones. As has reported, assets are deteriorating quickly in one of Carvana’s 2024 securitizations which will result in liquidity pressure. Banks like Ally are also very exposed here.

What we are seeing in auto likely happened two-fold in mortgage. Companies I never heard of became overnight lenders, fueled by private credit. Additionally, as talked about often, FHA stepped in to government-sponsor subprime. Recently, John Burns published research showing that indeed - despite everyone saying it wasn’t so - FHA loans were given to those on work and student visas. The Trump administration stopped that in May. According to the research, these loans made up 6% of the FHA loan-lock volume in April.

Auto is not as sexy as housing, meaning the amount of folks speculating in housing will end up being far greater when all is said and done. Realtors became developers, also believing everyone was getting rich, building $10+ million-dollar spec homes in cities across the country. Earlier this month, Redfin reported the lowest sales for luxury for any August since they started tracking in 2013 with the highest inventory levels since 2020. The superprime are also pulling back likely due to losses from investments in many of these schemes that are blowing up all over the system. For those that lived the lifestyles of the rich and famous on leverage, they will have issues when no buyers can be found.

But mortgage delinquency is low, you say, unlike auto which has increased by over 50% since 2010 according to Bloomberg and Vantage Score. While some argue that auto delinquency is not all that bad despite subprime, according to Fitch, reaching a record high in January, we must be wary of what we don’t know. Wolf Richter uses Experian as source for the overall delinquency rate for his article arguing that the consumer is “not breaking”. How many of these private credit lenders were actually reporting to credit agencies like Experian? I’ve had it confirmed in mortgage that there are smaller servicers who are utilized in the private note space that are not. Never fear, though, mortgage has most definitely joined the party. As mentioned last week, FHA delinquency rose in September. I’ve also now been able to peak at mortgage books for September, and I have some news which I will share below. Additionally, Redfin data is out for September, and there are some surprises there as well. I will share my forecast for existing home sales, high-level regional statistics and lists of cities where motivated, distressed and depressed selling is in full swing. The West called, and they have quite a non-seasonal story to tell. And, finally, a deep dive into Portland.

Drumroll…

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I remember the day this article came out in 2007 like it was yesterday. At my former company we were already under stress as the private equity company that purchased us sensed the shift in the market and wanted a purchase price adjustment. We knew though that day in July meant the world would know what we knew…those bonds were not worth what anyone thought they were worth. The emergency that would consume six years of my life began on that day.

I would walk in every morning to another hundred-million-dollar writedown which meant we were near to breaking covenants on our lending facilities at the big banks. My department was tasked with calculating our tangible net worth daily as executives flew to New York to beg. Although we had a small bank in Utah, we were not a bank, and those lending facilities were our lifeblood. In many ways GMAC ResCap is the poster child for what happens to a nonbank when the bezzle is uncovered. As I shared in a video this week with and Jack Gamble from Nobody Special what is likely happening behind the scenes at these banks and across the system is panic. You wouldn’t know it from many of the headlines in the US financial media.

To translate, “rethinking risks” really means they are desperately trying to understand their exposure, and it won’t stop with this initial list of impacted entities. Because much of the shenanigans were happening in the murky world of off-balance sheet financing, victims can take time to surface.

Who those investors are, and how far the chain of debt stretches into the mainstream banking system, is an open question. Jefferies says it has $715m in exposure to First Brands. An investigation has been set up in part to examine whether invoices were pledged more than once.

But it goes further, with concerns mounting that First Brands’ precarious arrangements could be found elsewhere.

Brett House, an economics professor at Columbia Business School, says concerns are primarily about unregulated private debt markets and the assets they hold that are often not marked-to-market, an accounting system that values a company’s assets and liabilities at their current fair market value.

‘When these assets become impaired, it’s a surprise to markets, because there hadn’t been a gradual updating of information,’ House says, ‘and because we don’t have great transparency on the location and concentration of where these assets are being held. And that can often have knock-on effects that are unanticipated.’

Insurers such as AIG, Allianz and Coface are also on the hook as they wrote policies that were meant to protect trading partners or investors from losses. This also reminds me of yesteryear when big private mortgage insurers got into hot water and stopped paying claims. The crazy thing is we received very few reimbursements for our claims which of course then exacerbated our liquidity issues. Somehow though most of those businesses continued to operate.

It’s getting real out there folks, and this all feels eerily familiar. Despite headlines to the contrary, yesterday’s stock market selloff in my opinion had more to do with this festering wound than tariffs with many banks ending deeply negative on the day. I believe my former company, which is now called Ally, will also be in the crosshairs of the distress in auto. Yesterday, Ally saw a -5.69% drawdown and is now down -17.09% from its recent high in September. The banks and private credit have been extending and pretending, masking the distress in auto and commercial real estate. While everyone could see the distress brewing it has not mattered as mania prevailed in the market. I believe we have reached the point where it is going to matter. The shadow banking system is much larger now than during the GFC.

No matter what Fed Governors may say, private credit poses deep risks to the system and no one knows just how big this genie will be when it is fully unleashed from its bottle in the shadows. In our hyperfinancialized markets where you can gamble on auto parts receivables (like seriously why?), the game is one of confidence. Chase lost confidence in Lehman to meet its commitments and the rest is history. Once faith is lost then gradually turns to suddenly very quickly.

We will likely see bank failures soon. Will this be a repeat of March 2023 with the Fed swooping in and juicing the market once more? I think we are on much more precarious footing now. As my buddy Jack discusses in the video linked above, Nvidia and the AI narrative became the last great hope to keep the money flowing. There is fraud written all over these AI companies who are using Enron-like accounting practices. For more details, please see the linked video or Jack’s video from August 2023.

I started writing this piece early yesterday. This morning’s articles are taking on a more serious tone. For someone who doesn’t scour financial media though, it may be easy to miss this story about a subprime auto shop that lent to immigrants and an auto parts company. I caution you to take it seriously and to watch. The tariff war does seem to be escalating but what happened on Friday is about much more than that. If we continue to see stock market weakness or an even greater drawdown, get ready to see home price declines accelerate. We know that confidence has already been rocked in housing as Redfin reports record cancellations for home sales, higher than any August since they started tracking in 2017.

The biggest reasons these home sales have been cancelled? Property inspections coming back with issues and additional repairs needed. FOMO-buying is no longer the order of the day, and property inspections are no longer being waived (never, never, never waive a property inspection).

As mentioned here several times, sellers are deluded, driven mad by their spurious zestimate. We have been taught to see housing as an investment - it’s even defined as such on the Census Bureau’s website. This indoctrination has been purposeful to drive the wealth effect and keep us spending even when we shouldn’t. I implore you not to fall for these tricks. Your financial future is at stake. Once larger awareness occurs, the confidence game that is housing will be shattered.

For today’s post I will be diving into an expat housing market at the request of a subscriber. Additionally, I will share Top 5 city summaries, an update on delinquency and lists of cities where I’m seeing motivated selling, distressed selling and a new category I’m now calling depressed selling where sales are down as well as home prices YOY. There are two cities in the Midwest that are blinking red, signaling what’s to come there. Early reports for September are pointing to slightly stronger sales than last year. For true price discovery, we need sales. Based on what’s happening with foreclosures, which I will discuss below, we will be getting sales one way or the other. The new FHA waterfall is in place and the jig there is up. That means foreclosures will start to accelerate, reaching critical mass next year.

Without further ado…

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Although by this point I had traveled a bit around the world, arriving in Taiwan was like arriving in another universe. Of course my driver was not there. Calls to the contacts I had been given were fruitless for hours as it was the wee hours of the morning, and I began to wonder if I had been taken for a ride. Would I end up like those in the stories I had heard about when speaking with other TOEFL students who were lured by false promises from bad actors never to be paid or housed in bug-infested hovels? Finally, a man of indeterminate age showed up with a sign with my name on it. He was clearly drunk, his eyes bloodshot and his teeth were red from chewing betel nut. Despite that I was relieved.

What I would soon realize after a few months at the bushiban was that I wasn’t actually supposed to teach the kids English. I was just supposed to teach the kids enough drills and silly dances to American tunes so that after each session end the parents would write another check to the school. Affording the school and sending your kids there was required to keep up with the Joneses of the area. This was no elite school or system where mastery was expected. Bushiban attendance was a sign of status, like carrying around a purse with a Labubu on it, or a Stanley or now Owala. The other Westerners, mostly from Canada, were there to party or find Asian girlfriends, but I was actually there to teach and learn, getting up early every Tuesday and Thursday to take the train to Taichung to learn Mandarin. Silly, silly me.

I soon became frustrated as did my British roommate. Her father came to visit, and after expressing some of his dissatisfaction with his daughter’s treatment was carted off to the local police station where they accused him of stealing a cell phone. Or at least that is what we discerned after the Mayor, who was a part of my roommate’s biking club, arrived and told us. The two of us were a bit of an oddity in the town because we didn’t act like the other Westerners and had tried to make local connections.

Stealing a cell phone? He was well-to-do and had his own cell phone of course. As I sat in the police station wondering where the nearest Consulate was, I could not believe this was happening. It was just so ludicrous. Like were these people serious? I had studied Russian literature and felt as if in a novel set in Soviet-era Russia. It was a very strang-ee experience. Strang-ee you ask? Many of the children that I taught could not break the habit when speaking of pronouncing the silent “e” in words like orange and strange as a long “e”. Thus, orange was always orang-ee. My roommate and I would always joke when encountering some new Taiwanese bureaucratic maze on just how strang-ee the situation was. I still find myself making this joke which is usually lost on those around me understandably needing translation.

The Mayor sorted it out but that incident was enough to send us both packing despite pleas from the school owners. As I traveled home through Germany on a plane filled with young men returning from a deployment to one of our forever wars, I thought that all those proclaiming that the Chinese would beat out America had it completely wrong. Based on what I had learned from my friends in Taiwan who were originally from the mainland and my experience among them, it seemed as if the Chinese were not interested in teaching its children how to critically think. Rather children were taught how to take tests or perform excellence. And for those that will say this was just the Taiwanese approach, I believe we largely misunderstand the relationship between the Taiwanese and mainland China, perhaps led to that misunderstanding on purpose. I was assured by my friends that this is how it also was in China. From what I came to understand many in Taiwan wanted to make their fortune and then return to the mainland. They did not see Taiwan as home. This of course was my limited experience but if our media got it so wrong back then, how wrong is it now?

That was then. As our school systems started to focus on test taking and less on critical thinking, as the type of classical education I had as a child was eschewed, I soon found the products of that education in the workplace similarly challenged when faced with tasks which required critical thinking. The speed of this change still shocks me.

Why this long preamble and personal story? After receiving new and existing home sales this week, I could think of only one word: strang-ee. Before we dive in, I want to pick up from last week’s post discussing the small chance that a refi boomlet will turn the housing market around. If you remember, excitement abounded last week after refinance applications jumped. I shared just what it would take to truly turn the market around and how low rates would have to go. Relatedly, I had the opportunity last week to talk to folks on the front lines in a large institution, and they shared that their appraisals were coming in lower than expected for new loans. Well of course they did, I thought. But, when one follower commented and confirmed the same, mentioning that he was having issues on one where an appraisal waiver had previously been granted, I smacked my head. Right! How many could there be? The requirements for origination for FHA, Fannie, Freddie, VA, etc. can be bizarre and byzantine and exceptions (used to be) limited. And because my bias is steeped in years of trying to implement changes that would ensure tighter underwriting my initial gut reaction was that there couldn’t be that many.

Wrong again, Ms. Wrong. Exceptions became commonplace during the COVID boom. For those that argue the Fannie and Freddie books are just fine, I say no way. Not only did many of these folks receive appraisal waivers, meaning no appraisal was required, they also waived inspections and paid over asking. And then of course there is this:

I recently shared a story about a family member whose appraisal came in $20K lower due to issues that were present during his last appraisal. As I heard from another follower who was working on a refinance for a repeat customer, the GSEs are now requiring appraisals on homes which were not required previously. Can you imagine what it could look like for folks who waived appraisals and inspections and did not do repairs? Ouch-ee (sometimes I add the long “e” to other words as well).

Upon receiving sales results last week, I was initially a bit confused and disheartened until I started looking into the details. The sales distribution and regional results in August include some important clues. Today I will discuss aggregate and regional details and what it means for the path ahead. Additionally, I’m currently in Dallas at a default conference and spent yesterday touring several construction sites and existing home neighborhoods. I should know by now that the information we receive out there does not match the reality on the ground which is why these trips are so important for perspective and my sanity. Lastly, I will share what I found when visiting a neighborhood identified with large numbers of underwater FHAs originated by the builders. You won’t believe it…or maybe you will.

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- Green Day, Wake Me Up When September Ends

September is suicide prevention month and a hard time for my family, having lost the first grandson, my nephew, to suicide in September of 2018. There is a certain shame I think families bear when they lose someone this way as they feel as if somehow they could have prevented it. What’s wrong with us? They tell you that you never get closure after a suicide. Instead, you have to live with the constant questioning of motives and last moments. No matter how much time passes September hits my family with a ton of bricks. The ninth month of the year also brings the memory of the many friends I lost on September 11, 2001, including my good friend Cira Patti. Last year Helene made September even harder. As the days of September pass the dread intensifies. While some years the dread is unwarranted, this year was not one of those years.

Everything I now do is to honor my nephew. Stepping into this arena is not ever anything I dreamed of doing. I shunned attention and felt more comfortable shining the light on others than myself. Losing him though woke me out of a long stupor of thinking that the way I was living was a life. It wasn’t. Having gone to NYC for graduate school I was surrounded by certain schools of thought that I now realize were curated and confirmed in the media as well as by Hollywood. Why? How else could they convince a whole nation to sign up for the destruction of the family so we could keep spending to maintain GDP?

When I first read Fed Up, by I realized that in fact much of what had happened to my family in the 70s and early 80s had everything to do with what was happening in the economy.

Had my parents not bought a house just as rates were skyrocketing, my mother would not have had to go to work when the initial plan was to stay home. Who knows how that would have changed the trajectory of our lives. During the same time, my grandfather lost his farm when Reagan decided not to bail out the farmers, and we lost my uncle who was 31 at the time of his death. He succumbed under the pressure of trying to save the farm, dying of an overdose and leaving a young daughter behind just as my nephew would leave his own young daughter behind almost 40 years later.

Since losing my nephew I have dedicated my life to breaking my family’s generational curse. I believe you have to act very intentionally to do so. The first step I took was arming myself with as much knowledge as I could about the economy, how it worked and what really drives it. That research led me to Eurodollar University and the research of Emil Kalinowski who coined the term silent depression to explain what we have been experiencing since the last crisis.

The labor force participation rate for men has been coming down since the 1950s but in recent years has accelerated to the downside. The younger generations have lost hope they will ever own a home. Some of you may wonder why I’m talking so personally about the past. Policy shifts have real impacts on family, making it personal. We cannot be ignorant of the significant effects of these forces. If so, we may find ourselves being run over by them. Deaths of despair have risen at an alarming clip since the late 90s.

In 2015, life expectancy in the wealthiest country in the world fell for the first time in decades. Then came the nearly unfathomable: Life expectancy in the US fell again in 2016 — and for a third time in a row in 2017.

It is hard to communicate just how disquieting that trend is. Outside of wars or pandemics, life expectancy across the world has been consistently rising for almost a century, and has become a hallmark of highly developed nations. The last time a three-year downturn in life expectancy happened in the US was more than a century ago when the 1918 flu pandemic wiped out anywhere between 17 million and 100 million people worldwide.

What was happening? As Princeton economists Anne Case and Angus Deaton first pointed out in a 2015 paper, working-age white men and women without four-year college degrees were dying of suicide, drug overdoses, and alcohol-related liver disease (my emphasis)— what Case and Deaton termed “deaths of despair” — at unprecedented rates. In 2017 alone, there were 158,000 deaths of despair in the US: the equivalent of “three fully loaded Boeing 737 MAX jets falling out of the sky every day for a year.”

The unemployment rate for our youth WITH college degrees is now at 6.4%, higher than when we entered the recession in 2008 when it stood at 5.6%. We now have to worry about those with college degrees as well. In a recent podcast I did with Marty Bent, we talk about the existential threat to the Boomers we faced during the GFC. I believe our biggest threat today is to our younger generations who are teetering on the edge of nihilism. The events of last week shook our nation, and I worry. I worry that we will continue to fight each other instead of demanding better from those who make these terrible and costly decisions.

Humans are meant to be productive, to work. I know that we are all exhausted from working too much and may find that hard to believe, but the utopic vision being put forth by the technocracy is just not based in reality. They paint a picture of a future where we can all do whatever it is we want to do - paint, write, create - at our leisure while subsisting on universal basic income (UBI). Forget that we need an inordinate amount of energy that currently doesn’t exist to power AI which is why you may have noticed your power bill going up. Forget that AI has not delivered on its many promises and can be caught hallucinating more times than not. Forget that it’s not the greatest coder ever! as many claim.

The replies:

Right. As I shared with , many of the Fintechs with which I worked realized that it was actually cheaper to do the work manually using offshore resources instead of using “AI”. Soon folks will realize that we simply are not there yet. In many ways, I view this hype as a ruse to disguise just how bad our economy really is. It’s much easier to blame some new-fangled (which isn’t new at all) technology than admit the truth.

Last week I wrote that it was no wonder we had folks using housing as a casino as wages were not keeping pace with cost of living. It is also no wonder that people have attached to the AI story. It was hopium that things could keep going a wee bit longer; the last great hope to ensure a soft landing.

Just as most I meet tell me they agree with what I’m saying about housing, but it will never go down in their market, I hear folks saying well AI won’t work for x and y but watch out z! I believe there are limited use cases currently where it can be useful if properly maintained but the costs still outweigh the benefit. As I’ve said, we may get there but I think even the attorney use case is limited for instance. The way AI summarizes often provides incorrect interpretations when reading large documents, using words to describe things which are absolutely wrong in context. For example, imagine if you are working on a wrongful foreclosure case and ask AI to summarize a letter that states a borrower has been denied for a modification but also states that the borrower should re-apply. AI misses the nuance, and you believe that the borrower was told they were not eligible for the modification when in reality they just needed to reapply. You wrongfully believe the company did something that was illegal when in reality it did not. One reason we rely on case law is because hardly anyone can fully agree on what words or laws mean.

I wish our leaders would stop lying to us about the economy so we could get down to fixing what ails us. We need jobs - the kind of jobs that make home ownership a possibility. The kind of jobs that make us proud to do them, not sick with dread. The kind of jobs where we can still have a life and participate in raising our kids. The kind of jobs that mean children grow up with fathers. No one should grow up without a father. As well we also need to reprioritize. How often have you told yourself you deserve that new pair of shoes or expensive vacation because you work so hard? Do you ever notice how the more money you make, the more expenses you have? Don’t have time to clean the house, hire a maid. Don’t have time to mow the lawn, hire someone else to do it. Don’t have time to cook, order out. Don’t worry about eating all that processed food…I’m sure it’s fine. I can take an expensive pill to make it all go poof, right?

We must start making better, informed choices. The way we spend our money matters. If our consumption is 70% of GDP, then these decisions matter a great deal. We are not powerless. Making smart decisions now and delaying gratification just a little may mean that in the near future you will be able to make your dreams a reality. Hope is not a strategy; it is an effort.

For today’s post I want to share a theory I have about the recent talk about taking Fannie Mae and Freddie Mac private and how there may be a hidden agenda. If the agencies are allowed to buy MBS, could they effectively step in where the Fed stepped out? Would that get us the lower rates most believe are coming? Refinance applications shot up this week after we saw mortgage rates come down in recent weeks and are 70% higher than this time last year. For perspective:

Such a jump in refinance volume on such modest rate moves is not a healthy sign. It means that people are desperate to pay down debt with higher interest rates such as credit card and auto debt. If Fannie and Freddie did buy MBS, would rates come down materially enough to turn the housing market around as they did when the Fed went hog wild during COVID?

Let’s discuss…

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When I was the boss in corporate, I would marvel at the way people would appropriate me and assign meaning to actions that were meaningless. You are typically dealing with their false “idea” of who you are, based on assumptions and expectations, and not reality. This ‘idea” about who you are is often used to confirm and bolster their self-affirming narrative. There are times when navigating those ideas and expectations can become completely destabilizing which is why I’m incredibly grateful for my faith. What I’ve always done in times like this - after spending countless hours trying to suss what is actually happening, painstakingly examining my assumptions, words and actions - is put my head down and solider on, hoping and praying that eventually truth will prevail. Before 2015 truth seemed to prevail in Corporate America, but somewhere around then people seemed to stop caring about the truth. I made it 4 more years before packing it all in.

I recently saw this video on social media about a woman’s husband losing his job after 17 years of faithful service, and it hit hard. Our social contract has been broken as companies no longer have any loyalty to their employees and spend every dime they have to support an unrealistic stock price. What departments like Human Resources actually do is to ensure nothing gets in the way of that mission. In this video, you learn the contractors were creating a crappy product cheaply which did not meet specs, with no concern for quality. When the employee repeatedly noted that the product was defective, three of the contractors conspired against him and Poof! There goes 17 years of faithful service down the drain.

Is it any wonder that almost anybody with a pulse wanted to use housing to get rich “as seen on TV”? Wages were not keeping pace with expenses and each year it felt you had to do even more and more to just keep your job. I’ve said this before, but by the time I left Corporate America I was doing the job of 3-4 people. On Friday, Challenger released layoffs for August, and it was not pretty.

The much-anticipated jobs report also came in rather chilly setting up for a funky fall indeed. There was much speculation as to whether the numbers would look rosier due to data manipulation, but Trump has now qualified that he meant jobs would be great later down the road. For a deep dive into the jobs report, I recommend ’s latest stack which features this graph:

See how Average Weekly Hours trended up after the GFC while wages were fairly stagnant until our little spurt post-COVID which has disappeared with a whisper? That little spurt convinced many that everyone was getting rich and spurred luxury building of apartments and homes all over the country. Hopefully I don’t have to state the obvious. This week I had that sickening feeling as I watched layoff announcements pop up everywhere. Although I believe that these job losses will ultimately force the hand of those holding on to unprofitable investment properties and 2nd homes no longer needed, it’s appropriate we remind ourselves “just don’t f*cking dance.”

The bond market has responded, and mortgage rates dropped to 6.29% as of this writing, their lowest since Aug/Sept last year. As previously discussed, if rates stay here or go lower, we will start to see inventory increase non-seasonally again. Florida’s snowbird selling season begins next month. A rate cut in September is now a given. How will the bond market respond to that cut? The housing sector and motivated/distressed sellers are hoping it plays nice, unlike last year. The problem? All those cancellations we keep hearing about are likely due to folks not qualifying or looking at that final price tag, which includes your insurance quote, and getting cold feet.

Rates would have to go meaningfully lower to do more than modestly increase sales. My hope is that we do get a boost to sales as only then will we have price discovery. Every week I look at each of the markets I track, and price cuts are accelerating. Until they sell though we won’t see those numbers and awareness will continue to be postponed. It feels as if we are getting closer. As many have said, and I agree, when the anger comes at you the fastest and most furious it is usually because you have struck a nerve. The escalation this week of attacks on my person, instead of the data, is yet another sign that conditions are changing. Luckily Corporate America trained me well how to withstand - so no pity party here.

For today’s post we will make a stop in the Midwest. I have been confounded by Chicago for months now, but I have not had the time to stop and look as you all had other cities ranked as more pressing. My curiosity has moved this up the line. Additionally, we will look at the Top 5 City Summaries for July sales, price and inventory as well as cities where we are seeing motivated and distressed selling. Many of you will be surprised to see the major metropolitan which came in at #1 for YOY decrease in prices for cities with a population over 500K that was profiled here in the Spring of 2024. Hint: it’s not in FL, TX or CA.

Time to take a peak…

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