Awareness

Memorial Day Weekend of 2023 I posted a deep dive into loss mitigation on YouTube as folks were calling for a tsunami of foreclosures when I knew absolutely that would not occur in the near term. Back then I had less than a thousand YouTube subscribers, and every time I posted I was filled with anxiety about how bad the lighting or sound was, but this was an important message to get out so folks would understand what would come next. Of all the videos I’ve done on my channel, this is the one I have shared with folks most as an answer to both claims that the government would prop up housing forever and that foreclosures would explode.

The truth, as it always is, was somewhere in the middle. We have now arrived at the moment when foreclosures will start to happen and have an impact on the housing market.

The number reported by Black Knight for foreclosure sales is relatively low but starting to pick up with an increase of 6.42% MOM and 9.43% YOY. Importantly, the signal from this headline is key. Just as it took FHA being outed in the WSJ as an issue (one which I’ve been highlighting since June of 2023) for Black Knight to talk about it, we have arrived at the moment where Black Knight can no longer ignore the signals they are receiving in the data...signals that have been there for a while. Additionally, as I’ve talked about quite a bit, Black Knight has about a third of outstanding mortgages on their platform. Based on what I heard in a phone call last week, the number for foreclosure starts and sales is probably much higher. I’ve discovered the technology platform preferred by private note investors. That platform currently has about a million loans on it. I’m hoping to get some stats, so stay tuned. Based on anecdotal reports from the private note conference I attended, it is likely those are much more delinquent than the 3.22% rate Black Knight published for April.

ATTOM publishes a monthly report on foreclosure, but their data is dependent on timely county recordings of your Notice of Sale or Lis Pendens. One of the most excruciating roles I had in servicing was document administration. There are almost 3,200 counties in the U.S. with individual recording systems. Some are automated and some are not. During COVID for instance, Los Angeles had over a year delay in document recording. That has improved but many counties across the country have significant delays. Just another fun fact as to why the picture will be murky as the default engine starts in earnest. Another fun fact - one of my primary responsibilities for my clients is making sure the servicers are timely moving the loans through default because they hardly ever do. Between the servicers and the default firms that process these, the delays moving these foreclosures are endless. Strategic delay tactics such as filing bankruptcy or temporary restraining orders will also delay starts and sales. Regardless, the detail we are receiving signals that it is time to pay attention.

According to Attom, South Carolina is #1 for foreclosures with Illinois coming in at #2 and Florida at #3. In the coming weeks I will share some information on the foreclosure process in key states so we can start to estimate timelines for increases and impacts to prices.

I’m meeting with a large servicer as well this week to discuss how they plan to address the FHA requirement that precludes borrowers with delinquent loans from obtaining a loss mitigation workout. I have gotten contradictory answers from the servicers thus far, so hoping to get a better understanding as to timing this week. In the meantime,

Reverse Engineering Finance

gives us an updated view of his delinquent student loan analysis and the upcoming payment shock for many FHA borrowers to paint a picture of the turmoil likely ahead. This student loan/credit score story is just beginning, so we will track it closely from here:

Late last week I published a quick note for paying subscribers sharing my estimate for Existing Home Sales and Price. I estimated that sales would come in non-seasonally adjusted at 345,000 with a median price of $411,351. April existing home sales came in at 349,000 (down -3.06% YOY, but up 10.79% MOM) with a median sales price of $414,00 (up 1.82% YOY and 2.70% MOM). I also conjectured that NAR would likely revise their price down, while the builders would likely revise theirs up, which they did.

Existing home sellers are in a price corner, and there is no way out. April’s existing home sales are the second worst April since 1999, tied with 2009. On Friday, new home sales were also published with stronger sales than Zelman’s survey suggested. The builders are pushing hard to move the 504,000 homes they currently have for sale, the highest since 2007. They have been taking share in the $300-$399K price tier, while existing homes lag in the lower tiers. Those sellers of existing homes would be wise to wake up to current market dynamics. Redfin has now joined the 2025 price decline party.

I don’t believe that any of these firms - Zillow, Redfin, etc. - understand the FHA and student loan issues that are coming down the pike. Understanding credit is critical to what comes next, and these folks have been way behind the curve.

For today’s post, I will dive into the April results as there are many key details worth noting under the hood. The Northeast is roaring to life with both increases to listings and sales for instance. How are our friends out West? Not so hot when it comes to prices…for two months in a row. Additionally, we will review some travel data which is not good news for our short-term rental owners. Conditions are changing quickly in housing. You can hear it as every analyst out there starts to pivot. Awareness is coming. With that we will deep dive into Boston as I believe things there are about to turn…and bring the Northeast with it. While analyzing Boston we will also discuss the recent attacks on universities such as Harvard and what it means for the future of higher education, which was already ailing. The proliferation of student loans changed our university system and not for the better.

Before we dive in, just a quick note that I am excited to announce I will be participating in the George Noble Investment Conference on Thursday, June 5th. George has pulled together some of the sharpest macro minds out there. This is real signal, not sponsored fluff. I will be speaking alongside Michael Howell and Marc Cohodes and many others who will give actionable intel. Click here to register. Promo code: Save100 for $100 off.

Without further ado…