Hey Melody, I just found your Substack and I really like it. I'm going to share it in my newsletter. Can I ask you though, what's your background in real estate? How did you come to have this level of interest/expertise in the subject?
Jun 23, 2023·edited Jun 23, 2023Liked by Melody Wright
After reading this post and watching the accompanying YouTube video, I have to ask you this as nicely as possible: have you given any serious consideration to the possibility that your thesis (or to be more charitable, your timing) is simply wrong? In the video, I noticed you pointed out a significant increase in Airbnb prices and said something like "this doesn't line up with the news we're receiving." Well, could it be that the data doesn't line up with the news you're receiving because the news you're receiving is cherrypicked? Not necessarily by you, but by the people delivering it to you, who largely agree with your thesis and (like me!) want it to be true?
I have to tell you that when I leave the comfortable echo chambers of housing bubble subreddits and crashtwit, I see a whole lot of data suggesting anything BUT the beginning of a recession, in housing or anywhere else. It's looking more and more like the trillions of dollars of printed money are still sloshing around with abandon, and with the latest AI stock bubble and the rebound of housing (and crypto, ffs) prices and the general mainstream narrative--once the banking nanocrisis ended--of "everything's fine now," the wealth effect is back in effect.
So how much do you believe in your "it's about to turn over" narrative at this point, really? I just have a sinking feeling that the markets aren't quite done being irrational.
The problem with coincident indicators such as stock prices and general sentiment is they work flawlessly almost always yet fail spectacularly when you need them the most once a decade or so. As far as I can tell it's not about cherry picking sources to confirm biases or to disprove them as if all opinions are equal. It's about focusing on leading indicators rather than coincident. For example, sellers may be very optimistic and confident (and even buy AI stocks) when they post their house for sale but they are generally unaware of rising number of listings. Focusing on number of listings is a way to gauge their future success and future optimism.
Very nice. When you price the US Home Index in gold, the real top was in the early 2000s. Not in mid 2022. And the same topping pattern that built out over 7-10 years before the crash, morphed into existence again over the past decade. Right now, (give or take) priced in gold, we are at the same level as 2005. And heading lower at the moment.
I believe that so much of the data is being manipulated….similar to what you pointed out regarding the ‘2nd’ lien issue on the moratorium amounts, that a regular person trying to figure out what is actually occurring will eventually lose their mind. (Mine was lost long ago, per my wife).
Which is why people like you and Amy Nixon and HBD are so important. Cheers.
Thank you! I always love to hear your historical perspective as it gives a good anchor....yes, I think we are in a real, real data dungeon. And, the only way we don't lose our minds is by knowing we are in it together.
Hey thanks. And good morning. Pricing things in gold is very useful. The first house we bought in 1983 (16% rate) would have taken 192 Oz of gold. That same house today would take 155 Oz of gold. Priced in ounces of gold it is actually 20% cheaper than 40 years ago.
Just an interesting way to track the destruction of purchasing power over time.
Similar house on same street 3 doors down currently listed at 299,000 (and it’s not on the pond so our old house might fetch a few more $ for “waterfront”.)
2023-$299,000. 7%+.5 PMI. 7.5%. 10% down. Payment with taxes and insurance-$2185. Gold price $1925. #oz needed-155.
If you run an inflation calc from 1983-2023 the house ‘should’ be priced at 232,000. So in that sense it is overvalued by nearly 30%, nearly all of which has occurred in the past 3 years. It’s been on the market for 3 months. So it’s pretty clear it will sell for less. My bet is that by the end of the correction, the value will be much closer to 232k than 299k.
So while nominally the price increased by 393% in 40 years, price in gold it actually fell by 20%.
You are welcome. It’s always interesting to price things in gold as it removes all bias.
My base case since late 2021 is that median price would return to 2012 levels in real terms. I know for certain that our old house sold in 2014 for 200,000. So in 2012 maybe it was valued at 175-180k. If you run an inflation calculator from 1983-2012 guess where we end up? $175,192. In the end, as you obviously know, it all comes down to math. And I was not a good math student. So I could be wrong. But I’m betting in the end that I get it pretty close. At least in some geographical areas. It’s just going to be an ultra slow grind to the bottom.
Well done! The stats made MEGO. Someone has to interpret them, I reckon. Buckle up! There will be no contagion...BB Nobel prize winner and Raccoon, h/t Ben Hunt
Hey there - I think there may be some confusion - I was talking about the prices in May and the timing of that :). And, I was being honest that my long-term framework is taking longer due to things like the ERC credits. I've never claimed to have this timed, but I do think we will start to see significant increases in inventory by the beginning of Q4 and am working on a forecast. The prices I'm seeing for July 4th are notably much LOWER. That was my point. I consider the question of what I'm missing at least once every five minutes, honestly. But I make sure that I don't just stay in the echo chamber and read people who completely discount my view and make sure to carefully consider all challenges. My timeframe is very long-term as to what I see happening in housing. What is your timeframe? Maybe I can speak directly to what I see in your timeframe. Or, are you watching to guide investments. Tell me why you are here and I can help tell you my view :). And thank you for reading and the engagement!
I started my management training program out of nam in my early 20s 1977 Avco Financial Services. I did it all with a typewriter and adding machine lending $$ for anything, including signing the checks.
I collected every category of delinquency and chased people in the field locating my collateral. I made the loan, I better collect it was the standard for managers. I ran several credit and collection departments for many iconic companies. Nations bank/credit, Wieboldts, Polk Bros, Security and Southern Pacific to name a few prime, 1st National, TCF bank(s) and Ameriquest subprime. I handled BK claims, wage assignments and appeared in court for the creditors collection lawsuits, very rare experiences. I fought the system from my position refusing predatory activities that hurt borrowers. In the evenings (extra $) I closed mortgage loans at people's homes for title companies, recognizing all the front end and hidden backend fees I tried to talk consumers out of signing. Lost that job. I saved and helped hundreds of customers throughout my underwriting and lending career trying to change lending standards during the predatory years but fought a losing battle. The burnout from working in "lending and collections" was a private life altering profession. Love your efforts and experiences.
Hey Melody, I just found your Substack and I really like it. I'm going to share it in my newsletter. Can I ask you though, what's your background in real estate? How did you come to have this level of interest/expertise in the subject?
Thank you for reading, the kind words and the support. Here is a summary of my background: https://drive.google.com/file/d/1CpU5dUtrEVb6pKgKlNV_QsR9Y63Gso1K/view?usp=sharing
Wow, I can see you've done a lot! Lends even more weight to what you're writing. I'm looking forward to reading future articles.
Thank you and thank you :)
After reading this post and watching the accompanying YouTube video, I have to ask you this as nicely as possible: have you given any serious consideration to the possibility that your thesis (or to be more charitable, your timing) is simply wrong? In the video, I noticed you pointed out a significant increase in Airbnb prices and said something like "this doesn't line up with the news we're receiving." Well, could it be that the data doesn't line up with the news you're receiving because the news you're receiving is cherrypicked? Not necessarily by you, but by the people delivering it to you, who largely agree with your thesis and (like me!) want it to be true?
I have to tell you that when I leave the comfortable echo chambers of housing bubble subreddits and crashtwit, I see a whole lot of data suggesting anything BUT the beginning of a recession, in housing or anywhere else. It's looking more and more like the trillions of dollars of printed money are still sloshing around with abandon, and with the latest AI stock bubble and the rebound of housing (and crypto, ffs) prices and the general mainstream narrative--once the banking nanocrisis ended--of "everything's fine now," the wealth effect is back in effect.
So how much do you believe in your "it's about to turn over" narrative at this point, really? I just have a sinking feeling that the markets aren't quite done being irrational.
The problem with coincident indicators such as stock prices and general sentiment is they work flawlessly almost always yet fail spectacularly when you need them the most once a decade or so. As far as I can tell it's not about cherry picking sources to confirm biases or to disprove them as if all opinions are equal. It's about focusing on leading indicators rather than coincident. For example, sellers may be very optimistic and confident (and even buy AI stocks) when they post their house for sale but they are generally unaware of rising number of listings. Focusing on number of listings is a way to gauge their future success and future optimism.
Yes! And, thank you. Great perspective.
Very nice. When you price the US Home Index in gold, the real top was in the early 2000s. Not in mid 2022. And the same topping pattern that built out over 7-10 years before the crash, morphed into existence again over the past decade. Right now, (give or take) priced in gold, we are at the same level as 2005. And heading lower at the moment.
I believe that so much of the data is being manipulated….similar to what you pointed out regarding the ‘2nd’ lien issue on the moratorium amounts, that a regular person trying to figure out what is actually occurring will eventually lose their mind. (Mine was lost long ago, per my wife).
Which is why people like you and Amy Nixon and HBD are so important. Cheers.
Thank you! I always love to hear your historical perspective as it gives a good anchor....yes, I think we are in a real, real data dungeon. And, the only way we don't lose our minds is by knowing we are in it together.
Hey thanks. And good morning. Pricing things in gold is very useful. The first house we bought in 1983 (16% rate) would have taken 192 Oz of gold. That same house today would take 155 Oz of gold. Priced in ounces of gold it is actually 20% cheaper than 40 years ago.
Just an interesting way to track the destruction of purchasing power over time.
Good Morning! Very, very interesting indeed. I love when I get a really good dose of perspective :). Thank you.
1983-$73,000. 16% +.5 PMI. 16.5%. 10% down. Payment w/taxes and insurance-$1221. Gold price EOY-$380. #oz needed-192
Similar house on same street 3 doors down currently listed at 299,000 (and it’s not on the pond so our old house might fetch a few more $ for “waterfront”.)
2023-$299,000. 7%+.5 PMI. 7.5%. 10% down. Payment with taxes and insurance-$2185. Gold price $1925. #oz needed-155.
If you run an inflation calc from 1983-2023 the house ‘should’ be priced at 232,000. So in that sense it is overvalued by nearly 30%, nearly all of which has occurred in the past 3 years. It’s been on the market for 3 months. So it’s pretty clear it will sell for less. My bet is that by the end of the correction, the value will be much closer to 232k than 299k.
So while nominally the price increased by 393% in 40 years, price in gold it actually fell by 20%.
Wow. What a cool analysis! Thank you. I'm going to think about this some more this weekend....very wild to think about it this way.
You are welcome. It’s always interesting to price things in gold as it removes all bias.
My base case since late 2021 is that median price would return to 2012 levels in real terms. I know for certain that our old house sold in 2014 for 200,000. So in 2012 maybe it was valued at 175-180k. If you run an inflation calculator from 1983-2012 guess where we end up? $175,192. In the end, as you obviously know, it all comes down to math. And I was not a good math student. So I could be wrong. But I’m betting in the end that I get it pretty close. At least in some geographical areas. It’s just going to be an ultra slow grind to the bottom.
Well done! The stats made MEGO. Someone has to interpret them, I reckon. Buckle up! There will be no contagion...BB Nobel prize winner and Raccoon, h/t Ben Hunt
Hey there - I think there may be some confusion - I was talking about the prices in May and the timing of that :). And, I was being honest that my long-term framework is taking longer due to things like the ERC credits. I've never claimed to have this timed, but I do think we will start to see significant increases in inventory by the beginning of Q4 and am working on a forecast. The prices I'm seeing for July 4th are notably much LOWER. That was my point. I consider the question of what I'm missing at least once every five minutes, honestly. But I make sure that I don't just stay in the echo chamber and read people who completely discount my view and make sure to carefully consider all challenges. My timeframe is very long-term as to what I see happening in housing. What is your timeframe? Maybe I can speak directly to what I see in your timeframe. Or, are you watching to guide investments. Tell me why you are here and I can help tell you my view :). And thank you for reading and the engagement!
I started my management training program out of nam in my early 20s 1977 Avco Financial Services. I did it all with a typewriter and adding machine lending $$ for anything, including signing the checks.
I collected every category of delinquency and chased people in the field locating my collateral. I made the loan, I better collect it was the standard for managers. I ran several credit and collection departments for many iconic companies. Nations bank/credit, Wieboldts, Polk Bros, Security and Southern Pacific to name a few prime, 1st National, TCF bank(s) and Ameriquest subprime. I handled BK claims, wage assignments and appeared in court for the creditors collection lawsuits, very rare experiences. I fought the system from my position refusing predatory activities that hurt borrowers. In the evenings (extra $) I closed mortgage loans at people's homes for title companies, recognizing all the front end and hidden backend fees I tried to talk consumers out of signing. Lost that job. I saved and helped hundreds of customers throughout my underwriting and lending career trying to change lending standards during the predatory years but fought a losing battle. The burnout from working in "lending and collections" was a private life altering profession. Love your efforts and experiences.