MELODY WRIGHT | We Are Moving Into DISTRESS Selling!

Chapters
00:00 California Fires and Insurance Crisis
05:24 Impact on Employment and Mortgage Delinquency
09:42 Banking Sector Challenges
11:55 Housing Market Trends and Price Corrections
17:12 Real Estate Inventory Dynamics
22:04 Ownership Imbalance in Real Estate
25:40 Rising Costs and Selling Pressure
27:22 Understanding the Real Estate Market Dynamics
29:31 The Shift from Motivated to Distressed Selling
31:37 Indicators of Distress in the Housing Market
33:50 The Impact of Economic Factors on Home Prices
37:30 Housing Affordability Challenges
39:36 Potential Solutions and Market Predictions
41:02 The Future of Home Ownership Costs
42:52 Current Economic State and Recession Indicators
49:35 Final Thoughts and Market Insights

This interview with MELODY WRIGHT was recorded on 1/16/2025.

In this conversation, Gary Bohm and Melody Wright discuss the ongoing crisis in California due to devastating fires and the resulting insurance issues. They explore the potential economic fallout, including rising unemployment and mortgage delinquencies, and the challenges facing banks. The discussion also covers the current state of the housing market, including price corrections, inventory dynamics, and the imbalance in property ownership. Rising costs associated with homeownership are highlighted as a significant factor leading to increased selling pressure in the market. In this conversation, Melody Wright and Gary Bohm delve into the complexities of the current real estate market, discussing the rise in mortgage delinquencies, the shift from motivated to distressed selling, and the implications for home prices and affordability. They explore various economic indicators, the potential for a recession, and the challenges facing homeowners and investors in the coming years. Melody emphasizes the importance of understanding market dynamics and being cautious in decision-making, particularly regarding home valuations and future trends.

SOME TAKEAWAYS:
- California's insurance crisis could lead to significant economic fallout.
- Unemployment and mortgage delinquencies are expected to rise in affected areas.
- The banking sector may face challenges due to non-bank lenders' liquidity issues.
- The housing market is experiencing one of the worst downturns since the financial crisis.
- Rising interest rates and costs are impacting home sales and affordability.
- There is a misconception about low inventory in the housing market.
- Many properties are being held as short-term rentals, affecting available inventory.
- The current real estate market is characterized by an ownership imbalance.
- Recent homebuyers are facing unexpected costs, leading to distress sales.
- Increased selling pressure is anticipated as homeowners struggle with rising expenses. Repairs not done can affect home valuations.
- Mortgage delinquencies are rising despite low unemployment.
- The unemployment rate may not accurately reflect the labor market.
- Real estate market is frozen, with sellers under pressure.
- 2025 may see significant price corrections in housing.
- Distress selling is becoming more prevalent in the market.
- Indicators of distress include rising servicer advances.
- Housing affordability is a major concern for the future.
- The Fed's actions will influence market recovery.
- Understanding market dynamics is crucial for buyers and sellers.

SOUND BITES
"California is not structurally strong."
"This crisis could be significant."
"We are moving into distress selling."
"There is plenty of inventory."
"I think it's an ownership imbalance."
"There is so much vacancy out there."
"The builders have to move those houses."
"We're already in a recession."
"We have to be careful with silver."
"The miracle won't be in spring."

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Video Title: MELODY WRIGHT | We Are Moving Into DISTRESS Selling!

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[DerrySky]

Gary is an excellent interactive interviewer and we really like the split screen format, you feel like you are part of the conversation! Melody Wright is our favorite mortgage and real estate analyst. She truly is the canary in the coalmine

[chrisschill]

Finally, a RE pod that admits observable reality. Thank you both!

[lawrencesmith]

I really want to see people who have paid too much or gone without insurance taking 100% of the losses. No more passing the buck on to the rest of us.

[Kitpu]

Melody is amazing!! Ty appreciate her knowledge.

[fortstocktonjeffBarber]

Gary Thanks for an incredibly informative podcast. We sold at the top and have been renting. We are hoping the true distressed properties come to the market by Q4

[TonyBennett-vk]

Hats off to both!

Want to add 2 thoughts.

1) Investors of all stripes have burrowed (in some cases deeply) into SFH neighborhoods everywhere. They'll Slash and Burn (great comment Melody) and take first loss (the best) on the way out without a nary of worry about what the neighbors think. Vicious Cycle will leave owner occupied holding an even shorter end of the stick than investors. Will also accelerate the process.

2) I don't think the 30yr mortgage will make it anywhere near 8%. The answer to high prices / rates is even higher prices / rates (in the short run). We are very near to putting those in rear view. As the recession (we're in now) makes itself ever more noticeable ... down we go. Disinflation / Deflation will be watchwords for H2.

[vickijohnson]

And, technically the mortgage crash started in 2005, as variable rate terms kicked in, real estate was completely imploding in 2007. The “crisis” didn’t hit Wall Street until the credit default swaps hit in 2008. People would be surprised how much fraud is covered up by finance, until the just bursts through, with speculators betting against the debt.

[markwriter]

I agree, 7% is not great but closer to normal. The prices are mind numbing without a hefty down payment. Plus high and rising taxes and ever increasing insurance. I expect all insurance, regardless of policy type, are going to quadruple. Good luck if you want a home. Even if you squeeze in, it could be taxed away by inflation at the end of the day

[Erik-rphi]

It's not the interest rate it is the price.

[lak]

The California situation shows complexity on top of complexity.

Cali and Florida (another large-economy state) have both been hugely impacted by natural disasters (exacerbated by climate change) within 12 months of each other.

This can only have ripple effects across the US (and the world). 😢

[mark-]

How long can new home builders offer these buy downs before it affects their bottom line?

[teresad]

For year and years many people VLOG about the demise of California. They never post when it turns out they're wrong. It just seems to be a topic people like to post about. Truth is, nobody has a crystal ball, nobody knows the future and none of this is any one person's control.

[yveivy]

So can someone explain to me how these assessments are coming through and massively increasing property taxes but the houses can't sell for anywhere near the inflated assessment?!? How does that make any sense?

[ericmaclaurin]

Rebuilding neighborhoods probably creates more jobs than lost.

The insurance issue isn't going to be a failing institution. Its going to be an inability to get insurance for less than the cost of the house.

[DionTalkFinancialFreedom]

She has called 11 of the last zero crashes.

[emills]

Anyone proposing the US build more Nuclear plants should be forced to live next to one.

[Erik-rphi]

No new here, Los Angeles Beach cities built in the 60's.

[NationArmy]

Melody : we will see "true price discovery". Wrong! Not in $. Price discovery has already happened and continues to happen ONLY in terms of houses priced in bitcoin. Study bitcoin, Melody. It is free to study. We are not living in 2008, pre- Bitcoin. We are now in the bitcoin era so forget about the GFC.