How to read the foreclosure data

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about inflation, the Fed and how to read the foreclosure data.  Related to this episode:  Home equity hits $18T even as delinquencies, foreclosures rise  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  HousingWire Mortgage Banking Summit – October 1  More info about HousingWire  Top 5 Trending:  Newrez agrees to $15.5M settlement over forced-place insurance  Housing Market Spotlight: Price cuts and the battle for leverage  America at 250: Property rights remain the foundation of the American dream  Two Harbors calls UWM lawsuit ‘frivolous,’ slams management for $600M hedge loss  Inventory is down year over year, but months of supply says the market is functioning  Want more from Sarah? Don’t forget to subscribe!  The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.

Transcript

00:10Welcome, everyone. I'm joined today by my podcast partner, lead analyst Logan Motoshami to talk

00:16about inflation, the Fed and foreclosure data. Before we dive in here, the top five trending

00:22stories on housingwire.com. First is new res agrees to $15.5 million settlement over forced

00:29place insurance, followed by our housing market spotlight, price cuts and the battle for

00:34leverage. Then we have America at 250 property rights remain the foundation of the American

00:40dream. And two harbors calls UWM lawsuit frivolous slams management for hedge loss. Finally, we

00:47have Logan's inventory is down year over year, but months of supply says the housing market is

00:51functioning. Okay, Logan, welcome back to the podcast. By the way, before we get to start,

00:57we have to say, we have some awesome news today. Redfin came out with their lowest buyer demand ever

01:05and the highest sellers ever. So the reason I bring this up is because the doomers take this

01:11and they run with it. It also makes a case that we shouldn't be building homes if we have all

01:16these

01:17homes available. In any case, this actually ties into our foreclosure discussion. But I think half

01:24of X is starting to realize there's something wrong with that because usually you get, I get bombarded

01:29by, oh my God, it's 2008, it's worse than 2000s ever. And then I think people will realize.

01:34I don't know. I saw a lot of stuff on that. I sent it to you first thing this morning.

01:38You of course

01:39had already seen it, but I was like, this seems like more interesting.

01:41I always go, I mean, how I do it is I showed our chart from our article. I said, excuse

01:47me,

01:48I got a question. Wasn't inventory down year over year and sales up and prices up? Didn't Redfin

01:58just have like a 16 month high in home price growth year over year recently? I have questions. It seems

02:05weird that there's only 967,000 buyers. I don't know. I don't know. So in any case, I think a

02:11lot of

02:11people have figured that that is sketchy to a degree, but this morning inflation again came

02:18in below estimates. Beth Habik, who we love. Yeah. Beth, only 20,000 jobs being created. It's all

02:26good. She said, we need hikes now. Who's the girl in Wonka? Was it, what was her name? Violet? I

02:34don't

02:34know. I want it now. Oh yeah. I do think it was Violet. Violet. Okay. Yeah. Beth,

02:40Beth is like on a Wonka thing. Oh, that's what I need to do next. I need to put Beth

02:45Hammock

02:45in a, in a violet. Just give me rate hikes now. We don't do that to Beth.

02:54It's so she stayed consistent, which was, which was good for the timing of our podcast, but

03:01the 10 year yield fell again. There's also some news with Iran that Iran's getting money from Gulf

03:06state neighbors and stuff. So oil prices down. So you put that and inflation came in lower again,

03:12it's, it's going to get a little bit harder for those four, you know, Beth Hammock needs to like

03:17four people to join her for the rate hike. Uh, so, you know, the next jobs report, you know,

03:23it should rebound, right? You're not going to get the same government jobs being lost. Uh, but I,

03:28I think it's, she's probably hoping that, you know, we, we have a good number so she can get

03:32everyone. Cause she's running the show. Kevin Warsh is like, Hey Kevin, how you doing? You know,

03:37uh, by the way, I'm going to get all these people to hike rates. So, uh, that'll be, that'll be

03:42another interest variable, but the PPI inflation, uh, a little bit underestimates.

03:46Boy, I thought the timing of that was so interesting because in our podcast that just aired today,

03:51right. That we did yesterday, you, you were talking about Beth Hammock and then she came out and

03:55it was like, we have to raise rates. Like we have to raise rates. It's like, do we though? I

04:00don't

04:00know. I'm going, I'm telling you, I'm going to do the whole, you know, Willy Wonka. Yeah. But, um,

04:07so for, for on the inflation, um, anything surprising there for you?

04:12You know, the inflation data before we started this year, the federal reserve basically said,

04:19we understand inflation is going to be hotter than anticipated, uh, going into the first half of

04:24the year, but in the second half of the year, the tariff thing should dissipate. And then we got

04:30all caught up into the conflict and diesel prices and all that stuff. So if it is true,

04:38some of the fed members might go, well, we're just going to kind of stick to our tariff thing.

04:42If the conflict is over, then we don't have to worry about it. This is why the conflict kind of

04:47ruined everything because it's in its six month and we don't really have like oil prices to where

04:54they were and diesel prices to where they were, where we don't even talk about that for any

04:59seconds. We're just waiting for the tariff inflation to wide out. So we'll see. Uh, I mean, it's, it's

05:04still, it's still well above, uh, uh, the target, you know, uh, in a sense for the PC inflation,

05:11PC inflation, they want near two, two percent. But, uh, so far since Christopher Waller went all

05:16guns of Navarone on, on the CPI report, three of the four inflation, uh, reads have been a misses

05:23and, and the other one, uh, uh, was kind of in line. So we'll, we'll, we'll see how it goes.

05:29I'm

05:29sure what we could have 4 million jobs lost in the next report. And Beth Hammock, raise rates,

05:35raise rates, Lori, Lori Logan, Dallas fan. Come here, come here, come here. Let's

05:39raise rates together. So.

05:41Oh, yeah, it's tough. Um, okay. Well, let's talk about the foreclosure data because you've

05:46been wanting to talk about how to read the foreclosure data for a while.

05:51So I just want to, you know, teach people how to understand like what, when does foreclosure

05:56data actually become, become serious?

05:59I love that. No, we need it because again, um, this is something that is on people's minds.

06:04They read about it. So, okay. How do we, how should we be looking at the foreclosure data?

06:08So rule number one, you don't, you do not reference 2008 ever, right? It just like,

06:15and, and especially the new kids on the block are worse than 2008. That's, that's the really

06:20interesting part. Um, we've had many recessions post-World War II. We've only had one foreclosure

06:27crisis. So the reason why we don't say, uh, don't use 2008 because 2008 had a massive credit

06:34boom, a credit bust. Uh, and then you had massive underwater, right? So the foreclosure,

06:40the supply of homes that could be, uh, in foreclosure was enormous compared to traditional

06:45cycles. But what, how I, you know, every, everywhere we go on the nerd tour, I always say

06:51when I die, Sarah Wheeler promised me, as she'll say it here on the podcast, I will put chart

06:58daddy on the tube stone and I'm going to put the foreclosure chart, you know, on my tube stone.

07:03Uh, so you're going to do it, right? I am definitely going to do it. If those are your last

07:08wishes.

07:08Yes. Yes. Okay. Um, and what had happened, you know, starting in 2005 is that the foreclosure data

07:16started to pick up, but there was no job loss recession. So in a traditional cycle, what would

07:24happen is we would have late cycle lending risk. A lot of times FHA, VA low down payment, high five,

07:31high, high DTI, uh, uh, uh, loan profiles. And then when people start losing their jobs and they

07:38don't have a lot of selling equity, those would be authentic new late cycle foreclosure, uh, uh,

07:44candidates, uh, eventually. So the, the New York fed foreclosure data is a credit check. It's the early

07:53phase of what's going to happen in the future. So always keep an eye on that. And just remember it

07:58took 2005, six, seven, eight, then the job loss recession happened after all of that. So you had

08:06a massive surge in the credit data before the recession. There's where, you know, something

08:10is wrong. So wait for that foreclosure data to actually start breaking higher from a very, very

08:18normal trend. And you could take, you know, the 2013 or 2019 data. We're not back to 2019 levels yet,

08:24but when that happens, if it increases before recession, there's something you, you keep an

08:30eye on. But what traditionally is the case is that jobless claims start to break. Unemployment rises,

08:36people start the delinquency. So you got to do the math here. Okay. If you've got a 30 day late

08:4130,

08:4160, 90 day, 120 NOD filings. And then in some States, it might take two years before that home

08:48comes on the product. So first you start with the foreclosure data, right? If it breaks above trend

08:54before recession, something is wrong. If it happens when a recession is here, you count jobless claims,

08:59you go to foreclosure, but the key is the next one. The next one is even if I had a

09:05hypothesis of a

09:06foreclosure crisis, I would have to tell everybody, I need to wait for the new listings data to take

09:11off. This is why housing wire intelligence. Now, all of you that are housing wire subscribers,

09:16you could do this in your own area in Florida, New Jersey and Nevada and Washington. You could

09:22actually take that and move it forward because you'll have access to that new listing dance because

09:28those homes have to come onto the market. You could have 10 million homes in some state of

09:34foreclosure, but until they get into the new listings data, they're not there. And that's why

09:38I always reference this in every tracker article we write. During the housing crash years, after all

09:45that credit foreclosure buildup, our new listings data ran 250 to 400,000 per week for years. Ladies

09:54and gentlemen, boys and girls, women and children of all ages for years. Post COVID, we haven't had one

10:02year that was normal new listing. So all these foreclosure experts you were supposed to hear,

10:07all these people selling webinars and do poor YouTube sites and everything have never actually

10:13properly modeled out how the new listings data work. So wait for the credit data to start picking

10:19up above trend. If you want to wait for jobless claims to break, that's perfectly legit. But then also

10:25make sure you track it to the new listings data because that seller is not going to be a buyer.

10:29That is a distressed sale out there, whether there's a short sale or foreclosure. And then also

10:34you have to remember that how the underwater data looks, especially in the area, if you're in a certain

10:40area where the underwater mortgages are about 5%, where the nation might be under two, that might

10:47have a little bit higher risk. So you keep an eye on that new listings data when that happens.

10:53It's not happening this year. It didn't happen last year. It didn't happen in the last, you know,

10:58all going all the way back to 2013 even, but the new listings data will break. So keep an eye

11:04on that

11:04foreclosure, then keep an eye on the new listings data, and then see how many sales are, how many,

11:10the percentage of all sales, how many of it is going to be distressed. And that's how you really,

11:14the basic fundamentals of understanding how that foreclosure process works. It's very,

11:19very, very, very slow. This is why housing is very sticky. It's not like a stock that

11:23this is earnings after hours and it's already down 30%. You don't have that capacity, especially

11:29with an underwater mortgage. You know, the bank has to approve the short sale, the foreclosure and

11:33all this stuff. So it's not a very fluid process. You know, that statistic that you put in the tracker

11:39every week about how many new listings were coming onto the market every single week for years,

11:45it blows my mind. Like I still, I know it's true, but it's like, that's why nothing when people are

11:51like, oh, it's going to be 2008. It's like, you clearly don't know what the scope of 2008 was

11:56because we're so far from that. None of these people are analysts. They're entertainers.

12:02And if you have to be an entertainer, you don't necessarily have to like have a model or create it.

12:07By the way, I just want to give props to Libby who made a reggae song of me about going

12:17after

12:17doobers because they don't have models and they keep on forecasting. And it was absolutely priceless.

12:22But our fans have some skill on the music side, which was great. But it is true. If somebody keeps

12:31on saying the same thing every day, you don't forget about the forecast. Say, okay, what in your data

12:36line tells you this is actually occurring? They don't have any, right? They're entertainers,

12:42right? You want them to actually show you something. So again, active inventory, new listings,

12:48price cut percent. We have all these things, but with foreclosure data, boy, when the new listings

12:52data starts to take off, they're like, okay, there's something wrong here. Oh, wait a second.

12:57The last two years, this was building up. Okay. Then you see the distress sales and all that. So

13:02we're just not there. I mean, again, this is one of the crazier stats this decade. If I took the

13:08highest new listings in the last five and a half years, it was 91,000 in 2022 for one week.

13:15If I

13:16doubled that, doubled it, it wouldn't even hit the bottom levels of the new listings data back then

13:23where the bottom was around 250,000. That was at the end of the year where nobody was listing their

13:28homes. There were just still a plethora of distress sales out there. So let the data come to you. This

13:35is my old high school basketball coach talking right here. Don't force the game out there. Let

13:41the game come to you. Then use your skills to do what you do best, but don't make up stuff.

13:47Let

13:47connect the dots, be the detective, not the troll. Ladies and gentlemen, that's how we do it here.

13:54And then this way you can show people, right? You could visually see boom, boom, boom. That's not

14:01happening. When it happens, you all get to see it. So you don't get caught into this

14:06kind of a doom porn cycle where everybody keeps on every single day. Oh, it's coming, man. It's

14:11coming. You're not prepared. You're not prepared. By the way, I'm going to sell you this gold piece

14:16from 1940. You know, it's just viewers are going to do, man. It's a scam. No, that was an oldie,

14:21but goody. Be the detective, not the troll. That's one of your very first sayings, I think,

14:25that I heard you say. One thing good about going on X and battling the Russians, the Chinese,

14:31Iranians, the anti-Central Bank, the MMT people, and the crazy left and right doobers out there

14:36is that you figure out a way to make them look silly. That's how it came up. You know,

14:40be the detective, not the troll. So you deal with all these trolling people and you go, okay,

14:46so let me see your forecast. Let me see your models out here. Zip. Nothing. Nada. No game

14:51whatsoever. But you put them out in public, name and face and all that stuff. Can't be trollish when

14:57you got to go out and play ball in front of everyone. Well, let's set this. Let's give some

15:02context for the foreclosure data right now. Are we back to 2019 levels? Not in that data line. Some of

15:09the delinquency data are back to pre-COVID levels. But this is actually one of the things that I got

15:16wrong. I thought we'd already be by 2019 by now. And part of the things is, you know, that New

15:23York

15:23Fed is a credit, you know, so you go into the foreclosure. But you also have to remember,

15:28once you go into that foreclosure stage, your credit delinquencies, like if you have equity to

15:33sell so you don't have to ruin your credit, you're going to sell. So part of it is the

15:39FHA law that, you know, held, and there's a lot of mitigation and helping people in that process.

15:46And that probably held it off. But also, if you're sitting on 30 or 40% equity, why would you

15:52ruin your

15:53credit, you know, and start the process? Sometimes you have lates because of things that are not in

16:00your control, but, you know, they fix themselves up soon. But I just think the equity portion has

16:06kept that on top of, you know, the government programs and some of the loan mods. But I really

16:13thought we would have been at 2019 levels already. And it's just not, I mean, it's really sad.

16:19Sarah, when I draw those black lines, you know, I mean, when I draw those black lines and you see

16:24what happened in 2005, six, seven, eight, and I had to like draw the black line and have it go

16:29a little

16:29bit lower because this last quarter, it went down. So many people were thinking, oh, this is the

16:34quarter was finally going to surge because, and it didn't happen. Millions and millions of doom

16:40porn people, just a sad face, tears coming out. We're going to get clean. That's what we need to

16:45do. We need to get Kleenexes. We're going to ship Kleenexes to all these people so they can wipe their

16:51tears out because, you know, it's not, you know, housing 2008 and home prices aren't crashing.

16:56Oh my gosh. Okay. Well, this is a great setup for, to let our audience know, you're going to be

17:02headlining our mortgage banking summit. It's October 1st. It's here in Dallas. You are going

17:08to be talking about all sorts of things. You're our headliner. We also have a lot of other speakers

17:12lined up. People should go ahead and get tickets now. Don't, don't wait till the last minute and

17:17have to get on the wait list. But I'm excited for that session.

17:20Do you know what we really need to do? We need to have a Logan versus Logan. What was that

17:24movie?

17:25Kramer versus Kramer? Yes. Well, we need a Logan versus Logan and not a twin Logan to be a face

17:33off. That would be, that would be tragic. Lori Logan, Dallas Fed, you know, and, and, and I know

17:42some of the Dallas Fed listen to this. I know you're hearing me. So I'm giving an invitation

17:48to Lori Logan, you know, or some of the Dallas Fed members, you know, I know Daryl is part of

17:55that,

17:55but if any of the staffers want to come and take on the chart daddy, or, you know, give your

18:03point of

18:04view, we have an audience that is very into what Federal Reserve policy is more than anything. So

18:12it is an open, open invitation to anybody in the Dallas Fed. I love that invitation. And, and for

18:18real, like if, if you want to come and speak, if you're at the Dallas Fed, let it, let us

18:21know. We'll

18:22reach out as well. But looking forward to that. And Logan, thank you so much for getting us up to

18:26speed on all of the foreclosure data. Pleasure. And just remember when I die, make sure to put that

18:31chart right there, right underneath chart daddy. So everyone remembers. I will figure out a chart.

18:37This assumes I'm older than you. So, you know, maybe you need to be doing something for Mark

18:41Gravestone. Okay. Yes. I doubt that. I'd probably be the first one to go.

18:47What a hilarious discussion. Okay. Thanks, Logan. Talk soon.

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