Manufacturing the Recovery: Modify. Default. Repeat.

Published on
December 20th, 2019
35 minutes

Manufacturing the Recovery: Modify. Default. Repeat.

The Expert View ·
Featuring Keith Jurow

Published on: December 20th, 2019 • Duration: 35 minutes

Housing analyst Keith Jurow takes exception with the idea that the housing market has fully recovered from its 2007 crash. He explores the mechanisms used to “kick the can down the road” and highlights the return of risky practices like cash-out refinancing. Jurow also drills down on his favorite and least favorite housing indicators and answers the question, “should I be a buyer in this market?” Filmed on December 5, 2019 in New York.



  • PB
    Paul B.
    2 April 2020 @ 00:45
    Paints a very real picture on the Property Market plumbing Finance.
  • SR
    Samuel R.
    20 December 2019 @ 14:27
    • KC
      Kenneth C.
      31 January 2020 @ 17:10
      an idea might be to print out the transcripts and you could right your remarks on them.
  • WG
    Wade G.
    10 January 2020 @ 19:33
    I confess I don't know what to do about all of this... dismiss it/ forget it because sorting it out would require so much work? Seize it and size it, understand it well enough to act on it... because if Mr. Jurow is right, it should have profound implications? There are questions below, wondering how such losses could be carried/buried for so long. Why aren't losses transparent for the banks/servicers? While I have no idea, I'd start with the suspension of mark-to-market accounting rules. My understanding is that FASB had it's arm twisted by Congress in a committee meeting held March 15, 2009, and as a result, suspended FASB rule (I think 187) effective April 1, 09. Its easy to confirm the basic story around FASB suspension of mark-to-market; it's harder to understand just how ludicrous the consequences may be.
    • KJ
      Keith J. | Contributor
      23 January 2020 @ 17:20
      Wade, Very thoughtful comment. Dismissing my thoughts and data would not be wise. I don't make up this stuff. If you want to check the data, look up my sources. Don't focus on bank losses because they've sold off much of the bad stuff to institutions, private equity and hedge funds. That is where most of the risk now lies. But they don't have to mark to market. So how do you determine delinquencies out there? Very hard. Re-default rates on modifications are probably the best proxy right now. I'll continue to discuss this in my MarketWatch columns.
  • gc
    guillaume c.
    3 January 2020 @ 18:00
    If this is true, this is a huge thing. But I have some difficulties to believe that they can hide losses on real estate for 10 years now. If RV can find some other sources to confirm that, that would be great.
    • KJ
      Keith J. | Contributor
      7 January 2020 @ 17:53
      Guillaume, I understand your skepticism. It took me years to understand just how much the relevant information on mortgage delinquencies and modification re-defaults had been hidden. There is much to hide. Check out some of the sources that appear in my tables and graphs both in this interview and in my MarketWatch columns.
    • mw
      michael w.
      22 January 2020 @ 05:44
      The marketwatch columns explain it well.
  • VM
    Vincent M.
    16 January 2020 @ 03:36
    One thing not taken into account is the 1.3M+ immigrants coming into the US... along with the lack of new supply for almost a decade ( much of which has been apts ). I do not think this is a debacle but likely means if you are betting on hitting it big as a flipper, watch out. Best comment is all markets are local. I see the move to lower priced states out of CA, IL and the Northeast as one way people are dealing with this. Just don't be the one to turn out the lights!
  • TW
    Thomas W.
    3 January 2020 @ 16:57
    Now THAT's valuable content.
  • KF
    Karen F.
    2 January 2020 @ 16:19
    When I first saw Keith's interview it was like a light bulb going on. I was a RE appraiser in the 2000's and I saw the bubble first hand and the crash. I sold in 2007 at the top because it was obvious to me but not to anyone else. Then the crash just seemed to disappear. I thought I might pick up a foreclosure but couldn't find any good deals. I am old enough to remember the Resolution Trust Corp and the unwind of the real estate crash from the late 1980's and what it took to move through all of those properties. It was a huge deal and I knew this bubble was way bigger. Everything just disappeared. Now I know why. Amazing what can be hidden from view. We live in a crazy world right now and I have no idea how this is all going to end. Everything you are saying Keith, totally matches my experience of how this all went down.
    • KJ
      Keith J. | Contributor
      3 January 2020 @ 12:57
      Karen, Very interesting comment. You saw first-hand what has taken me years to uncover. I continue to be shocked at what I find. Servicers seem determined to keep us in the dark. You might want to take a look at my new column on thelooming jumbo mortgage debacle which should be out next week.
  • TC
    Thomas C.
    2 January 2020 @ 17:21
    I guess most all of Keiths bearish housing premise rests on the idea that the banks are hiding a huge amount of defaulting "modified" mortgages from us? But everything else this time is VERY different from pre-2008: -the last 10 yrs have seen the tightest loan underwriting for many decades (very hard to get a loan, down payments much bigger, record numbers bought with all cash) -we are at all time low for cash out refi's, helocs, and equity extraction and have been for 10 yrs n (meaning most people have equity in tact) -builders have added almost no supply this go around - no one is building - new home construction is WAY off previous recoveries (less supply means less inventory) -probably what 90% of homeowners have a 30 year fixed fully amortizing loan with a rate that begins with a 3 or a 4? Fully amortized means every payment pays down big chunks of principle -lack of labor to build new supply of homes
  • PD
    Peter D.
    23 December 2019 @ 13:27
    As a DC real estate investor I can’t help but think that this guy’s numbers are way off on homes not foreclosed on. Most pre-foreclosures get snatched up by investors. Is he accounting for this? Based on the numbers you showed I can’t imagine he is. There are certainly plenty of cases of people staying in their home not paying and/or doing modifications, but 20k+ In this market. I seriously doubt that these are not properties that are getting picked up by investors and the data is not being properly reflected.
    • KJ
      Keith J. | Contributor
      23 December 2019 @ 14:03
      Peter, While you may be very familiar with the DC market, what you say is not happening around the country. I've just uncovered too much evidence that jumbo mortgages have not been foreclosed by the servicers for the past 10 years. My next column will discuss this in detail.
    • md
      mike d.
      28 December 2019 @ 20:52
      I think Keith is right. I invest in boston, in 08 or 09 there was tons of properties if you had cash, then it changed, when there was a repo the bank was right there to buy it back. They did not want investors buying, investors don't pay. With the help of the fed they created the market we have today, smoke and mirrors way over valued. I don't think it will hold out much longer.
  • WS
    William S.
    23 December 2019 @ 23:24
    Can’t make this up. I actually bought the single Nashville house foreclosed and put on the market for over $300k. What a story in itself. Excellent video even without the personal connection to a chart. Happy New Year to RV land.
    • KJ
      Keith J. | Contributor
      24 December 2019 @ 04:15
      William, That is truly amazing. It must have been hard finding a nice foreclosure over 300k.
    • WS
      William S.
      25 December 2019 @ 21:41
      When the agents stand down and allow a direct dialogue with the bank’s REO PM, magic happens: bid, counter, lift, done inside two minutes. Don’t ask about the title.....
  • dp
    david p.
    22 December 2019 @ 23:19
    How have these banks been able to carry these for so many years w/o impacting their cash flow, balance sheet and profitability?
    • KJ
      Keith J. | Contributor
      23 December 2019 @ 05:29
      David, That's a great question. I'm convinced that the large banks don't reveal the real situation with their residential mortgage portfolio. I still haven't figured out how they can hide so many delinquent mortgages which they have not written off. I'll keep digging.
    • TR
      Travis R.
      24 December 2019 @ 12:57
      Mark-to-Model accounting.
  • AH
    Andrew H.
    20 December 2019 @ 16:54
    You know. I have not finished a single video since they started advertising at the end of their videos. Getting a little sick of the constant marketing. Still a good platform, but also getting pretty watered down and promotional at times.
    • MK
      Michael K.
      21 December 2019 @ 00:02
      Yes I would presume they’d be considerate enough to understand when we have a high engagement factor that we don’t need to know every single time we watch a video that they offer institutional production services. Perhaps YouTube free channel has worse repeat listening but your average YouTuber who listens to one video is probably not the CIO able to influence strategy budget spend and vendor engagement. I’m still very long RV and I sympathize and would love more of their growth and success, but these ads are beating a dead horse a bit.
    • ET
      Eugenia T.
      21 December 2019 @ 02:11
      Commented something similar but my comment was deleted. In the end, if they don't believe this alienates people more than it helps, it's their business. I'm just sorry for the people who signed up and are having the quality of their subscriptions watered down. To me, as someone still under a trial, this is annoying. If I had actually paid, I'd be livid.
    • dm
      dude m.
      21 December 2019 @ 02:18
      Just a comment that I'm OK with the promo videos at the end. I feel that I'm still part of a small, personal community of RealVision viewers, like you. RealVision does not want to be a predictable or stereotypical media company. If you are not interested in the promo vids, then it's OK to skip them. Just keep enjoying the great interviews and donate generously to your RealVision annual membership.
    • DC
      Dan C.
      22 December 2019 @ 07:14
      I suppose I haven't either, but I stop when their pitch begins. It's literally 45 seconds or so at the very end. Not sure why that'd be upsetting to you or anyone else. It literally has no impact on viewing.
    • M.
      Milton .. | Founder
      24 December 2019 @ 09:24
      These pitches are making new subscribers aware of the production services we offer which over time has gathered interest from some members that we are now working with. We wanted to keep it as swift as possible so adding them at the end made sense because people can simply pause and exit.
  • CS
    Chetan S.
    20 December 2019 @ 16:13
    Great interview. Two features would be useful: 1. Ability to add your own bookmarks and private notes at those bookmarked moments on any video. 2. Ability to create your own sub-folders within "My Videos" to better categorize the videos anyone adds to their list.
    • RM
      Richard M.
      21 December 2019 @ 17:44
      Yes, they used to have that feature (being able to add notes at particular time marks), don't know why they removed that (I use to use that a lot)!
    • MS
      Michael S.
      21 December 2019 @ 23:32
      Indeed. Being able to have a sub-folder for "Argentina Stocks" or "Oil Bears" or "China Bears / Kyle Bass" (Lol) or just "Tesla Videos" whatever would be great! I would also suggest site searchablity that extends to the text of the transcripts, or at the very least tag ticker symbols on the video page for securities discussed so one can search for the ticker and pull up videos discussing that. All those hundreds of "Trade Ideas" videos are in the wind; there's no way to easily refer back to them to go over changes to those theses and sell prices and such. I don't know what other people do, but I only use "My Videos" for unwatched videos that are basically my reading list.
    • M.
      Milton .. | Founder
      24 December 2019 @ 09:21
      We used to have bookmarks but it was one of the least used features so when we released the new interface around 2 years ago, we cleaned up some of the least used features. I’m monitoring the requests on this one and if it’s a valued item, we might get it back. Usually Google has the best search feature. Since we now have transcripts on the actual page, you can head over to and type in “ term” in which you can replace term with anything you’d like.
  • AH
    Andreas H.
    23 December 2019 @ 14:42
    The strongest argument are the millennials. That is the key! First of all, they are bigger then the boomers. What happened with the economy when boomers came into play? Do they stay with their parents or are they going out and build families and firms! Its always the same: Older generations do not believe in younger generations! And that is always a mistake! (I am an Xer).
  • BG
    Bryce G.
    23 December 2019 @ 02:43
    This was one of the most shocking videos from RV I've watched yet. As a millennial who ISN'T struggling... between the information presented here and the gross disconnect between prices and reality in my local market I cannot see myself becoming a homeowner anytime soon unless required by life circumstances. But certainly not as an investment. I've never owned a home so I might be missing some key nuance, but the biggest question to me is what happens to all the deeply defaulted mortgages in the end. The banks can control whether to foreclose or not so they're not going to make a mass run on themselves and cause crash... So these houses stay off the market, the price remains artificially high, no one can afford anything, buyers continue to dwindle until there's a huge correction anyway?
    • KJ
      Keith J. | Contributor
      23 December 2019 @ 05:26
      Bryce, Very interesting comment. To be shocked is perhaps the best way to view the interview. Truth that's been withheld by Wall Street and the media can be shocking when revealed. Hopefully, it can help me make smarter, more informed decisions.
  • DC
    Dan C.
    22 December 2019 @ 07:22
    Suppose I'm in the minority on this board but I remain completely unconvinced. Too much data was anecdotal and not terribly convincing ("lots of millennials are still living at home" and "some people are still living in their houses after not paying for 5 years"). Ok... millennials are picking up household creation and somebody's always got a scam - doesn't mean it affects the market as a whole. Remarkably little was said about rates, regulation, employment, or specific marketplaces. And of course, that's what drives most of the real estate action.
    • KJ
      Keith J. | Contributor
      22 December 2019 @ 18:12
      Dan, Of course, not everyone will be persuaded by my analysis. Too anecdotal? There are four graphics with reliable and detailed statistics. I use these stats to explain what really happened and which you probably have never seen before. Perhaps you might take a look at a few of my recent columns on MarketWatch.
  • JP
    John P.
    21 December 2019 @ 00:52
    I really enjoyed this presentation and this week. Even after working 4 years in commercial real estate I still have no idea where this market will go. I thought 2016 would be a peak yet here I am on the eve of 2020 with even more savings waiting for a buy opportunity. While I have a good income and plenty of capital from investments, I cannot fathom how anyone around me is able to afford or wants to own at prices of 650k to 1 million. With interest rates so low and prices so far above wages, I feel like buying a house is less about owning the asset and more of a short dollar, long inflation trade.
    • MS
      Michael S.
      22 December 2019 @ 00:22
      Bingo: "...buying a house is less about owning the asset and more of a short dollar, long inflation trade." Speaking of shorting the dollar long inflation trade, I think one of the best "inflation trades" today are the few remaining good cash-flowing 4-unit multi-family properties in various towns in the U.S. Midwest that produce a consistent and rising 20% cash-on-cash return and which you can purchase with your ten allotted conventional/Fannie Mae 30-year fixed loans. I love the USA! Here's the inflation trade: Once they finally give up and devalue the dollar/Yuan/Euro/etc. against gold (seems sure to happen within the next 10-20 years), destroying those fixed debt service payments, these properties will become gold mines as one will be getting paid rent in a dollar recently brought (temporarily) in closer connection to gold and one will be making fixed payments in an old "fiat-era" dollar, so to speak. A perpetual put on the dollar, with a 15-20% coupon.
  • AT
    Andrea T.
    21 December 2019 @ 22:45
    Very clear and insightful :)
  • VP
    Vincent P.
    21 December 2019 @ 17:46
    Sobering analysis and also believable given how this entire recovery has been engineered by bankers and politicians. To sum this up, the US economy has a hollow core. Thank you.
    • KJ
      Keith J. | Contributor
      21 December 2019 @ 19:04
      Thanks Vincent. May I suggest also taking a good look at a few of my recent MarketWatch columns. Just search for my name under "Advanced Search."
  • AT
    Atul T.
    20 December 2019 @ 13:17
    Thank you Keith. Just curious about your thoughts on how best to track the markets in San Francisco Bay Area? Things definitely seem extremely expensive. How should one decide whether to own or rent in these over priced markets?
    • KJ
      Keith J. | Contributor
      20 December 2019 @ 14:46
      Great question, Atul. As I indicated, San Francisco is an unusual market because of the impact of Silicon Valley, the software companies, and Chinese money which poured in. But it is definitely weakening as the impact of bidding wars has plunged and listings are up. Sales are also weakening. Go to to see the latest figures for SF and other major markets. Personally, I would not be a buyer in the SF metro area.
    • jh
      joo h.
      21 December 2019 @ 10:15
      How about in Denver,CO market? I have living in Denver for 30 years but never seen price went up alot in last 5yrs. I still see a lot of new buyers around 300k houses and still building new houses everywhere. Any thought on the Denver markets?
  • EK
    Edward K.
    21 December 2019 @ 00:06
    Keith - are you saying the purchases by private equity are not significant (or not significant enough) to be a factor?
    • KJ
      Keith J. | Contributor
      21 December 2019 @ 04:12
      Edward, Institutional buying was mainly a buy-to-rent deal and was never more than roughly 5% of purchases in any major market. It's even less now.
  • MA
    Maurice A.
    21 December 2019 @ 02:58
    Confusing median with mean?
  • DH
    Dabangg H.
    21 December 2019 @ 00:56
    Looking for more details on US housing market, which is 100X bigger (?) that Aussie one.
  • WB
    Wes B.
    20 December 2019 @ 16:38
    Tough to look at RE through a national lens. Most of Chicago where I live is trading well below peak prices from 2005-6 era so tough to say that we've re-inflated prices all that much here. I'm shocked he didn't talk about how the removal of SALT deduction is affecting prices. It's pretty obvious that high tax states are losing people to low tax states and we are seeing a bifurcated RE mkt because of this. Interesting take but I think there is a bit of recency bias from 08 housing crisis. I just completed a refinance and I can say that mortgage standards now are much more strict than pre-crisis. With Millennials just entering the age where they will start buying homes en masse it's tough to be real bearish on housing. I'm not bullish by any means but it wouldn't surprise me to see housing prices remain stable at the very least.
    • KJ
      Keith J. | Contributor
      20 December 2019 @ 20:54
      Wes, Interesting point. I doubt whether the tax changed have made much of an impact on any markets. Do you think people make buying decisions mainly on the deductibility of taxes or interest? I don't. As for tight mortgage underwriting standards, my next column on jumbo mortgages may cause you to re-think your point.
  • TR
    Thomas R.
    20 December 2019 @ 17:39
    Keith - does your research on the discrepancy of foreclosed homes to homes put up for sale include the large bulk sales that were bundled up and made? I was familiar with the Phoenix market, actually picked up 10 houses myself in 2009/2010 all of which I subsequently sold in 2015/2016. I looked into bulk purchases but did not have the resources nor was I willing to take the risk that the big players did. These bulk purchases never hit MLS.
    • KJ
      Keith J. | Contributor
      20 December 2019 @ 20:50
      Thomas, That was very smart investing you did in Phoenix. Congrats. The collapse there is prices was greater than almost anywhere else. During the crash, almost 100,000 properties were foreclosed and sold in the Phoenix metro. Bulk buying was never a big factor there or anywhere else. The big players did mainly buy-to-rent investing. They are still not much of a factor.
  • Cd
    Christiano d.
    20 December 2019 @ 20:11
    Would be nice if they had explored some parts of Europe as well during this week. The situation in Munich is very difficult. Tons of immigrants and very short supply of apartments. I have already noticed that buying an apartment would be better than paying rent (short term), but I believe that any downturn in the economy would make a lot of immigrants leave Germany and supply would increase a lot. But every time I say something like this all the germans say things are very stable here compared to other European countries and the economy would never fail (they believe it so much that I have the feeling Germans spend all their money traveling and don't save any).
  • MR
    Mitchell R.
    20 December 2019 @ 16:14
    Classic example of Greed before Logic, Want before Needs...
  • AK
    Ado K.
    20 December 2019 @ 09:59
    This week was great, loved to widen my knowledge of what is happening in the US and Australian housing market. The view seemed to be rather in line with the macro analysts, meaning that we most likely are heading into a storm, and one better buckle up so to say. The fact that people are not paying and can still live in the house for years as well as refinancing due to appreciating value seems like nothing short of a true mess. Thanks for your time Keith, and thanks RV.
    • la
      luis a.
      20 December 2019 @ 11:07
      4 days fully dedicated to the housing of a country the size of a city, what a great week indeed !!!
    • BS
      Benjamin S.
      20 December 2019 @ 14:47
      Luis. Given it is the most dependant country on exports (30%?) to China. I would say its a pretty good indicator of health of their economy.
  • JB
    Jon B.
    20 December 2019 @ 13:29
    have we learnt nothing? rhetorical big picture question on society. Not aimed at RV :-) Great interview.
  • ME
    Michael E.
    20 December 2019 @ 11:52
    Excellent interview.