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home builders Across America are dealing
with their biggest pile up of inventory
since the 2008 housing crash this pile
up of inventory is now causing these
Builders to cut prices and many of them
are now issuing concerning warnings
about the state of the housing market
heading into 2025 because what we are
now seeing is a supply Pipeline on
Builder Lots that's the biggest of all
time even bigger than the previous peak
in the 2008 crash you can see that home
builders in America now have over 300
,000 homes for sale in the South that's
the highest level ever and these
Builders are now having to get desperate
to sell many of these homes I'm seeing
40 $50,000 price cuts on a lot of these
houses and they're even doing 4.5%
mortgage rates I'm wondering how these
Builders are even making money on these
houses anymore and the most recent
Home Builders Warning
warning comes from lenar the second
largest home builder in America they
just reported fourth quarter earnings
and showed a 9% year-over-year decline
in Revenue with their stock price
plummeting as a result meanwhile one
month ago DR Horton the largest home
builder in America had a stock clunge on
a Q4 earnings Revenue Miss with the big
issue being the amount of homes for sale
on these Builder Lots home builders now
have 492,000 homes for sale at the end
of 2024 that's the second highest level
of Builder inventory ever the only other
time we saw Builder inventory even close
to this high was 0607 7 before the big
crash meaning that these home builders
could be cutting the price by a lot in
2025 if these Trends hold in fact some
Builders have already been cutting the
price so I want you folks to take a look
at this community close to Tampa
everyone I actually tour this community
over the weekend and I was shocked at
how affordable some of the houses were
here you can see that the Builder is
offering five bed three bath Homes at
2500 ft for
$369,000 that's 100
$150 a foot and not only that they're
giving crazy mortgage rate buy Downs I
actually went to that Home Building site
and Tor it and talked to the sales agent
and she was saying I could get a
4.7% mortgage rate for the full 30-year
term of the mortgage meaning that my
payment would only be 2,100 a month for
a five bed three Bath House indicating
Housing Demand
that there's something strange going on
in this housing market right now
everyone I mean these Builders are
cutting the price they're giving big
mortgage rate buy Downs they have plenty
of homes to choose from and yet they're
still struggling to make sales
suggesting a real problem with housing
Demand right now home buyers seem to be
checked out on the housing market
they're not jumping to buy homes right
now just because the Federal Reserve cut
interest rates and the election is over
rather these Builders are observing
persistent challenges with home buyer
demand you can see in particular stwart
Miller the CE CEO of lenar said that in
the course of the fourth quarter the
housing market that appeared to be
improving as the FED cut short-term
rates proved to be far more challenging
as mortgage rates Rose almost 100 basis
points he says accordingly in the fourth
quarter sales Pace lagged expectations
and our new orders fell short of
expectations at 177,000 homes vers
19,000 homes projected now we can see
that lenar they're the second largest
builder in America by volume of units
delivered so the fact that they're
reporting these issues is of big big
concern meanwhile the number one home
builder is Dr Horton and concerningly DR
Horton is also reporting similar
problems DR Horton missed their fourth
quarter earnings estimates their revenue
was down 5% year-over-year their CEO
Donald Al said in their earnings call
that we believe that rate volatility and
uncertainty are causing home buyers to
stay on the sidelines in the near term
but the broader implication here folks
is not good for the housing market in
2025 I mean in many of the states where
these Builders are most active we have
record high home prices and the fact
that these Builders are signaling
weakness shows that there's fewer buyers
coming into these states and that prices
are going to need to come down to allow
local buyers to step into the market and
afford the homes open up reventure app
I'm going to show you some of the states
where these Builders are most active we
go to a demographic data point called
building permits you can see the most
building permits are pulled in in Texas
as well as Florida North Carolina
California Arizona and Georgia so these
states in red have the most building
permits but on a relative basis it's
really here in the South where the
builders are most active and so one way
to actually think about these Builder
warnings about demand and inventory is
that it's really impacting this slice of
the US housing market here they're
called the smile states warm weather
sunb belt climates this is where the
builders are most active and this is
where inventory has gone up the most so
in Texas there's now 115,000 homes for
sale on the resale Market that's the
highest level of inventory in 7 years so
on the resale Market inventory in Texas
is exploding now you have the builders
saying we're having issues meaning more
inventory is going to hit in 2025
meanwhile in Florida inventory is up to
152,000 homes also the highest level in
7 years suggesting that we're in a
downturn in Florida's housing market
meanwhile in Tennessee Tennesse C just
hit its highest level of inventory in 7
years most notably here in the sun Bel
which is where I think home prices have
the greatest likelihood of dropping in
2025 is after all the housing market is
a supply and demand equation everyone
how many people are looking to buy homes
versus how many people are looking to
sell homes and that equation in the
south is tilting towards now an
oversupplied housing market that's much
more favorable to buyers where sellers
are really going to have no choice but
to cut the price next year and the
interesting thing about these Builders
is that they have pricing power so while
they're starting to struggle in terms of
their earnings reports and their stock
prices lenar is down 25% over the last
three months they still actually have
decent profit margins so they have room
to cut the price and they have room to
give mortgage rate buy Downs that's
something that's going to mean that the
builders actually end up fairing better
than existing home sellers I want you to
think about something everyone remember
this community I showed you earlier the
lar Community where they're selling
houses at $150 a foot if you go to the
same area east of Tampa you could see
that there's existing homeowners
resellers who are also trying to sell
their homes maybe they bought a home
from the Builder two or 3 years ago like
in this case and they're trying to sell
a 4 bed two bath for $3.95 and they're
still trying to make a profit on it like
the owner of this house bought it for
317 in 2021 they're trying to get it for
$ 3.95 however this seller is now
competing with the builder who's
offering a bigger newer house for
$20,000 less with a 4.7% mortgage rate
and this is almost the conundrum that
you have as a home buyer in these home
builder communities is that while it
might appear attractive on first glance
to buy a house from a builder because
they giving a more affordable price and
they're giving a mortgage rate buy down
if you then go to try to sell that house
two or three years later you might
actually have trouble selling your house
because you're going to be competing
with that Builder when you go to sell it
and actually folks I had to see this for
myself everyone I I was looking at the
lenar earnings reports I was looking at
the data on how much the Builder
inventory was going up and I said to
myself I need to go on the ground and
look at what's going on here in the
Tampa Metro uh for myself so I did that
and over the next couple minutes I'm
going to show you some clips of me
touring different Home Building sites
and you know what I saw everyone was
something that kind of shocked me this
Dr Horton
folks I want you to take a look at
what's right behind me I just drove
about 10 minutes down the street and I
find a deserted Home Building site here
from Dr Horton this is America's largest
home builder DR Horton I talked to you
about a month and a half ago about how
they gave some warnings in their
earnings call about reduced demand in
Florida and Texas well look at what
we're seeing here in Florida all these
brand new Built Homes from Dr Horton and
I'm going to I'm going to take you down
here so you could see what we're dealing
with almost universally these homes have
an available sign in front of them
that's how you know that the house is a
spec house that the Builder built it and
finished it and there's no buyer you can
see it's an available sign available
available available available available
it looks like one person bought that
house over there and this is what scares
me actually about the Builder market
right now and the housing market in 2025
is not just the overall home hes for
sale but the amount of spec inventory
that's sitting on the market we just
haven't seen this ever except for the
2008 bubble and so many people in the
housing market seem to think that a
crash is impossible this is what amazes
me is that we're seeing all the signs of
a downturn already playing out in the
market in Florida and Texas it's
unquestionable that there's a downturn
playing out in those two markets
inventory is spiking on the resale
Market Builder suppli is surging prices
now starting to drop yet there's still
this Denial in the housing market
mainstream that this is actually
happening and I think one of the reasons
why there's the denial is people look at
the national home Price Index right and
the national home price index is still
at a record high and it's still actually
Up 3 and a half% uh to 4% year-over-year
depending on the metric you look at so
we still are seeing National home prices
go up and as a result I think a lot of
analysts in the housing market they lose
the local perspective and a lot of the
news reporters lose a local perspective
and are ignoring the fact that there is
a downturn occurring here in Florida now
I want you to take a look at this
everyone this is another Home Building
site but you could see they're just
putting the stakes in the ground here on
this Home Building site they have a
couple houses out of the ground here
they have a couple houses out of the
ground here but you could see all this
land all this land and you can see the
signs over there for where they're going
to have their lots for their homes and
this is what's also interesting is not
just is there a big pipeline of Builder
homes completed and under construction
there's also a big pipeline yet to be
built and what's super interesting is
that these Builders don't seem to care
about the slowdown in the market rather
the builders are going Full Speed Ahead
into 2025 and are building more homes
into this Regional downturn in Florida
where I think prices in Florida could
probably drop by about 10% in 2024 I'm
going to get into some of those specific
projections in a second on how much I
think prices are going to drop in
Florida this year but the thing to
understand overall is that the builders
don't seem to care about the Slowdown
and actually the CEO of Meritage Homes
who's the seventh largest home builder
in America they just came out and said
on their earnings call they're going to
build more spec inventory in 2025 and
they're going to build more homes in
2025 even acknowledging the slowdown in
the market and the reason they said
they're going to do that is because they
anticipate a good spring selling season
and I think a lot of this actually has
to do with Donald Trump so Trump was
elected a little over a month ago and
since then there's been a big surge in
sentiment all over the economy all over
asset markets even in the housing market
the Builder surveys are now showing
they're more confident about the future
with Trump in office and you know this
is because Trump is a business-friendly
president he's going to reduce
regulation he plans to reduce taxes so
it's not that surprising that sentiment
would increase the problem though is
that increased sentiment doesn't
necessarily improve the fundamentals of
the market right just because Trump is
now president doesn't mean all of a
sudden that people are going to be able
to afford houses right the math of the
affordability being the worst of all
time is still in place and so if
Builders just decide to ramp up
production even more that's not necess
going to bring more buyers to the table
rather that's just likely to push home
prices down which again would be good
for you guys out there I think the moral
of this story is a positive one if
you're a prospective home buyer it's a
negative one if you're someone who's an
investor who already owns homes in these
Home Building sites or who is you know
flipping homes this is a negative
because the prices are going to drop
these Builders are going to drive the
prices down in Florida in Texas in
Tennessee in Georgia in Alabama because
they still have room on their margins
the profit margins of these Builders
went up a lot during the pandemic it's
now gone down but they still have room
to cut prices more do bigger mortgage
rate buy downs and one interesting thing
about these houses everyone is like
these are tiny these are tiny floor
plates look at this wonder how much
they're going to charge for these houses
I've seen some price points below
$300,000 in this area uh about 40 mil
southeast of Tampa this is where all the
action is as far as the Home Building
sites and you can also see that the
builders I mean they
pick very rural outlying suburban Loc to
build as well so if someone builds a
home out here I'm not sure if that's
necessarily going to impact the housing
market in downtown Tampa or in penel
county in St Petersburg they're kind of
different markets anyway what I think
you all should do out there if you're a
prospective buyer understand that the
volatility in this market is real that
the builders are doing some crazy things
and that prices are likely to drop and
the markets they're most active and what
we do on reventure app is we try to
account for this in our home price
projections our home price projections
look at the inventory levels they look
at the price Cuts they look at the do
and then they try to project where
values are heading in the future in the
short term over the next year if you're
going to put your hard-earned down
payment into a house if you're going to
take the risk of a mortgage if you want
to start buying investment properties
you have to understand the trends in the
Market Force everyone we're going to
have to track these Trends into the
future one bad earnings report from a
bunch of home builders doesn't
necessarily mean that the housing market
everywhere across the country is going
to crash and so what I would suggest you
do is go to ww. reventure doapp and
track this data in your area
particularly the home price forecast
score for your state city and zip code
and gives a score ranked from 0 to 100
on how prices are forecast to move in
the future closer the score is to zero
the more likely that prices are to drop
meanwhile the closer the score is to 100
the more likely prices are to go up the
more of a sellers Market it is so what
I'll suggest you do is go to ww.
reventure doapp right now and search
your city and zip code so you can see
the home price forecast score to get the
full data you'll need to upgrade to a
Premium plan the cost is $39 a month
which is ultimately a very affordable
price compared to the cost of buying a
house and having peace of mind about the
current trends and future Trends in the
market especially with these Builders
doing big big price Cuts you're going to
want to see if your city your state is
affected and how prices might be heading
in 2025 as a result