The Real Estate Market is Flipping.

well we just got earnings from Lennar

and it's quite useful to look at the

Lennar earnings call to get a peek at

what's going on in the housing market

but not only is it useful to look at

Lennar it's also useful to look at the

Redfin data center because thanks to

dropping rates in January or falling

rates in January we actually ended up

getting an interesting data release from

the Redfin data center take a look at

the national median sales price of four

homes and what's happening here this is

actually some degree of good news now

I'm going to explain this in just a

moment but I want you to understand this

my goal is to be neutral about the

housing market I really like for the

purposes of my businesses it does not

matter what's going on in housing it

just matters that housing is stable I

don't wanna nobody wants to catch a

falling knife and we don't need a

massive wave of foreclosures to make

money in a massive housing crisis I

think that would just prolong the pain

and slow down for example what we could

do with my housing startup so so for for

my bias up front want to be clear does

not matter if housing values massively

crash they already have corrected 15 to

25 percent in areas throughout the

country

but it's very important for us to pay

attention to this inflection on screen

right here because if this trend

continues the potential Peak fear that

we might otherwise expect in May could

soften now we're going to talk about

that along with talking about what's

going on with the Lennar earnings call

the Lennar earnings call I would say is

a little bit more on the bad news side

whereas this particular report is very

interesting this is the Redfin Data

Center and typically what we would

expect is that come about May June we

would expect that year-over-year prices

which is this black line right here

would be negative as they compare to the

light blue line on the left if housing

were to stay stable at higher rates

however housing is actually starting to

slightly Trend up again after the rate

drops that we saw in January now for a

period of time in February mortgage

rates actually increased again so it's

past possible that we could have sort of

this this drop of this light blue line

again and then a take up again

afterwards we'll see it also depends on

what happens with inventory which is

I'll comment on inventory in just a

moment but what I want you to see is

that we it looks like at the beginning

of the year bottomed around 343 here

which if we saw a year over year figure

from 387 to 343 we'd see a pretty decent

correction in Nationwide home prices you

could look at individual regions as well

to see that some areas are actually

doing decently year-over-year like South

Florida is booming you're over you're

basically flat year over year whereas

areas like Idaho and Austin Texas which

is where I am right now looking at real

estate are down about 20 percent so

you've got a nice discount here already

but take a look at this you're actually

seeing a little bit of a swoop up in

pricing right here from 343 to 353 and

it's somewhat aligning with this black

line right here which means if interest

rates were to continue you to fall with

mortgage rates it's possible that if

inventory stays as low as it is it is

possible that once we actually get to

the year-over-year numbers that housing

prices are actually flattish not as

negative as they are when we compare

Peak uh which is about April May to now

so think about that for a moment compare

April May to now across the board

Nationwide average you're down 10

percent

some areas you're down 20 percent some

areas are flat

but if we rise into May and we actually

get our year over year numbers we might

be flat in may not actually year over

year negative some areas could actually

be positive a lot of this is because of

the belief that housing inventory will

remain tight and it has been extremely

tight every single Market that I visited

and I've been probably in about 50

cities in just the last uh oh I don't

know uh 60 days here I've been in a

plane for for 70 to 80 hours in just the

last two months flying around exploring

different cities and meeting realtors

for my housing startup and what we're

finding in every area is yes there are

less buyers but they're also way less

homes for sale now that could change the

one place we think there is a change

that could happen is institutional style

liquidations Open Door Redfin REITs

other companies who ended up buying too

high that need to liquidate or even home

builders who have a lot of pipeline Home

Building massive amount of pipeline home

building we have the most pipeline home

building that we've seen since about

2006 seven that could end up all coming

onto the market around that May June

time now if we have this surge of

inventory in May June

at the same time as we get lower rates

because maybe inflation is under control

maybe housing could be stable going

forward this year however if we are in a

fear environment where the Federal

Reserve has to raise rates higher

inflation is sticky or the banking

crisis worsens or unemployment increases

then at the same time we have that surge

of inventory and we see a reduction of

buyers with potentially higher rates

that's how you really set up for more

pain and that's when you could get that

year-over-year Peak fear so I'm not

making a a conclusion here in terms of

exactly what is going to happen nobody

knows that nobody anybody who tells you

this is exactly what's going to happen

that is oh how's things going to the

moon or housing is going to crash into a

hole is is in my opinion for some reason

leaning towards dishonesty because we we

don't know that what we know is the data

we know housing prices have corrected 20

and if prices stay stable then that

year-over-year fear will hit but if

prices rise into the year over year

comps then that year your your fear

won't it if prices fall into the year of

Year may comps then that fear will be

even worse so we don't know but the

trend we're seeing right now and then

we're going to look at this Lennar

earnings call in just a moment but the

trend that we're seeing right now

is that

interest rates are coming down on

mortgages people are getting over the

quote unquote sticker shot of high

mortgage rates yes we had an adjustment

for higher mortgage rates yes there's

still a risk that markets can go down

more but as long as we don't get a surge

of inventory and rates start trending

down we could actually start seeing

people buy earlier now I want to show

you the Lennar earnings call because

they give us some insights so a few

things that we're going to look at here

first let's look at the actual lindar

earnings results and then let's go into

their earnings call just remember there

are three things you always want to keep

in mind here number one if you want to

go from zero to millionaire uh in real

estate investing check out the real

estate investing course linked down

below it's amazing great way to get you

started if you need life insurance go to

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bundle out with the zero to millionaire

real estate investing course new orders

decrease 10 percent at Lennar and this

is what you're seeing is you're seeing a

decrease of orders a decrease of volume

but average selling price is holding up

and a lot of these companies actually

are receiving or seeing a lot of uh

height well I should say sustained

margins one of the reasons they're

seeing sustained margins is actually

because they bought a lot of their land

in 2019 and 2020 that's the land that is

being sold with homes on it now in 2023

the problem is those prices were a lot

lower than they are in 2023 for land

that means stuff that's now being built

that'll end up coming out in 2025 will

be being built on very expensive land

with potentially lower sales prices or

even if we're at stable sales prices at

25 what you end up having is a situation

where margins that these home builders

are really expected to plummet so you

want to be careful with some of the home

builders in my opinion at this point

especially since there's also there are

rumors and speculation of of dare I say

near near fraud and this is just rumor

and speculation and I'll give my opinion

on it but basically what what some home

building sales reps are saying is that

you could end up having home sales reps

and what the home sales reps are doing

is they're potentially putting people

under contract you see they're putting

people under contract whom they know are

not qualify to actually buy those homes

So eventually the shoe will drop when

those deals cancel and the under

contracts go away now all of a sudden

the appraisals end up getting hit for

existing transactions other existing

transactions and new ones and when the

appraisals get hit now the builders

actually really have to start reducing

prices and then you actually get a

pricing War at the same time as you get

a surge of inventory look let me be very

clear about this okay if it and I'll be

clear with my bias as well okay if

here's what you are hoping for if you

are a bear what you want is you want a

surge of inventory nobody can determine

what's going to happen with rates but I

promise you if we get an Institutional

or a home builder surge in inventory the

Bears are going to win here in real

estate

if you are a real estate bull

you think and believe that the amount of

buyers we have while it may be lower

will be enough to offset the surge in

inventory especially since a lot of the

move up Market or move down Market the

homeowners aren't wanting to get rid of

their low rental rates so they're

actually turning properties into rentals

the problem with this is as people who

are keeping Properties or turning

properties into rentals you're actually

seeing downward pressure on rents that's

statistically what we're seeing as well

whether it's uh what we're expecting to

see through owner's equivalent rents or

what we're already seeing through

apartment lists vacancy rates up rents

down uh Zillow leading indicators for

rents rents coming down rents are

trending down that actually is also

dangerous because it suggests that if

you're looking at rental property you

should be very conservative with what

you are renting out properties for what

you're projecting for your property

rentals now uh I'm going to give you a

couple anecdotes here first I want to be

very clear about my bias I have a

housing startup we we don't know if our

reg a will go through if it does then we

can raise money from non-accredited

investors probably in May otherwise if

you're an accredited investor we close

the accredited investor around in two

weeks so that's it we people have two

more weeks to put money into house hack

as an accredited investor and that's tip

but what our goal at househack is is we

don't actually care if price is uh how

much they fall of course we'll get a

better deal because they've already

fallen a lot but we would rather buy a

slightly on the uptrend than catch a

falling knife with the startup that's

very important for us so I don't really

care if prices keep going down we got

cash we'll take the money if prices stop

falling I get to go to work sooner

because we're just sitting on on nearly

30 million dollars in cash uh and you

know we might raise you know another 20

to 30 more and if we do our reg a so the

point is it doesn't matter to me if

prices keep going down we wait if prices

stop going down then we start buying

right so the point is I I want to be

very clear with my biases because like I

I don't care what the answer is I just

want to know what the truth is and there

are a lot of real estate Bears who are

telling you the sky is falling and

that's not what I'm seeing on the ground

I don't think there's anybody else who's

actually visit it as many different

cities as I've gone to in the last uh in

the last two months you could look up my

flight history just Google it just go

into Google uh type in

n88w

FlightAware FlightAware n88w go to

flight history look at my flights it's

I'm fully transparent about where my

plane is which I pay for not my startup

so you could see all the markets I'm

going to I don't think anybody else is

doing that and I'm in every single one

of the markets and I'm not seeing people

deathly fearful of the bear case but I'm

also not seeing people super bullish

things are pretty neutral right now

which is very interesting so that's why

I'm reporting this the way I am because

that's just the reality of what's going

on now let's go jump on over to the

earnings call which I've been talking

about here

stalking Kevin look you could you could

pay to like hide your your track flight

history or whatever but I actually think

it's uh

it's good to be transparent but anyway

so what do we have here

uh okay here's lennar's earnings call

for you what do they tell us well first

they tell us we purchased very little

land this quarter as we await for better

pricing in line with current home sales

prices in other words Lennar is telling

you we are going to wait

we are going to wait to buy now that's

very interesting because here you have a

home builder telling you

we're just not going to buy land right

now we'll buy back our stock instead

very interesting

with our balance sheet strong we'll be

able to continue with stock repurchases

right

some markets are performing well however

in most of our markets we've had to

adjust prices increase incentives or

provide mortgage buy Downs that's

another thing that's propping up the

market right now mortgage buy Downs

what else our cancellation rate is 21

it's still pretty dang high it's down

from 26 percent though look at the

specific markets that are doing well

like this market right here

Kevin's course member Market the zero to

millionaire real estate investing course

with the expiring Saint Patty's Day

program linked down below where if you

get in you guarantee the best price and

the price goes up after that coupon

expires what oh wait sorry we've had 10

markets that are performing well

Southeast Florida Southwest Florida

Tampa I was just there so I grew up in

southeast Florida

Southwest Florida is like more like

Naples than that but I grew up in

southeast Florida I just visited Tampa

that's interesting that's very

interesting because that's what I've

seen as well over there palm Atlanta

this is where I met Kathy uh Kathy Wood

anyway uh New Jersey Philly Charlotte

Coastal Carolina's Indianapolis I

believe and uh and San Diego

now that's very interesting

the category 2 markets the markets where

we've made more significant adjustments

this is like hurricane categories here

huh three in no category three markets

oh that's good okay so you've got

category one markets that are performing

well and then you've got category two

markets that are not doing so hot those

markets include Jacksonville I was just

there Orlando I was just there Northern

Alabama Atlanta Raleigh I'm going to

Raleigh soon Virginia Maryland Chicago

going to Chicago soon Minnesota National

going to Nashville soon all the markets

in Texas I'm in Texas literally right

now filming this video I was just in San

Antonio yesterday I'm in Austin today uh

Dallas Fort Worth probably tomorrow TBD

anyway Colorado I've been there like

four times Phoenix been there like five

times Vegas been there like five times

Tucson haven't been there yet and the

rest of California and the Pac West

including Seattle Utah Reno Boise I mean

all of those places all within the last

two months while inventory is limited in

each of these markets yes we had to

offer more aggressive financing programs

and base price reductions or increase

our incentives in the area very

interesting

uh in some cases to avoid cancellations

we've had to adjust our pricing on our

existing contracts or our backlog uh or

our new deals and the existing contracts

continue to make progress on reducing

trade costs this is what makes me very

excited about my real estate startup too

is I think there are going to be so many

opportunities because even if pricing

for houses stabilizes I actually think

construction costs will come down

substantially labor costs and material

costs this is a sign of disinflation

right here this is actually very very

good so if you're looking for

disinflation it's right here fantastic

lower construction costs helping us on

the business side saving about fourteen

thousand dollars per home should help us

with margins yada yada I'm trying to

respect your time so I'm going a little

faster here so

I'm just curious can you reconcile these

comments about pricing maybe finding a

clearing price so basically finding a

bottom so they say we're looking at

pricing on an everyday basis in each

Community hey we've heard that before

all real estate is local right in a very

granular assessment to reconcile what

I've said about the end of February at

the end of February interest rates

started moving dramatically in a

different direction that's up and we

definitely saw a direct impact in

traffic levels that's down we were

intrigued to sit watch as we went from

February into March now rates are coming

down

but anyway the sticker shock of rap of

high rates is subsiding and so we think

we're going into stability the first two

weeks of March I agree with that that's

roughly what I'm seeing as well however

there is also a lot of fear about the

banking sector and if people think we're

going into a financial crisis

in a weird way rates could actually come

down

but people might not buy real estate

because while rates come down they end

up having fear about the banking crisis

it's entirely possible so

bottom line

pretty neutral right now on real estate

because rates are coming down we have to

see how that fear is going to lead to a

change in inventory

that's actually perfect for my real

estate startup because I've been saying

for over a year and a half now that

we're looking at buying real estate Q3

Q4

uh which we're very excited about you

can follow the journey obviously here on

the channel you if you're an accredited

investor you have two weeks left to

invest uh by going to househack.com read

the solicitation there this video is not

a solicitation

uh and the non-accredited round may

occur in May subject to

a green light from the SEC which

obviously we can't guarantee that we'll

end up getting but we will operate

whether or not we have a reg a obviously

I expect we will have a reggae but we

have no guarantee no way to guarantee

that we will so in the meantime if

you're accredited housak.com so that

gives you some ideas about what's going

on in the real estate market