Crisis in Home Sales WORSENS Real Estate Recession.

there's no question at this point the

housing market is crashing and it is

starting fast folks i filmed this video

to talk about a luxury home buyer demand

but we just got even more data so let me

give you the more data let me talk then

about luxury home buyer demand which

everybody said would hold up then we'll

talk about implications and what this

means for the market so the new data

that just came out within the last 30

minutes is that home prices have now

declined 0.77

from june to july if you go to the

redfin data center we've already seen an

over five percent decline in real estate

prices from peak but this is the first

time that we have actually seen home

prices decline according to black knight

a real estate and data analytics firm

and this company cites that not only is

this the first decline since 2020 when

we had a brief decline because of covid

but it is the largest decline in a

single month decline of home prices

since january of 2011 and it is the

second

worst july or summer performance going

back to 1991

that's terrible it's obvious why this is

happening rates going up affordability

in the toilet and unfortunately

affordability is getting worse just this

morning joe biden suggested hey

let's forgive student loan debt so what

did that do that pushed the 10-year

treasury right up to 3.11

which is more pain for real estate

anything above 2.75 for the 10-year

treasury is painful at 3.11 we're gonna

be seeing six percent mortgage rates

back again very very soon on top of this

pending home sales fell one percent in

july

and sales are down

19.9 percent for all resale properties

from a year ago now some realtors are

saying the bottom is in which is kind of

similar to what you're seeing toll

brothers say which we'll talk about in

just a moment

but folks

the fact that the 10-year treasury is

now jumping even more today especially

after the biden news

now let's listen to the story on toll

brothers but folks if you're not

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there's one thing everybody kept saying

about real estate and it's that oh don't

worry kevin don't worry the luxury home

buyers they'll be just

fine even though mortgage rates may go

up they'll just pay cash for properties

and they'll keep buying real estate real

estate's gonna be fine man don't worry

demand won't soften okay well we got a

little bit of an update today on that

one and it ain't good although there is

some light at the end of the tunnel and

that is actually very interesting let's

get right into it remember august 26 is

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down below all right folks let's get

into this so

toll brothers just reported earnings

they just reported their second quarter

report or earnings which is actually

their fiscal third quarter but calendar

year it's the second quarter i hate it

when they do this crap but anyway

the big smoke and gun disclosure that we

got was the following take a look at

this

contracted homes were down

60 percent

so in other words the number of homes

that they were able to sell was down 60

percent compared to last year now they

have a funky calendar but a decline of

60

means that in may june and july of this

year they signed 60 fewer homes which

means they actually had under contract

3165 homes during 2021 during those

three months during the summer buying

months and that plummeted all the way to

1266.

that's a huge red flag now what's

actually really interesting about that

though is that the stock market was

basically at all time lows during those

months in fact what i think is really

important to do is literally to pull up

the stock market pull up the day chart

on the nasdaq for example and look at

your absolute lowest points because

wealthier buyers tend to have more

exposure to stocks their down payments

could be coming from stocks and take a

look at this

may lows june lows july lows and we only

started getting a stock recovery towards

the end of july we also

have a really interesting note here

though which i think is incredible

because it shows us this connection

watch this okay

as our third quarter progressed we saw a

significant decline in demand as the

combined interest of sharply rising

mortgage rates higher home prices stock

market volatility and macro uncertainty

caused many prospective buyers to step

to the sidelines it's going all the way

up to about mid-july which remember what

happened here in mid-july

mid-july we hit the bottom basically

well it was kind of at the end of june

but roughly around the same time

mid-july and we started going a little

bit more towards the moon again right

and in recent weeks we've gone a little

bit more towards the moon now we've

retraced a little bit even from from the

recent runs but

take a listen to the next line here

however in more recent weeks we have

seen signs of increased demand as

sentiment is improving and buyers are

returning to the market average weekly

deposits in the first three weeks of

august were up 25

compared to july how interesting because

when we look at the first three weeks of

august which ends roughly the 21st

they're basically talking about this

green bar section here so from like

right here contracts collected on the

weekend over here which would be the

30th the 31st of july all then turned

into green days in the stock market

beginning of august green green green

green green green only started having a

little bit of a pullback here leading up

to about the 19th and that was nominal

compared to the last couple days

so interesting how you can really

correlate this pain over here

with a pain in a luxury home builder

with an average home price of like 925

000 in fact they tell us the average of

full year 2022

home price is expected to be 9 15 to 9

25 but fourth quarter home price

is actually now expected to be higher

than the full year's numbers between

nine hundred thirty five thousand and

nine hundred fifty five thousand this is

really interesting and it shows us this

tale of almost two cities because it's

like wait a minute so the numbers are

really bad i mean sales are down sixty

percent contract signs are down 60 at

toll brothers

but

they actually think they'll be margin

improvement and higher prices towards

the end of the year and they're seeing

more signings as

we're seeing the stock market go back up

interesting how you're seeing this

correlation between wealthier home

buyers now in my opinion the stock

market though is not the only reason

we're seeing this move

one of the reasons in my opinion we're

seeing this move is a lot of folks in

late july

we're able to lock in

lower interest rates than what we

actually have today you have to keep in

mind a lot of the people when they sign

a contract for a home

they've already been walking in with

their pre-approval letters and they're

getting large builder incentives to get

rates that are lower than what they

currently actually are so this is this

is kind of uh you know two two pieces of

the puzzle here to remember uh but the

first piece of the puzzle here is that

in august we've actually seen

starting at the beginning the first week

of august going all the way through

today we've actually seen the 10-year

treasury yield skyrocket now it really

took off in the last three days so i'd

be curious to see if contracts are

starting to fall again a little bit as

these these higher rates really start

biting in i believe that anytime rates

are above about 2.75 which is that

yellow line there anytime we're above

that you're going to see pressure on

sales and if you look the beginning of

august actually had rates below that

people were able to lock those in sign

contracts it's potentially true that

more people signed contracts in the

first weeks of august because they saw

the stock market going up and interest

rates actually trending down

unfortunately the opposite is happening

today we are seeing interest rates trend

up

and we are seeing

the stock market kind of start getting

rejected uh on on its uh bull run here

which many are just calling uh a bull

trap

so what does this mean for us uh you

know people who are not trying to buy

like million dollar homes here okay i'm

not in a million dollar home i don't

plan to move to a million dollar home

this is probably an 850 000 home okay

okay i get it that's kind of close but

still out there

a million dollars okay anyway point is

how does this affect us going forward

well here's my opinion on this

first i really believe that what you're

seeing here from toll brothers

is a sign of volatility and uncertainty

in the real estate market when you zoom

into any market any market you zoom into

you're always going to have a market

that looks like this it's going to look

like this really jagged and it's going

to look really intimidating on the day

to day basis oh my gosh is up 10 it's

down 10 oh my gosh the signings are this

like imagine if we could see tesla order

deliveries every day it'd probably be

like oh it's a red day in the stock

market no orders oh it's a green day in

the stock market and tesla's up five

percent oh my gosh ten times the orders

that we usually get right wouldn't

surprise me at all if that's what

happens because you know what that's

just the reality of the way people

operate you know they do say the stock

market is a graph of human emotion but

what's the big deal

for the real estate market well the real

estate market even though we have these

crazy fluctuations there are large

trends

happening and these large trends matter

and that's what we want to pay attention

to because right now what we've had is

we've had this incredible run-up of real

estate prices that has almost been

exponential and it has started to slow

we've already seen home prices as in the

video that i described from this morning

decline about 5

from their peak when we zoom into the

noise we can constantly see updates

about what the heck is going on in the

market and let me tell you just because

toll brothers is telling us oh well the

first three weeks of august are looking

good

yeah now rates are higher and we're

starting to get rejected on stocks again

don't hold your breath for the next

quarter contracts are going to be in my

opinion quite down compared to last year

again and all of this is going to

contribute to the trend that real estate

is no longer going straight up to the

moon instead it's actually on a slight

downtrend we're not expecting to see a

crazy crash it's not like we're going to

wake up tomorrow and like snapchat's

down 40 percent the real estate market

is down 40 it's not going to happen it's

going to move very very slowly the real

estate market will continue to see

buyers but we'll also continue to see

companies like toll brothers or lennar

that are like ah crap you know we should

probably start building less that's why

we're seeing building starts miss

expectations and plummet and not only

are we seeing less building but we're

seeing builders who are more anxious

than ever to get their existing

inventory off the shelves by any means

possible and remember the trick that

homebuilders use and this is a red flag

as well for even toll brothers

even though their average home price

might go up you have to keep in mind

they love to throw in incentives like

crazy

i'm hearing some home builders are

offering buyers four to five percent in

credits sometimes even more on a nine

hundred thousand dollar home that could

be as much as forty five thousand

dollars to help you get a cheaper

mortgage to help make it affordable that

doesn't last forever though

eventually the fear hits markets and we

start seeing prices actually crest down

which we've already started seeing all

you have to do is go to the redfin data

center it's really easy you go to the

redfin data center and you type in

median home price uh and you will see it

uh and we'll start seeing the decline

once that becomes more popularly known

and people believe that ah crap

10-year treasury yield which is closely

linked to mortgage rates isn't actually

going down if anything it's going up

then we'll continue to see fear build

off of that black line at the top which

is 2022 rotating down already five

percent

from its previous highs around 395 down

now to about 374. the real estate fall

has started

now it's just a matter of how long will

it last

and the longer rates are above 2.75

the longer the real estate market will

have pain the good news is it creates a

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