BusinessWeek Writes: D.R. Horton CEO: Somebody Please Tell Home Buyers Rates Are Still Low

The Texas-based builder’s new home orders dropped 2 percent from the year-earlier period, which Horton Chief Executive Officer Donald Tomnitz attributed to consumers’ high sensitivity to tiny interest rate changes. “I don’t mean to date myself, but … no one around this table can remember mortgage rates being higher than 6 percent or 7 percent,” he said. “And I think one of the factors that we are dealing with, quite frankly, is most analysts, and most young buyers—especially first-time home buyers in the market today—have been accustomed to low rates for all their lives.”

The difference in sales price is only $34,096, but the 2013 buyer will end up paying about $104,000 more over the life of the loan, including an additional $64,000 or so in interest payments. That’s not an insignificant amount of cash. It’s enough to cover a bare-bones Tesla (TSLA); it’s also roughly 25 percent more than the median household income in the U.S.

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Just as I have said many times before we are continuing to see signs that the Real Estate Market is beginning to roll over. This latest whining from D.R. Horton CEO is a clear indication of that.

A few weeks ago I went out on a limb and called for a housing market top. I gave you the exact reason why the real estate market is topping and what you should anticipate going forward. Once again, you can read the article here… I Am Calling For A Real Estate Top Here As one of the signs and as anticipated we are starting to see crazy talk from industry insiders. Even though interest rates are still historically low Mr. Tomnitz is blaming buyer perception of interest rates for slow down in his business. As if buyers are waiting for interest rates to come down again. Maybe that is the case, but I highly doubt it.

The real reason behind the slowdown is un-affordability of real estate in this country and a massive (unsustainable) speculative bubble that has been created in the sector once again. If I could, I would tell Mr. Tomnitz get ready for the 3rd leg down in the real estate market.

If history teaches us anything, it will be much more violent than the 2006-2010 decline in real estate prices.

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Warning: Real Estate Implosion Is Starting

Bloomberg Writes: A Lonely Housing Bear Predicts a Big Tumble

Talk to Mark Hanson about the housing market for five minutes and you may find yourself wanting to sell your home and park the cash in a suitcase.

The Menlo Park, California, real estate analyst, blogger and founder of consultancy Hanson Advisers predicts a decline of 20 percent in housing prices in the next 12 months. Half the gains since the latest housing bottom in 2011 could be erased in the hot areas — Florida, California, Nevada, Arizona and Georgia — by rising interest rates and a thinner herd of speculative private-equity buyers, he says.

In my last week’s post I Am Calling For A Real Estate Top Here I have laid out a case of why I believe the real estate market is topping and should decline from this point on. It seems like other people are starting to see the forest through the trees as well.

Even thought I have briefly mentioned it before, I would like to take this opportunity to talk about an important point as it pertains to the real estate market. If you study financial markets, as I have, you soon begin to see patterns and similar structures in all markets. One of the easiest things to understand is that markets NEVER go straight up and down and they RARELY complete their moves in one motion. Typically it takes 3 to 5 distinct moves (up and down) to complete either a bear or a bull move.

As such, what we have experienced in 2007-2010/11 real estate market was only the first leg down. What we are experiencing now is a rebound, 2010/11 to today. Rebound acts as a perfect tool to suck investors or buyers back in by promising that the worst is over and by offering outsized gains. Rebounds are often powerful, yet short lived. When they are over, markets tend to shift fast to continue on with their original move.

This is where we find ourselves today. The rebound is topping and the market is getting ready to reverse itself. As soon as it does (and I believe it is already happening) the market will resume its BEAR MARKET in real estate. The third leg down is typically more powerful than the first one. As such, I would expect significant declines over the next few years in the real estate arena.

Fundamental certainly support this development as well.

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