Tag: real estate

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Brand New Real Estate Market Ponzi Scheme. Will You Buy In?

The New York Times Writes: Wall Street’s New Housing Bonanza

house of cards

Wall Street’s latest trillion-dollar idea involves slicing and dicing debt tied to single-family homes and selling the bonds to investors around the world.

That might sound a lot like the activities that at one point set off a global financial crisis. But there is a twist this time. Investment bankers and lawyers are now lining up to finance investors, from big private equity firms to plumbers and dentists moonlighting as landlords, who are buying up foreclosed houses and renting them out.

The latest company to test this emerging frontier in securitization is American Homes 4 Rent. The company talked to prospective investors at a conference in Las Vegas last week about selling securities tied to $500 million of debt, according to people briefed on the matter.

 “The investment and lending opportunities are immense and perhaps just beginning,” Jade Rahmani, a real estate analyst with Keefe, Bruyette & Woods, wrote in a recent report.

In just the last two years, large investors have bought as many as 200,000 single-family houses and are now renting them out, according to the K.B.W. report.

Read The Rest Of The Article Here

by Alex Dvorkin 

If you were searching for evidence that our nationwide housing market recovery has been driven by speculators and massive credit, wonder no more.  Massive flood of capital from the FED’s into financial institutions has created all sorts of stupidities. This is one of them.

Trust me. Hedge funds providing massive amounts of capital “to plumbers and dentists moonlighting as landlords” is not as brilliant as it sounds.  As a matter of fact, it is fucking stupid. The only thing it will lead to is massive losses down the road for everyone involved. Big losses for hedge funds, for plumbers and dentists, for the FED, for the overall US Economy and for the average Joe with a house and a mortgage.

No one is talking about the elephant in the room.  Overall and after taking expenses associated with being a landlord into consideration, no one is making any money. There is no yield. Everyone is betting on capital appreciation to make a profit. I am afraid such capital appreciation will never arrive. Please see my Real Estate Market Top article here.

You also have to read between the lines to see the massive system wide risk. For instance, why the fuck would hedge funds who are awash with free cash from the FED invest in plumbers and dentists who would in turn become landlords?  For two reasons..

1. Everything is extremely overpriced. In bubble territory. The bond market, the stock market and even the real estate market.  They are investing in plumbers because there is nothing else left to invest in.

2. Everyone is playing the game of musical chairs, chasing performance. The money is FREE, so why not. Of course, we know what happens next. The music stops and the real estate sectors gets flushed down the toilet….again.

If this article doesn’t scream “market top” to you, I don’t know what will.  Don’t be fooled by Wall Street once again.  I am just curious to see what will happen to the real estate prices once “investors” decide that being a landlord sucks and begin dumping hundreds of thousands or perhaps millions of properties they have purchased. I wouldn’t be surprised to see 50-70% haircut from today’s real estate prices. Here is my valuation work.

The bottom line is, stay away from this Ponzi Scheme and don’t buy real estate over the next few years.  You can send me a gift basked later. 

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Brand New Real Estate Market Ponzi Scheme. Will You Buy In?

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From Flipping Real Estate To Flipping Real Estate

Breakout Writes: Underwater mortgages are a bigger problem than the national average suggests

flipping real estate investwithalex

If you follow real estate prices or sales trends or the number of homes going into foreclosure, you’re apt to have a pretty positive feeling that things are improving. If you dig a little deeper, however, and look only at the 15 hardest hit states, you’ll find a totally different story.

While these outlier markets and metropolitan areas are also seeing improvement, they are still years away from breaking even and being whole again.

For example, December’s headline data from RealtyTrac showed the national rate slipping to 18% of homes being underwater or having negative equity (which simply means a homeowner owes more than the property is believed to be worth), but at the bottom of the scale, there are still 9.3 million “deeply underwater” homes that are in the hole by twenty five or more. In fact, six states that are at least ten points above the national average of 18%, including Nevada (38%), Florida (34%), Illinois (32%), Michigan (31%), Missouri (28%), and Ohio (28%).

The case in certain cities is even worse, as the latest data shows towns such as Las Vegas, Orlando, Tampa and Chicago still have negative equity ranging from 33 to 41 percent.

Read The Rest Of The Article

What a shocker. Las Vegas still has negative equity to the tune of 33-41% even though Blackstone and other investors have been buying real estate by the billions in the city (to the tune of 50-70% of all transactions in the city are to all cash buyers/investors). I wrote about it in my previous article Timing The Real Estate Market Crash.

Is this good or bad? It depends on who you listen to. If you listen to traditional media and real estate professionals, this is of course, great news. The real estate market has bottomed and on the way up. Eventually, the negative equity in question will be recovered. However, if you listen to assholes like me, someone who would publish a blog post titled I Am Calling For  A Real Estate Top Here, you would have a different point of view.

Listen, this is fairly basic and easy.  The real estate market recovery has been driven by excessive credit available to financial institutions, private equity and investors (not you). Still, while some select markets, such as So. Cal, have almost fully recovered, the rest of the country continues to lag behind. As the article above suggests, to the tune of 30-40%.

What troubles me the most is the fact that the real estate market is starting to roll over. As the stock market declines into the 2017 bottom, the US Economy will once again experience a severe recession. The real estate market will also roll over and begin its 3rd leg down. As I have suggested previously, the 3rd down leg down is the most severe. As such, I wouldn’t be surprised to see real estate decline to the tune of 20-50% from this point on.

My valuation work displayed HERE showed that real estate could and technically should decline to the tune of 45-70%. As such, it pays to anticipate things. 

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Why Smart Hedge Funds Are Betting On Further Housing Collapse and Why You Should Do The Same

abandoned_house_2 investwithalex 

Bloomberg Writes: Gundlach Counting Rotting Homes Makes Subprime Bear

For Jeffrey Gundlach, the U.S. housing recovery isn’t so rosy.

The founder of $49 billion investment firm DoubleLine Capital LP is largely avoiding the subprime-mortgage bonds that jumped about 17 percent last year after home prices surged by the most since 2006, deterred by the lengthy process to sell foreclosed houses and the destruction that’s creating.

“These properties are rotting away,” Gundlach, 54, said last week on a conference call with investors, about homes stuck in foreclosure pipelines, adding that it could take six years to resolve defaulted loans made to the least creditworthy borrowers before the real-estate crash.

 “The housing market is softer than people think,” Gundlach said, pointing to a slowdown in mortgage refinancing, the time it’s taking to liquidate defaulted loans and shares of homebuilders that have dropped 13 percent since reaching a high in May. D.R. Horton Inc., the largest builder by revenue, has tumbled 20 percent.

Read The Rest Of The Article Here

A great read to understand why the housing market is in a Bear Market Bounce as opposed to any sort of a sustained recovery.  Well, what used to be a bounce.  In a gutsy call, I called for a real estate market top on October 3rd, 2013. You can read about it here I Am Calling For A Real Estate Top Here  Further, I believe my call was right on the money and we should see negative year over year numbers once October of 2014 rolls around.

No doubt, just like the stock market, the real estate market is rolling over. While I have already talked about various stages of the bounce and what awaits us in the future, I haven’t really talked about what is driving this housing recovery. There are a couple of things.

1. Cash Buyers (aka. Investors, Hedge Funds, Financials):  Nationwide that number stands at around 30%.  This staggering number has one driver. Too much credit. In layman’s terms, the FED floods the market with cheap credit, financials/investors take this FREE money and invest/speculate in real estate or other mortgage backed instruments. Driving the recovery and housing prices higher.

cash-sales

“Blackstone Group LP and Colony Capital LLC have been central to the rebound, buying more than 366,200 properties in just a few cities”. — I mean seriously, come on!!! Good luck unloading those.

2. Backlog Inventory: Financials and banks, whether directly or through mortgage backed securities are sitting on a massive stockpile of properties even though the market has rebounded. How many? The article states 1.2 Million, but I fathom the number is a lot higher due to various off balance sheet and accounting tricks the banks are playing.

The bottom line is this. Don’t confuse this “dead cat bounce” with true economic recovery. The real estate market bounce has been driven by cheap credit and speculation. Nothing more. When the steam runs out, expect the housing market to decline below 2010 lows. 

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Why Smart Hedge Funds Are Betting On Further Housing Collapse and Why You Should Do The Same

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Real Estate. Buy or Run Away?

InvestWithAlex Wisdom 13

Today’s 5 Minute Podcast Covers The Following Topics and is in direct response to one of my readers questions, “What are  your views on real estate? Is right now a good time to buy?” – Roman J. 

    • The truth about real estate. 
    • What is the real reason behind real estate rebound.  
    • The shocking truth of what will happen to real estate over the next decade. 
    • What you should do now and why it will save you a ton of money. 

Did you enjoy this podcast? If so, please review it on iTunes and share it with your friends as we try to get traction. Gratitude!!!

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Warning: Real Estate Collapse Stage 3 Is Beginning To Accelerate

The Wall Street Journal Writes: Banks Cut as Mortgage Boom Ends

 building demolition

A sharp slowdown in mortgage refinancing is forcing banks to cut jobs, fight harder for a smaller pool of home-purchase loans and employ new tactics to drum up business.

The end of a three-decade period of falling mortgage rates has slammed the brakes on a huge wave of refinancing by U.S. households. The drop-off has deprived lenders of a key source of income at a time when the growth in loans for home purchases remains weak.

The Mortgage Bankers Association next week plans to cut its 2014 forecast for loan originations, which include loans for home purchases and refinancing. The current forecast of $1.2 trillion would represent the lowest level in 14 years. The trade group Wednesday reported that mortgage applications in the two weeks ending Jan. 3 touched a 13-year low.

Read The Rest Of The Article Here

With the 10-Year Note being just a few clicks away from 3% (up over 100% over the last 1.5 years), this should come as no surprise to anyone.

As predicted in my earlier post “I AM CALLING FOR A REAL ESTATE TOP HERE” , the real estate market is in process of rolling over.  Listen, as far as I am concerned this is incredibly easy to see and I am having an increasingly difficult time understanding how most people don’t see it. This is reminiscent of me predicting the 2007-2009 collapse in the credit markets starting in 2006.

Alex Dvorkin In Early 2006: Listen guys, this credit market is about to blow up and will take the housing market, the stock market and the entire economy down with it.

Everyone Else:  “Alex, why don’t you just fuck off…… You don’t know what you are talking about….. Keep this up and everyone will know you as the “Boy Who Cried Wolf”…. and my personal favorite “My 88 year old broker who has seen the Great Depression is saying NOW is the buying opportunity of a lifetime”.   

Right.  If you are dumb enough to buy real estate in today’s market, you will get fleeced. Big time. Those who believe real estate always goes up need to go back to as recently as about 1994 to see how people felt about the housing market. Remember something very important. Today’s higher prices have nothing to do with the fundamentals and have everything to do with the massive speculative environment in the credit market. It’s fake….its not real….it is an illusion at best that is about to blow up.

As I have said many times before, stage 3 (upcoming stage) of any bear market is the most severe. Get ready. As I have predicted, the market is already rolling over. 

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Warning: Real Estate Collapse Stage 3 Is Beginning To Accelerate

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4 Scary Reasons You Should Run Away From Real Estate…..Right Now!

Yahoo Finance Writes: 4 Reasons You Shouldn’t Worry Over Rising Mortgage Rate

house-blown-up-investwithalex

An amazing puff piece from the Real Estate Industry. Please see my comments below. Also, please note that I have called for the Real Estate top back in early October of 2013. You can see it here. I Am Calling For A Real Estate Top Here. I am still sticking to that forecast. The market is already rolling over, although, a little bit slower.   

If buying a new home is on your list of goals in the New Year, don’t let talk of rising mortgage rates derail your plans just yet.

As the economy recovers, the Federal Reserve tapers, and home values rise, experts predict we are well on our way to seeing mortgage rates crack 5% in late 2014.

Rates for a 30-year fixed-rate mortgages already hit 4.69% this week, up from 4.63% the week prior, according Bankrate.com. In May, the 30-year rate was 3.52%. Fifteen-year fixed mortgages were up as well, from 3.70% last week to 3.73% this week.

But rising rates don’t necessarily spell doom for house hunters. Here are four big reasons not to worry. 

1. Mortgage rates are getting higher but not drastically so.  

“I don’t think there’s any reason to panic,” says Keith Gumbinger, vice president of mortgage rate tracker HSH.com. “Buying a home will be somewhat more expensive, but I don’t think it’s going to be a matter of ‘Oh, I’m losing so much ground that I have to go out and buy [a home] right now.’”

Historical context is important. A little over a decade ago, the lowest average rate for a 30-year fixed rate mortgage was around 5.24%, Gumbinger notes. It’s easy to forget that when rates fell so dramatically following the housing crash.

“Even if we do start to see 5% rates appearing in 2014, rates will absolutely remain favorable [to buyers],” he says.

When someone in the industry says “I don’t think there’s any reason to panic”, you MUST panic. While in historic terms rates are still low they are still up over 100% in the last 1.5 years. That is a huge move within a short period of time and it will take its toll. It is already happening. Don’t let anyone fool you that it doesn’t matter.

2. Housing inventory is on the rise. 

Nationwide home values have soared over the last year, with year-over-year gains of 13.6%, according to the Dec. 31 S&P/Case-Shiller Home Price Indices. That marks a seven-year high and the 17th consecutive monthly increase.  

But new-home construction has picked up in the last few months and is expected to ramp up more, which should help lift supply. New housing starts were up 30% year-over-year in November 2013, according to the Commerce Department. On top of that, more homeowners will likely sell this year to capitalize on rising home values, contributing to an inventory boost. 

I am not sure how this positive for the housing market, but they are absolutely correct. There is too much inventory out there. Too much hidden inventory for that matter, still sitting on bank balance sheets. Eventually all of that will come to the market and drive the prices lower.

3. There will be less competition from investors. 

Real estate investors were notoriously greedy in the wake of the housing crash, snatching up cheap properties and elbowing out individual home buyers before they knew what hit them. But Jed Kolko, chief economist for Trulia, predicts that competition from investors will die down now that the market is recovering.

Last year “was the year of the investor, but 2014 will be the year of the repeat home buyer,” he says.“Investors buy less as prices rise. Higher prices mean that the return on investment falls, and there’s less room for future price appreciation.” 

In other words, the author wants retail buyers to come in and purchase inventory from investors before market declines. This occurs in the stock market all the time. Again, I am not sure how this is a positive for the real estate sector. It predicts its inevitable decline. Don’t be that FOOL buying from investors at or near the top. 

4. Fed tapering isn’t all bad news.

All eyes are now on Janet Yellen, the incoming Federal Reserve chairman who will be charged with phasing out the bond-buying program that has helped to steady interest rates over the last five years. It will be a delicate process. If Yellen moves too quickly, investors could get spooked and send mortgage rates soaring, notes Bloomberg’s Kathleen Howley. If she moves too slowly, rates could fall and the market could get flooded with home buyers. 

But there’s a silver lining, Gumbinger points out: “Mortgage rates have started to firm up again not strictly because the Fed has started to taper but because the economy has gotten better,” he says. The fact that they’re considering winding down quantitative easing is a sign that the sluggish economic recovery is at least making some headway.

You joking, right? The economy has NOT gotten better. It has gotten sicker. A distinction must be made between real economic growth and a “drunken” credit driven speculative party. What we have seen over the last few years is the later. When it comes to an end in 2014 (based on my timing work) and the bear market resumes, this will be made very clear. Again, this is a horrible position to be in for the real estate market. As I have said many times before, the 3rd leg of the real estate decline will be a severe one. Position yourself now. 

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4 Scary Reasons You Should Run Away From Real Estate…..Right Now! 

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What Everyone Is Ought To Know About The Upcoming Real Estate Meltdown

Bloomberg Writes: Pending Sales of Existing Homes Slump by Most in Three Years

 housing crash investwithalex

Fewer Americans than forecast signed contracts to buy previously owned homes in September, the fourth straight month of declines, as rising mortgage rates slowed momentum in the housing market.

The index of pending home sales slumped 5.6 percent, exceeding all estimates in a Bloomberg survey of economists and the biggest drop in more than three years, after a 1.6 percent decrease in August, the National Association of Realtors reported today in Washington. The index fell to the lowest level this year.

Mortgage rates last month reached two-year highs and some homeowners are reluctant to put properties up for sale as they wait for prices to climb, leading to tight inventories. Those forces are pushing some would-be buyers to the sidelines and slowing the pace of recovery in real estate, giving Federal Reserve policy makers reason to delay reducing stimulus when they meet this week.

Read The Rest Of The Article Here

On October 3rd, 2013 I put my foot down and made a gutsy call. I have called for a housing top at the time. You can read the article here. I Am Calling For A Real Estate Top Here

Even though most people have dismissed this forecast I continue to stand by it. As new data points for the real estate market continue to come in, it looks as if I have made the correct and exact call. Yes, certain markets will roll over and start going down a little bit later, but the overall market is starting to look top heavy here. I would expect to continue seeing weakness over the next few quarters until we begin to see clear indications that the real estate market is heading down. At that time a lot of people will freak out and we should see a real inventory spike followed by even lower real estate prices. Of course this cycle will feed on itself for a long time.

Remember, this will be the 3rd leg down for the real estate sector. The first one was the initial decline between 2007 and 2010. Typically, 3rd legs down are longer and steeper. As such one shouldn’t be surprised to see large drops in housing prices over the next few years. As my previous valuation work here showed, overpriced markets like So. Cal should and could go down as much as 50%. 

For now we wait and see as the housing market continues its rolling over process.  

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What Everyone Is Ought To Know About The Upcoming Real Estate Meltdown

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WARNING: The US Real Estate Prices Are About To Decline 45-70%

I HAVE OFFICIALLY CALLED FOR A REAL ESTATE TOP ON OCTOBER 3rd, 2013. CLICK HERE TO SEE

housing bubble

 

Yes, I called it perfectly in 2006-2007 and now I am saying that it is not over. 

Before we can understand where we are now and where we are going in the future we must understand where we came from. The Real Estate run up that we have experienced between 1997-2007 has no historical  precedent.  Real estate data going all the way back to 1790 clearly shows that the US housing market basically appreciated at the rate of inflation.  Yes, there were some bubbles and substantial declines, but overall, appreciation at the rate of inflation is an appropriate way to look at the US real estate sector.

real estate 1 investwithalex

 

A QUICK HISTORY LESSON:

All of that changed in 1997 when Bill Clinton signed The Taxpayer Relief Act into law, basically allowing $250,000 in tax free capital gains in real estate.  While real estate was already appreciating at a good clip at that time, that law added fire to the trend. 

Later,  fearing significant economic slowdown in 2002-2003 the Bush administration added a huge amount of jet fuel to the Real Estate Bubble by cutting interest rates and making mortgage finance available to everyone (even to the dead people).  As people used to say, if you can fog a mirror you can get a mortgage. Of course, all of that led to the largest finance bubble in the history of mankind that “kind of” melted down in 2007-2009. I say “kind of” because most of those excesses are still in the financial system and will have to be worked through in the future.  

 

WHERE ARE WE NOW?

Issue #1: US Home Ownership Rate Is Plunging

On historical basis, home ownership rate in the US is in free fall. Take a look at the chart. I think it speaks for itself.  

homeowership-rate-investwithalex 

Issue #2: Real Estate Affordability Is Plunging

Take a look at the chart as it speaks for itself. The affordability index is in free fall as well. Most likely due to higher interest rates and rising prices. 

Housing Affordability Index

 

Issue #3: Interest Rates Are Going Up             

The trend has shifted up and the 10-year rate is up 100% over the last 12 months. I gave detailed interest rate analysis here. Please take a look here.

 

Issue #4: US Economy & The Stock Market Is About To Turn Down (Big Time)

Please read “The Long Awaited US Stock Market Decline Is Likely Here” as to why.

 

Issue #5: Who Is Buying All Of These Properties For Cash Today?

Chinese buyers, hedge funds, banks themselves, investors, speculators, etc…..  Who cares!!! Remember all those Japanese investors buying everything they could in California and Hawaii in the late 1980’s. I wonder how that turned out for them.

On a more serious note, notice that I didn’t say Average American Family. That is the only category that we should track if we want to accurately predict the future trend in the US Real Estate market. Every other category is irrelevant over the long run.  And guess what? They are not buying.  See the charts above. 

 

Issue #6: Bear Market In Real Estate (sucks people back in)

As I have said here before (US Real Estate At A Turning Point), this is how the bear market works. This is the stage #2 bounce, before the big decline (stage #3).  The bear market tends to suck people back in, offer them perceived safety and a high return before slamming the door, ripping their head off, drinking their blood and taking all of their money.  The US Real Estate market is topping in Stage #2 run up here. That is why you are seeing so many divergences. The market should turn down soon. Beware.  

 

FUTURE OF REAL ESTATE:

Real estate is not made of Gold.  There is a tremendous amount of land available in California, Florida and all over the US.  There is no housing shortage. As such, expect real estate to decline significantly in order to revert back to its natural inflation adjusted mean. It might take a few years, it might be different for various cities, but one way or another the market will get there.

BubbleBurst investwithalex

 

HOW FAR DOWN?

Let’s do very simple math for the San Diego market.  It doesn’t have to be exact for our purposes.

Setup:

  • San Diego Median Family Income: $61,500
  • As Per Various Financial Guidelines Families Shouldn’t Spend More Than 30% Of Their Income On Housing.  That means a $1,500/monthly payment.
  • Median Home Price in San Diego: $500,000 (pushing that level again as per Trulia.com)
  • Interest Rates: 30 Year Mortgage 4.72% (Rates as of 9/4/2013) 

With such fundamental input variables median house value should be $290,000 -OR – A 42% DECLINE     ($1,500x360month@4.72%)

What if interest rates go to 7% over the next 5 years, which can easily happen? 

The fundamental value of the median house drops further to $225,000 -OR- A 55% DECLINE

Also, don’t forget that markets oftentimes overshoot to the bottom, just as they set blow off tops. In such a case I wouldn’t be surprised to see a median price of $150,000- 200K -OR- A 70%-60% DECLINE

You say impossible….. I say study financial markets. Nothing is impossible. 

Now, I understand and agree that there are various market forces at play that make the picture a lot more complicated. Interest rates, timing, mortgage finance, cash buyers, the FED, foreign buyers, speculation, location, supply/demand, etc….    However, fundamentals will always prevail over time. Everything else is just temporary bullshit.

 

ADVICE: 

Your house is not an investment. Don’t be confused. It is the place you live and raise your family. If you are happy with your house, have a fixed interest rate, can afford your monthly payments and don’t care if your house depreciates in value, I would stay put.

If you find yourself in a contrary situation……..I would consider various options. 

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WARNING: The US Real Estate Prices Are About To Decline 45-70%

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Housing Market…Barbarians At The Gate

Reuters Writes: Home sales fall as prices rise

Contemporary-House-Ideas-Design

WASHINGTON (Reuters) – U.S. home resales fell in October to their lowest since June due to an inventory shortage and high property prices that have dampened buying power.

The National Association of Realtors said on Wednesday that sales of previously owned homes fell 3.2 percent last month to an annual rate of 5.12 million units.

Economists polled by Reuters had expected sales to drop to a 5.13 million unit pace in October.

At the same time, the median price rose 12.8 percent in October from a year ago to $199,500. It was the 11th straight month of double-digit gains, and up from last month.

Real Estate fundamentals continue to deteriorate.  Over a month ago I went out on a limb and called for the real estate market top.  Here is that post and reasoning  I Am Calling For A Real Estate Top Here  Even though the price is still increasing in certain markets (as I have predicted), I continue to stand by my forecast.

So, what is the future of housing? To understand what’s coming we must first understand overall macroeconomic picture.  Most importantly we must understand that….

A. Historically speaking the real estate market is still in a massive bubble driven by cheap credit. There is no reason for housing prices to be at this level. As my earlier valuation work showed a 50% haircut from today’s levels would bring the prices into the “normal range” of where they should be.

B. I know that many people will disagree, but your house is not an investment. It is the place you live. It could be an investment if you view it as a business and generate positive cash flow and ROI from your rental. However, that is next to impossible with today’s market prices.  Essentially buying today (or over the last few years) is a speculation where you bet on asset appreciation Vs. positive cash flow.  That is a huge difference.

C. The stock market and the economy will tank starting in 2014. The bear market leg will go into 2017. My mathematical timing work clearly shows that. It is now unavoidable. In such a case housing will experience its 3rd leg down.  Typically, 3rd legs are much harsher than the first decline. The bottom line is, I wouldn’t be at all surprised to see a 30-50% haircut from today’s prices.

Taking an even longer view, eventually we must get to a point where real estate is not viewed as an investment. Where people feel discussed by the housing market. That will be the bottom. Today we are on the opposite side of that view. 

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Warning: Real Estate Implosion Is Starting

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

 crying-house-investwithalex

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.

Read The Rest Of The Article Here

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