Homebuilders Just Confirmed It: The Housing Crash is Here

Today we are walking down Via La Brisa here in Larkspur, California, and we're going to talk about how the homebuilders across America just basically flashed a huge warning sign for where things are going with the U.S. housing market. Because like I've mentioned here on the channel many times before, homebuilders are kind of like the leading indicator of where things are headed for the market. And we're going to cover some of the labor issues these homebuilders are running into due to all the deportations as well as the new reality for home sellers and buyers across America. But first the homebuilders. Homebuilder confidence as of September of 2026 fell to the lowest level that we have seen in a year according to the National Association of Homebuilders. They are saying that buyer traffic has weakened across much of the country largely because of rising mortgage rates. Well yeah that must be it. You know that's the only thing that's making people walk away from buying a house. It's not the high prices. It's not the stagnant wages that aren't keeping up with inflation. None of that stuff really matters. And according to the National Association of Homebuilders, 38 percent of builders cut their prices in September up from 35 percent of builders in August. That is the highest share that we have seen in eight months. So they are having to get more and more aggressive to get these homes sold. They need to give larger and larger price cuts and more builders need to give price cuts if they want to see any movement at all. Now the average size of the price cut hasn't changed. It's still at six percent. So think about it. If a homebuilder has to cut the price by six percent maybe four or five months ago and maybe they did the same a year ago. Well by my math that's already an 18 percent reduction in prices. That's a pretty steep cut. A larger share of builders are also using sales incentives. 66 percent of builders use sales incentives in September to boost sales including mortgage rate buy downs or free appliances as upgrades. So why would mortgage rates be the reason that all the homebuyers are walking away according to the builders if they give mortgage rate buy downs? Because mortgage rates are essentially a non-issue. The builders are cutting prices. In a lot of cases these brand new houses are actually cheaper than existing homes. And to top it off they're giving you well below market rate for your mortgage. So how could that be the reason that buyers are walking away? I think there's a part of the story that they're not telling us. And you guys already know the story unless you're brand new to my channel. Which in that case, hey welcome. We talk about all things real here when it comes to the housing market and the economy. And the reality is that prices are still too high even for these lower priced brand new homes. And people are being squeezed from every single angle in this economy. When it comes to inflation. When it comes to wages. When it comes to the cost of living in general. All of those things have gotten so far out of control that a lot of people are lucky if they can just pay their bills right now. Let alone worry about buying a house. I mean look at this guys. In San Antonio, Texas the major home builder Lenar in September was offering homebuyers a promotional mortgage rate as low as three and a half percent. The last time we saw three and a half percent rates was before the Fed ever started hiking interest rates. This was like early pandemic interest rates. Three and a half percent. And they're having a hard time getting homes sold. Which shows you that even if interest rates went back down to three and a half percent for everyone, that wouldn't be a huge mover in the market these days. Maybe it would get a few extra hundred thousand homes sold each year. But you're not going to see millions of more homes being sold because of it. And the fine print on this offer that Lenar was giving out is a pretty big gotcha. Which is that this three and a half percent rate was for an adjustable rate mortgage from FHA. And it's only fixed for the first five years. So in case you don't know what an adjustable rate mortgage is, it means that you're going to get that three and a half percent rate for the first five years of owning that home. And then it will adjust, that's why it's called adjustable rate, back to wherever the market rates are. So for example, right now we have the market 30-year mortgage rate sitting at a little over 7% now. About 7.15%. Who knows, by next year it could be up to 8%. So people will take on these very low, artificially low payments if they accept a deal like this. And then in five years from now, they're going to get hit with a payment that could be double what they initially signed up for. Because most likely mortgage rates aren't going to be a whole lot lower in five years from now than they are today. Because the fundamental problems that make mortgage rates high to begin with are not being addressed. Recently we also just saw housing supply go up to a 10-year high in terms of all of the homes that are available for sale and the month's supply of inventory on the market. These higher mortgage rates that we're seeing right now are just going to slow things down even further, but they are far from the cause of all of it. In addition to this, Lennar was also in the news this week talking about how the federal immigration enforcement is hitting their trading partners as well as their labor crews pretty hard. Lennar CEO Stuart Miller said on Thursday that immigration enforcement is creating sporadic labor shortages in certain areas. And he particularly called out landscapers, for example, where all of a sudden they have no crews to do the landscaping on these brand new homes. And I'm sure it also comes down to the construction too, guys, because no matter which way you slice it, a lot of these construction companies have subcontractors who hire illegal immigrants that have no credentials to be in this line of work at all. And it's a form of cheap labor, right? And as long as they can do the job, that's good enough for them. But as soon as a lot of these people are no longer in the labor force, it makes it so all of a sudden they have nobody working. Here's another quote from Stuart Miller. He says, a decrease in the number of potential homebuyers due to increased enforcement of restrictions on immigration could cause differences between anticipated and actual financial results in future earnings calls. So he's already kind of foreshadowing that there might be some problems moving forward with Lennar's earnings due to immigration enforcement and due to the low buyer demand. According to Lennar, they say about 20% of different partners that Lennar uses are being affected by labor shortages right now. That just goes to show you and highlights this issue of how many people are employed basically illegally by the construction trades, guys. I don't know, you can let me know what you think about that down in the comments below. Do you think this is a legitimate concern? Do you think it's a problem? Do you think these jobs should go to Americans instead? Because I've heard those arguments before and I have mixed feelings about it. On the one hand, yeah, I think Americans should have those jobs rather than somebody who's not even legally supposed to be here. But on the other hand, if employers can't fill those jobs with American workers and pay them a living wage that they need, then it's not going to work out. That's the other half of the story. These construction companies and landscaping crews or whoever need to pay a good living wage for an American to want that job. Otherwise, if they don't, then it ends up going to an illegal immigrant who will work for anything and just wants to be here. So that, of course, is part of the problem as well. And then, of course, in order for that to happen, then Americans will have to pay more for everything. If you want to have Americans working on those crews, then you would have to be willing to pay more for the cost of the home, for example, or pay more for the landscaping because the labor costs of these companies have gone up. So it's one of those things. Americans want cheap services and cheap homes, but at the same time, they think all the jobs should go to the Americans instead of illegal immigrants, but nobody wants to pay those wages to make that happen. So it is an interesting dynamic to say the least. But it's about time that some of these real estate experts are coming out and finally admitting that home sellers are going to have to take a hit in this market, guys. There are too many things that are pulling the housing market downward right now, and sellers shouldn't be holding out for prices to continue going up, at least the vast majority of markets across America. According to Joe DeGrossa over at DeGrossa Capital Founders, which is like a real estate firm, he says that sellers right now have very high expectations, and it takes a while for sellers' expectations to come down, and that's the reality. And for buyers, I think a lot of people are going to have to wait it out and wait and see a better situation on the mortgage front. Once again, the mortgage thing. So I think this market's going to be tough on buyers and tough on sellers. That's what he says. According to Brett Rubin over at Compass, he says that fewer buyers equals fewer opportunities to sell the home in a less competitive environment. And so as a result, we're seeing a lot of sellers struggle to sell their homes in a market that otherwise would be a pretty strong market. That's what I've been telling people too. The expectations need to start meeting reality, guys. A lot of sellers are stuck on prices from years ago, or even just one year ago. Things have changed a lot in the past year when it comes to just oil prices alone. If you look at nothing else, inflation has gotten worse, but a lot of other things have gotten worse, but just oil prices. A gallon of gas now costs $1.50 more per gallon than it did a year ago, and diesel prices are at an all-time high. And just that one thing has major implications and ripples across the US economy. They say that we're starting to see homes sit on the market longer and more price reductions and hesitant homebuyers sitting on the sidelines. And this recent rate hike from the Fed is actually going to make that situation even worse. And of course it is, because it means mortgage rates are going to go even higher. And even before this rate hike, the 10-year treasury was already on the rise, already over 5%. Who knows where it's going to go next? And that means mortgage rates are going to continue going up, guys. But if mortgage rates continue to go up, I view that as a positive because it puts a lot more pressure on existing sellers, both people who own existing homes like this, as well as the home builders to lower prices even further if they want to make the sale. In fact, I would not be surprised if within the next six months, not even the end of next year, that we see mortgage rates climb to 8%. I'm not saying for sure that's going to happen, but I'm saying it is a definite possibility at this point with how fast the treasury yields have been going up lately. And sellers are going to have to realize that with the massive amount of appreciation that you have seen over the past six years, that if you want to sell in this environment, in most situations, you're going to have to take a hit. You're going to have to discount that property. And a lot of times, many sellers are still going to walk away with a very healthy profit, guys. And sellers who do need to sell or do want to sell are starting to realize that right now. Even Joe DeGrossa here again says that sellers who want to sell in this environment are probably going to have to lower the price. And this is something that me and a few other very wise real estate channels have been saying for the past four years. And we were ahead of the curve, but only just now, a lot of the experts, so-called experts, I guess you could say, are starting to catch this drift and realize this is the direction of the market right now. Brett Rubin from Compass, he has a funny quote here. He says that, I can see there being a correlation between rates increasing and home values decreasing, but I think it needs to be a really consistent increase over an extended period of time to really affect the market in that way. Well, you're going to get what you asked for because that's exactly what we're seeing right now. We're seeing a consistent increase in the 10-year treasury yields, all treasury yields, but the 10-year affects the mortgage rates more than anything else. And so that's where we're headed. We are headed to persistently higher mortgage rates, which is going to hit prices, guys. Even mainstream officials like this guy at Compass are admitting this now. Buyers are out of options. Buyers don't have the ability to pay more than what they can pay. And so if somebody actually wants to get a home sold, then they're going to have no choice but to meet a buyer where they're at in this current market. DeGrosa says, I think it's going to be a buyer's market in a few months. And if I were a buyer, I'd be in no rush to buy because I think there will be relief from sellers. But for now, we're going to have a frozen market. I've seen this multiple times over the past 40 years. Well, I'm sure he's never seen anything quite like this. This is certainly a unique situation due to the unique combination of poor economic conditions, along with a housing market that was already struggling ahead of the poor economy. And I would say that it's already a buyer's market, guys. It has been actually for probably a year already now, in most cases, especially after this recent announcement that housing inventory across America is at a 10-year high in terms of supply. That means it's a buyer's market. It means buyers have more choices than ever, more negotiating power than ever. But it doesn't guarantee you that you're going to get a good deal, unfortunately, because of this mindset of sellers, because of how they can be stuck in the past a lot of times, you can try to make a deal, but sometimes the sellers just aren't ready for that deal. Sometimes they got to let that house sit on the market for a year and take multiple price reductions and get disappointing offers before they come to terms with reality. I've seen this hundreds of times over the life of my real estate career. That's just the way it goes. It's a psychology problem. The only sellers who are going to be getting realistic from the get-go are the ones who absolutely need to sell. But the ones who are not in as much of a hurry are going to be the ones who want to play with the price and have it too high for too long. But that doesn't mean you shouldn't be trying, guys. So if you are a buyer or a seller for that matter, and you need a real estate agent, don't forget, I have a free service that you can use. I have a link for it in my description. All you got to do is fill out a short form, and one of my real estate partners will get back to you ASAP. And if you use it, not only is it free and it helps you, but it helps the channel and I appreciate it. Even Joe DeGrossa, he says something here in this story that I've been saying for a while now, which is that sellers in this market who delay price concessions, which is just a price cut, may find themselves competing for a diminishing pool of qualified buyers, signaling that patient buyers may soon be holding the bargaining power in the future housing market. For the average American, my view is there are going to be good deals coming over time. What have I been saying, guys, for the past few years? I've been saying the exact same thing. I've been saying that people who have been patient and who have been saving and getting out of debt and increasing their credit score and increasing their income are going to have a very good housing market in their future. It's already here in some cases. Some people are already getting great bargains. You guys write me all the time, different deals that people get right now. There's no shortage of deals out there. Just depends on your market, really. I think the future is looking very bright if you have been on the sidelines and doing all those things that I've been saying in order to prepare to be able to take advantage of this market. The federal government is scrambling right now. They're trying to figure out ways they can make housing more affordable in order to get more people to buy, guys. They've been doing this for decades now. A lot of those tactics have worked up until recently because home prices have gotten so high. The next thing they're trying to do right now, actually, their last ditch effort is they want to make it easier to cancel your private mortgage insurance. I have covered this on the channel before. Basically, if you put less than 20% down when you're buying a piece of real estate, you're going to have to pay something called PMI. That stands for private mortgage insurance, which is an extra amount of money you got to pay each month. It basically is a type of insurance in case you default, because as somebody who puts a low down payment, you are much more likely statistically to default on your loan than somebody who puts 20% down or more. They want to make it easier to cancel the private mortgage insurance, which it always should be easy to cancel. Historically speaking, it's been tough, that's something I've warned people about as well. Another downer if you don't put 20% down, because you're going to have to deal with this. About 800,000 borrowers just last year alone in 2025 got hit with PMI payments, meaning that they put less than 20% down. Now they want to make it if your loan is held by Fannie Mae or Freddie Mac, that the loan servicers can proactively call borrowers who are eligible to drop their mortgage insurance, so that way you can lower your monthly payment. The idea here is that maybe more people will end up buying a home, but really I think it's just going to make it so that people who already own a home, who put a low down payment, might get a little bit of financial relief once they're no longer required to pay that private mortgage insurance. Because as it stands right now, Fannie Mae will not let your loan company call and tell you that you may qualify because your home has gone up in value or that you've paid enough where you no longer need to have a PMI payment. So Bill Pulte, he says that we're fixing that and we're going to have Fannie Mae follow Freddie Mac's rule, which they already allow loan servicers to do this. So your loan servicer can proactively call you and walk you through how to cancel your PMI payments and keep a little extra money in your pocket. And I think it's just ridiculous that in 2026 and in the age of AI, that as soon as you reach a 20% equity stake in your home, that those PMI payments don't automatically fall off. Can't they have computer programs and algorithms pay attention to this stuff and just help people who have a mortgage drop those payments automatically? Why does it have to be a painstaking process? Everybody's so quick to take your money, just like when you buy something on a credit card, right? Then you need a refund, oh, five to seven business days. But as soon as you make the charge, immediately reflects on your account. So every time it comes down to the consumer getting their money back, it always has to be some kind of fight and hassle. But when it's time to pay up, they take your money right away. And these PMI payments can be expensive. They can cost you anywhere between 30 to $70 per month per $100,000 borrowed. So let's say you buy a median price home around 400,000, right? And you only put three and a half percent down or 5% down, which means you're borrowing almost the full $400,000. You could be paying anywhere between 120 to $300 a month in PMI payments. And that's just for the median price home. They say a Freddie Mac buyer who puts 10% down on a $450,000 house can expect to pay around $263 a month in mortgage insurance. And if you put 15% down, that drops the monthly payment down to $107 a month. Still talking thousands of dollars a year. Now, right now, lenders are required by law to terminate your PMI payments when a homeowner reaches 22% equity. But all the stories I heard from people who've had to get out of these PMI payments, it hasn't been that easy. And of course, why would they contact you proactively and tell you, oh yeah, by the way, you don't have to make this payment anymore. It's extra money going into their pockets. And here's the other little gotcha when it comes to these PMI payments being removed. Even if the servicer can reach out to you now after they change this and give you a heads up, a lot of times you still have to get an appraisal done in order to remove your PMI payment to confirm that you do in fact have 20% equity stake or higher and confirm that with the current market conditions. And now that home values have been dropping across America, it's going to be tougher for more people to qualify for this and you have to pay for it on top of that. So just another reason guys, that if you're buying a house, you probably should put 20% down. It's just going to make your life easier. Not having these PMI payments is going to save you a lot of money in the long run. It's going to insulate you from a big housing downturn, especially from being upside down on your loan. So I always advise people to do that, but not everybody can. And some people will say, well, I'd rather buy the house today than wait forever because I don't have enough of a down payment. And depending on your level of financial responsibility, some people can make that work, but a lot of people can't. So let me know if you learned anything new about the housing market in the comments down below. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.