Home builders trigger major Recession Warning. Supply spikes to 2008 levels.

these home builders are sending a major recession warning to the US economy that you all need to be paying attention to right now because something is happening here in the Home Building space that's only happened six other times in US history and every other time it's happened we've had a housing crash and a recession and I want to show you folks what we're seeing from these Builders we're seeing lots of homes that are completed or about to be completed for sale the Builder inventory is skyrocketing at a historically High rate and today according to the US Census Bureau there's 9.3 months of Supply right now on Builder Lots which is one of the highest rates of all time according to Reuters we're at now a 16-year high in housing Supply from home builders and this is especially true here in the South you can actually see that in the South we now have more new homes for sale today than we did at the peak of the 2006 bubble before the biggest crash of all time and so you have to wonder everyone if we're at a 16year high in Builder inventory and the south is even higher than it was in ' 06 just how bad can this downturn get and what does it mean for the US economy everyone because as you can see here all the other times that Builder Supply went up this High we had a recession shortly thereafter with the exception of 2022 which was like a near recession but almost perfect perfectly when Builder Supply gets to this level when the construction gets this High and the inventory increases the economy hits a downturn in the next 6 to 12 months one of the ways that this is going to happen everyone is through layoffs in construction because the more new homes we have Sitting empty and looking for a buyer and the more the Builder inventory increases the fewer permits they're going to pull in the future and the less need they're going to have for construction workers and so don't be surprised if construction is one of the first shoes to drop in terms of employment in the second half of 2024 and I'm not saying that to scare anyone I'm saying that to just merely report to you what's going on here in the housing market and of course in particular this is a big deal down here in Florida everyone because uh as I've been reporting to you over the last couple weeks Florida's housing market has entered a downturn the prices here have started going down the inventory levels are skyrocketing and Florida in some ways is leading the nation along with Texas in terms of this housing downturn so here in Palm Beach County where I am right now you can see the active inventory on the market has absolutely skyrocketed over the last year to year and a half we're now back to prepandemic inventory levels at the same time sellers are cutting the price at the highest rate on record here in Palm Beach County and so you say to yourself what does that mean for the future of home prices this is actually one of the most expensive markets in Florida to buy lots of wealthy people come down to Palm Beach County lots of New Yorkers actually have invaded Palm Beach over the last four years since the pandemic and they're coming with cash they're coming with bags of cash and they're buying up a lot of these homes or at least they have been buying up a lot of these homes I actually just talked to uh uh someone who works in construction here uh at this site and he said the demand here is still good he says they're still pulling permits um but the reason he says is because a majority of the buyers actually come with cash majority of the buyers are over the age of 55 moving down from the Northeast coming with cash and so they're not as exposed to an economic downturn they're not as exposed to higher mortgage rates and so their demand is more steady however in spite of that the inventory levels here are still skyrocketing and they're also Skyrocket Marketing in a lot of other nearby parts of Florida if we go up to Port St Lucy we can see the inventory is way up if we go down to Broward County we can see the inventory is way up and we can see that the median list prices are also going down and so you know there's some people out there who you know they come up to me actually on the street down here in Florida a lot of people have come up to me and they say hey Nick I watch your videos and you know uh sometimes they say hey when when's the crash going to happen I know you've been talking about the crash for the last 2 or 3 years um I want to buy a house right and I would answer like in Florida right now now and in Texas in these areas where the builders are most active this downturn is already started however the thing you need to understand is that a housing crash a housing downturn takes on average 5 years if you look at historical housing downturns they take 5 years to play out uh from Peak price to bottom price and in some ways the the housing cycle can even be even longer than that when you talk about peaks in buyer demand and lows in buyer demand so for instance in the last housing downturn prices peaked in 2007 and they kept dropping and didn't bottom until 2012 and so there was a lot of people in the last housing downturn around you know 07 even in the beginning of ' 08 who were saying like oh this is no big deal they're saying the prices have barely dropped there's not going to be a broader collapse there's not going to be a broader recession and then boom it happened similarly in the early 1990s there was a National Housing downturn particularly in the states like Massachusetts and California home prices went down for 6 or seven years in that early '90s downturn so what I want you guys to think about in terms of assessing the housing market is that it moves slowly it moves slowly when it comes to prices uh especially prices going down and it can take a long time for sellers to get out of their own way and lower prices to where they need to be before so they can sell their house but one thing I would really encourage you guys to pay attention to if you're a home buyer or investor is pay attention to the differences in the local markets across America is we're in what's called a a bifurcated housing market right now where we have an unquestionable downturn beginning to play out in Florida in Texas in Tennessee in Arizona uh in Utah and Colorado in these states here in red on revent RP you can see the inventory is spiked and the home price forecasts are below 50 uh the price forecast are suggesting values are going down in these states into the future however if we go to other parts of America like the Northeast the Midwest and even some parts of California you can see we still have a shortage we still have very low inventory and we can uh actually and we actually have positive home price forecasts on revent trp for these areas in the Northeast Midwest and California so make sure to go to reveng trp at the end of this video but first folks I got to tell you it is hot down here in Florida today it is about 97° at least my car said it was 97 and the humidity is really really high uh I've been down in Florida for last two or 3 weeks this is definitely the hottest day it's been so far um I'm going to have to drink a lot of water you have to drink a lot of water if you're in Florida like I've been walking around Miami I normally drink a couple bottles of water a day three bottles of water no no you got to double that if you're in Florida because you just get dehydrated instantaneously I know a lot of you who have moved to Florida looking to move to Florida you know about the heat I think it's actually something that's causing a lot of people to leave at this point is how hot Florida is I think a lot of people came down during the pandemic from uh maybe a little cooler colder States for the warm weather down here and then they stayed a couple Summers and they're like oh my goodness it is hot and sticky uh the best analogy that someone gave me I think for what it's like to live in Florida during the summer if you don't mind me here just explaining this is they said imagine taking a shower and then not drying off and putting your clothes on and going outside that's what it feels like you're constantly sticky you're constantly wet um so definitely something to think about if you're looking at moving to Florida if you can tolerate that heat in the meantime I want to show you guys some of these homes here in this Builder site this is a builder called couter homes here um in Palm Beach County and they're um higher end Builder you know it seems like they build a a nicer product the price points of these homes are definitely kind of expensive I mean you're seeing 700 up to a million dollar for some of these homes and we're kind of in the middle of nowhere we're on the western side of Palm Beach County so to pay that type of price to live in a kind of more rural secluded location that doesn't really offer you any land uh to me that's probably too expensive and if you look in this ZIP code here on revent trp you can see oh boy inventory is spiked price Cuts have spiked when you see that combination of spiking inventory and spiking price Cuts it's important you understand that's telling you that the Market's turning down and I think it's just very important for you guys to understand that because there's so much mixed messaging in the housing market right now you know depending on what day and what web you read a news headline you could be reading a headline that's bullish on the housing market or bearish on the housing market and you know just yeah the other day Reuters came out with the headline housing Supply hits 16year high from Builders new home sales plummet that's a bearish headline comparatively there's other headlines like from a recent Bank of America study that's talking about how Bank of America thinks home prices are going to keep going up until 2026 and that they say there's actually a lot of demand and no Supply so that's that's bullish on the housing market and so if you're reading these news stories or watching YouTube or just looking at Instagram how do you as a buyer or a homeowner make sense of what's happening in the market I mean it can be very confusing and the answer to that question is you have to look at the data for your city and state and zip code once you do that once you understand your inventory Trends price cut Trends and how overvalued home prices are in your Market you have a much clearer indication of what's actually happening in the market you're not going to be as jerked around by whatever kind of the narrative is in the news that day you're going to have much clearer insight and be able to make a much more educated decision about what ultimately folks is like a massive Financial investment buying a house whether it's for 800 Grand or 400 Grand it's the biggest financial decision most of you will ever make and a lot of you are putting your hard-earned savings on the line with a down payment on these homes and you don't want to lose that down payment you don't want to see your Equity wiped away and so make sure to do the research on the trends in your Market in zip code before you make a decision to buy or not to buy there understanding that the trends it's going to save you a lot of money in the long run and potentially make you a lot of money in the long run but back to the economy everyone because in the end the housing Market's kind of a function of the economy and vice versa so what's going on in the US economy right now and what is this huge Surge and Builder Supply mean for the economy well as I said in the beginning every other time the home builder months of Supply which is calculated by dividing the homes for sale divided by the sales every time it's gone over 9 in the last 50 years we've had a recession except for 2022 which I believe was a bit of a outlier scenario due to how much money the government printed during the pandemic except for 2022 every other time the Builder Supply has gotten this High we've had a recession and the reason is everyone because the the builders they're kind of a leading indicator for the economy right um when the builders go crazy and they start pulling permits like crazy it's a signal that like there's excess Supply being built right and then all of a sudden demand drops off and you're like oh man uh the Builder's like oh man I don't have enough customers I don't have enough demand we got to start cutting the prices and you know Builders have cut prices already 10 to 12% from Peak I think they're going to cut prices by more into the future but really the thing to think about is like there's lots of other segments of the economy behaving in the same way as the builders there's a lot of Manufacturers who ramped up production for you know whatever their business was during the pandemic there's lots of new restaurants that opened during the pandemic the supply of a lot of different things in society a lot of different businesses expanded significantly during the pandemic and now we're seeing the demand drop off the retail sales have been flat over the last couple months they've barely grown actually over the last 2 years the consumer sentiment is going down and so now this excess Supply is intersecting with a decline in demand and that's ultimately what produces a recession as well as deflationary forces I think we could see some deflationary forces in the economy throughout the second half of the Year particularly here in housing particularly also in manufacturing um because all that excess Supply was built and so for those of you who think that somehow we've dodged a recession or we're not going to experience a recession I I wouldn't be so sure the metrics are definitely still pointing in that direction whether it's the Builder months of Supply the consumer sentiment the retail sales slipping we just saw today that a company like Walgreens is completely like slashing their earnings Outlook their stock is down 20% we have a lot of restaurants giving big warnings about the economy and consumer Behavior I mean things are definitely slowing in the economy me the question is uh does that slowing turn into an outright downturn in the second half of the year I mean I think the odds are pretty good for that everyone I'm not going to guarantee it but consumers are saddled with so much debt the credit card debts still really high and the interest rates are choking off economic activity so don't be surprised if we see a worsening economy in the second half of this year which causes home prices to go down especially in the South where the building is absolutely crazy and one thing that I think is super important everyone is as this economic downturn plays out as the Builder pipeline grows even bigger you got to understand what's going on in your Market in your city and so um use the same data that I'm using here um to track the market if you're a buyer investor a seller you're going to really want to understand the trends in your market so go to ww. reventure doapp right now sign up for a premium membership the data accessible with the premium membership is really going to give you insight into the housing market and the trends that you're not going to get any place else you're going to have a firm idea of whether you're in a buyer or sellers market and where prices are should be heading in your city over the next year and just for a little personal update on myself everyone um I'm still down here in Florida I'm actually thinking of opening up an office here in Florida for reventure app down here in the Miami area haven't made any firm decisions on that but uh one thing's for sure Florida despite its downturn is where most of the interest in real estate is it's where a lot of their Realtors and investors are and so um I'm thinking potentially I should be more around that scene in that crowd you guys can let me know what you think in the comments section below as well as what part of Florida you think I should open up the reventure app office in until next time this is Nick from eventure talk to you later

Channel: Reventure Consulting

Views: 183,360

Keywords:

Id: U3qUtMb489s

Length: 14min 41sec (881 seconds)

Published: Sat Jul 06 2024