Investors PANIC AS HOMEBUILDER STOCKS PLUMMET

Homebuilders have truly been leading the way in America's housing market over the past several years because not only have they been offering the best deals, but they have been the most aggressive when it comes to giving buyers incentives to purchase their homes. And this week, shares of Lenar, which is America's largest homebuilder, came out and sank to their lowest prices in more than a year after Lenar said that they have had to increase their selling incentives amid a weakening housing market. And these selling incentives are going to continue to cut into profits, they say. Lenar says that the good news is that they beat expectations for their fiscal first quarter profit, revenue, and home sales, and they provided an outlook for new orders in the current quarter that was above Wall Street expectations. However, the bad news is that sales strength is coming at a cost. Incentives to sell homes such as interest rate buy downs and lower prices are running more than double what the company considers normal, which led to a quarterly miss and a downbeat outlook on gross margins or profitability. This is kind of an alarming statement from the CEO of Lenar. He says that until recently, consumers have been generally confident that they will remain employed and that their compensation is safe. So now, no longer are people feeling that way, which is not really a surprise given the shape of the current economy right now. And this actually corroborates data from Fannie Mae that shows that consumers are growing increasingly worried about their personal financial situations right now. So Lenar has a healthy order of new homes on their books. They have 18,355 homes on order right now, which is good. But like I said, the problem is that they have to give these homes away at a significant discount and give selling incentives in order to get these homes actually sold. The average selling price per home fell also 1% from a year ago to $408,000. And it was expected to be at $412,000. So that was another miss for the company. And that ended up pushing their gross margins down to 18.7% down from 21.8% a year ago. And the expectation was that it was going to be at 19.1%. And check this out. This is huge right here and a big window into what's happening with real estate right now. The reason for the weak margins is that incentives were running at 13%, meaning that the actual price offered was discounted 13%. That is a huge discount off of a brand new house, guys. The CEO of Lenar says normally incentives wouldn't be more than 5% or 6%. Right now, they are more than double that at 13%. That's what it's taking to get these homes sold. And guess what? The average sale price per home is expected to fall even further. You know, it just came in at $408,000. It's expected to fall to $390,000 from $426,000 a year ago. That's a huge discount. We're talking $36,000 less to buy a brand new house than a year ago. And when you factor in how bad inflation has been, you can probably round that up past $50,000 discount in real terms, in real savings when you factor in inflation. And Lenar's margins are expected to fall even further down to 18% later this year. And the CEO of Lenar says this, As and when interest rates normalize, we believe that pent-up demand will be activated and our margin will quickly recover. Well, the thing is, companies like Lenar have a huge advantage over an average home seller because they can do all these incentives and, you know, sell homes, you know, by the thousands. And that gives them a huge advantage. They're able to, you know, get materials and get labor cheaper than most people can get. They can still come ahead of a healthy margin, you know, 18%, still not bad after selling a house, even at a steep discount, which is something that home sellers are not able to do or unwilling to do because they believe their house is worth so much more than what the market says it is. But you have to understand that the home builders are kind of leading the way and showing the direction that the housing market is going in. Okay. If a year ago, these houses were selling for $426,000. And by the end of this year, it's projected to be $390,000. What does that tell you? What does that tell you about where home prices are headed, guys? This is the direction of the market right here. Now, another startling discovery that has come to light recently is that now Americans are dipping into their 401k investment accounts in order to pay their mortgages. Now, this is pretty much worst case scenario because if you are dipping into your 401k, then that likely means you have exhausted all of your other options. You probably have no savings. You can't really pay the mortgage with a credit card. And maybe you already took a personal loan. So that's no longer an option. So what do you do? Dip into the retirement account. And this shows you two things. It shows you one, that people will pretty much do anything in order to not lose their home to foreclosure. And it also shows you that people are out of money. It says here that in 2024, 4.8% of people with 401k accounts took hardship withdrawals, which was up from 3.6% in 2023. And this is according to Vanguard. And the most common reason for taking a hardship withdrawal is making a rent or mortgage payment to prevent foreclosure or eviction, according to Vanguard. In 2023, 39% of hardship withdrawals were used for this purpose, up from 31% two years ago. And let's face it, guys, the 401k, the intention of that is to fund your retirement. And withdrawing the money prematurely can lead to significant penalties and lost retirement savings. And of course, the recommendation is you find another way. You do not take money out of your retirement account unless it is an emergency. And this is kind of your last resort. Well, what does that tell you? Once again, this is an emergency. This is their last resort. I need this money. Otherwise, I can't pay the mortgage. And there's actually only a handful of reasons that you're able to take a hardship withdrawal. And fortunately, for people that need this, not being able to pay your rent and possibly facing eviction or not being able to pay your mortgage and facing foreclosure is a qualifying reason to take that hardship withdrawal. But you are going to pay taxes on the money, and you are going to have a penalty for doing this. The experts say rather than taking the hardship withdrawal, you should consider cutting expenses and getting a part-time job. Well, what have I been telling people here on the channel this whole time? I've been telling people, cut expenses, find ways to increase your income. It's the same exact advice, actually. You could also contact your mortgage provider and go into some sort of forbearance program or loan modification. But I don't think that's really a good idea for a lot of people because what you're doing then is just kind of piling on more debt and getting yourself into even more trouble, especially if you're already having a hard time paying now. You have to look at the downsides of doing a loan modification or a forbearance because the forbearance, you're going to be making no payments and you're going to have interest adding up, and that's going to add to the balance of your loan. Loan modification, kind of the same thing. They're going to just kind of extend the terms of your loan, which means you're going to have more interest payments, which means you're going to end up paying even more in the long run. So they're both kind of the same thing, just different ways of going about it. And you have to ask yourself, if you're already having a hard time affording the house now, what are the odds that things are going to get better for me? Do I have a better job prospect? Is my business going to start earning more money? You have to know your financial situation in order to make that decision. But if you think that you've kind of reached your limit, it's probably going to be better to just cut your losses and sell that house while you're ahead. And really the last thing you want to do, and I can't even believe that this is mentioned here as an option for people, is they say, well, you could also take out a home equity loan or a home equity line of credit in order to help pay for the house. Are you realizing that you are using the house to pay for the house? And that is going to be an extra debt payment that you're going to have each month. You already can't afford the payment you have. This is going to be a really bad idea. It's horrible advice. Don't do it, guys. This is going to be almost a surefire way to lose your home to a foreclosure because you are going to have an extra lien holder for that house. And the moment you can't pay, they are going to start putting you into the foreclosure proceedings. So sell it while you're ahead and do not borrow more against the house if you're already having a hard time paying for it. One thing that many of us have lost control over is how our personal data is being used, shared, distributed, and even sold online. And that's why today's video is sponsored by Delete.me. Delete.me is a hands-free subscription service that will remove your personal information that's being sold online. Delete.me's privacy experts will remove you from hundreds of data brokers all year long. And I have been working with Delete.me since January of 2024. And over this time period, from then until now, they have reviewed over 22,000 listings on my behalf in order to remove hundreds and hundreds of different companies that have had my data and no longer do. And these companies have things like your name, your address, your marital status, your past addresses, your relatives' info, your court records, all sorts of things that is up for grabs. So make sure to get 20% off your Delete.me subscription by joining today using my link down below at joindeleteme.com slash Bordenero or use the QR code on the screen. You know, there's so many programs out there that are kind of designed to get people in trouble, especially when it comes to real estate and borrowing and debt. Because one thing I'm seeing a lot of influencers say online when it comes to real estate is they're talking about a program that lets you buy a house and pause your mortgage payments for a year while you're remodeling, which is true. That does exist. But like everything else, that sounds too good to be true. It is, and it comes with a big catch. So if you buy a house with an FHA loan and you get a 203k rehabilitation mortgage, that means you can now buy a fixer upper property with no mortgage payments for up to 12 months. And the problem is a lot of people see this and a lot of real estate influencers are pushing mostly investors to use this. And FHA has been used constantly and basically abused by investors, probably even more than who it's meant for as traditional homeowners. There's a lot of fraud with FHA because at the end of the day, no one's really checking in on you to make sure that you are living at the property. And if you're not, then you are committing mortgage fraud. Because when you buy a home with an FHA mortgage, you are supposed to live at the property for at least a year before doing anything with it. But here's the catch with this type of program. Yeah, you get to make no mortgage payment for 12 months, but it's just like starting a forbearance right at the beginning of your mortgage is what you're doing. You are not eliminating those payments. Those payments are still owed, but they are just getting added to the total loan amount. And on top of that, those payments can only be deferred while the house is being renovated and you have only a year. And this is actually a program that's been around for a long time. The only thing that's new about it is the timeline, because it used to be only six months that you had to do the renovation, but now they're giving people a year. But when you think about it, it's like, who is this really for, guys? Because people that buy a house with an FHA mortgage, most of the time, it's because they don't have a lot of money for a down payment. So if they don't have a lot of money for a down payment, how on earth are they going to have a lot of money to renovate the house? Now, they do have programs where you can actually borrow that money too. You can borrow the money to renovate the house, but that just ends up costing you even more. Because not only are you borrowing more than what you need for the house, but you are also delaying the payments at the end. So that way, you are just going to owe even more interest on all of this money that you've borrowed. So it's a great deal for the lender, not such a great deal for the home buyer, which is why I said it's mainly investors who use and abuse these types of programs. Because think about who does that. Who buys a house in bad condition and wants to fix it up ASAP and not have any costs in the meantime? Home flippers, right? Home flippers do that. That's their business model. It's a definition of what they do. So if I were you, I would just be careful when you hear about these things, especially from real estate influencers that are usually trying to sell you a program or a course or something to be like them, to be an Airbnb millionaire or to learn how to flip houses or whatever it is, the wholesaling business, all of this stuff. I'm not going to say it's a scam because it's not. These are legitimate businesses and people do make money from them. But the thing that a lot of people don't realize is most of the money being made from the people who are pushing you to do these things are from selling you that course or selling you that book or whatever. That's where their lion's share of their income is coming from, not from doing these real estate flips or wholesaling or whatever. Now, I saw another interesting story today talking about that if you start to see mortgage rates go down substantially from where they're at right now, it can be a huge sign of distress in our economy. And here's why. Right now, the chances of us going into an official recession are increasing by the day in this country. And at the beginning of the year, Wall Street analysts said that there was only a 15% chance that we're going to have a recession in 2025. And it has ballooned to over 40% now. And they're also downgrading their expectations for GDP growth. And so the idea here is that if there is a recession, which I've already said this a thousand times, but we already have the recession now, it's just that things are deteriorating in a way that is becoming more obvious to more people. Anyways, they say if a recession does play out, then the Federal Reserve may need to cut interest rates faster than anticipated in order to encourage growth, which could send mortgage rates down. However, that's unlikely to happen because just because the Fed cuts rates doesn't mean interest rates go down. And we have seen this with the very beginning of the Fed rate cuts back in September of 2024. They cut rates like what, two or three times last year, and mortgage rates only went up because inflation is still a problem. So even if the Fed comes in with emergency rate cuts, there is no guarantee that mortgage rates are going to go down because of it. Another thing to talk about here is that consumers are already in a tough spot and a recession would make that worse. Well, that's interesting because all of the news stories that we've seen over the past few years have been nothing but feel-good stories talking about how great the economy is doing and how rich everybody is. They say while the economy isn't in a recession now, the American consumer isn't in great shape. Well, that's exactly the opposite of what we've been told over these past few years. Everything they've been saying has been, oh, everybody's in great shape, you know, people still have jobs, unemployment rates still low, foreclosure rates are low, everything's looking great. Well, now they're changing their tune. And one reason they're changing their tune is because in February, the New York Federal Reserve Bank found out that only 62.7% of households in this country could come up with a $2,000 emergency expense, which is the lowest percentage recorded since the bank began tracking this data in October of 2015. And remember, going back to what we talked about earlier with Lenar, the CEO of Lenar even came out this week and said that a lot of people are afraid that they may lose their job or may lose their income, and that is contributing to the slowing of real estate sales. So lower interest rates is not going to be enough to bring people back into the market either because that's not going to change that uncertainty. You can have interest rates go down to zero, but if somebody's worried that they may get fired at any moment, that person is not going to be going out and applying for a Here we have a house that was sold back in 2021 for $1.875 million, and then they listed it for sale back in 2023 for $2.75 million, basically a whole million dollars more than they purchased it for. And they have been steadily lowering the price and lowering the price down to today to $2.4 million. And still no takers, guys. So this house has been for sale for almost two full years now, and still no buyers. But you see, going back to what I was saying at the beginning of this video, this situation right here is completely different than the situation that Lenar is in because Lenar is a home builder, right? They don't sell homes. They don't make money. So their business model is we need to offload these homes and make the most amount of margin and the best profit we can on each one of them without completely giving them away. And so that means they have to meet the customer where they're at, where affordability can actually happen, right? So that means a house that costs less than $400,000 while giving you a mortgage rate buy-down likely into somewhere in the 4% range right now, which is something that a homeowner like this back here is simply unwilling to do because they are trying to cash in on a real estate market that doesn't exist anymore, okay? They're trying to sell this house at a massive profit when there's nobody around looking to give them that money anymore. Borrowing has gotten a lot more expensive. The economy has made multiple turns for the worse over the past couple of years. So anybody who's still trying to cash in and make these huge profits, it's very unlikely to happen. Now, here's another thing that the so-called experts believe is going to happen if mortgage rates continue to go down. They say housing supply will become more constrained because if rates drop without an increase in housing supply, then home prices could skyrocket like they did during the pandemic. Well, that's also not true either because think about the current set of circumstances we are in. Nobody's rushing out to buy a house right now, not even as interest rates come down. So it's reasonable to believe that even if they drop further, people still aren't going to be rushing out to buy a house. And if we're heading into a recession like they say we are, then you're likely to see more people selling their homes right now, not less, due to affordability concerns. We just talked about also people having to dip into their 401ks to be able to make their mortgage payment right now. How long can you do that for? And how sustainable is that, guys? If that person loses their job, you think they're going to really be hanging onto that house? No. They're going to be forced to sell it whether they want to or not. But they just keep going back to this same old narrative that people who bought during the pandemic were able to secure low mortgage rates means that they're sitting on lower payments than the average person. And they say job losses during a recession tend to impact lower earners disproportionately who are renters. Well, that's not true either. You can see most of the layoffs and most of the things that have been happening so far during this recession have been high-paying white-collar jobs for the most part. So everything that they're saying here is just not true. In fact, the only reason there hasn't been more forced selling, as far as I'm concerned, is because people have had so many different resources to tap into. People have the 401k. People have had access to personal loans and credit cards. People have access to home equity loans and home equity lines of credit. Those all can be exhausted before being in a situation where you are forced to sell your house. And that can go on for years. And during those years, people can make a recovery. People can get a new job or a better paying job and turn their life around and potentially get out from under that. But if things keep going like they have been and more people keep losing jobs, that's less and less likely to happen. So let me know if you know of anybody who is taking hardship withdrawals from their 401k right now to pay their mortgage. Let me know if you're interested in buying a brand new house because the prices are projected to continue going down later in the year. Just let me know what you're thinking, guys. And if you enjoyed this video, make sure you subscribe to the channel. 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.