D.R. Horton issues HUGE warning. (Cancellations spike 18%)

America is in the midst of its worst home building recession since the 2008 crash. And this home building recession, it just got even worse. With new home sales plummeting to their lowest levels since January. With the supply on builder lots now getting so high that they're being forced to aggressively cut prices in what is now looking like a deflationary housing market scenario. With Realtor.com reporting that new home prices just plunged to a five-year low as sales falter. And to date, builders have cut prices by nearly 15% over the last four years, making this drop in prices the biggest since the 2007 to 2010 downturn. However, the bigger story here is not just about builders in home prices, it's about where the U.S. economy is heading. Because historically, when home builders start to run into these issues, it's not too long later that a recession and spike in unemployment is around the corner. Because you can see that there's only been three other times in U.S. history where home builders have ever had this much supply on the market in terms of months of supply. Today in 2026, they have over nine months of supply on their lots. The other periods where they had this much supply were the 08 to 09 Great Financial Crisis, the 1980 to 1982 Double Dip Recession, as well as the 1973 to 1975 Inflation Recession. And you can see if we overlay the blue line, the unemployment rate in the U.S. over the months of supply graph, the trend is very clear. Months of supply and inventory on builder lots spikes first, and roughly two to three years later, the unemployment rate spikes in response. This is a very predictable cycle that has happened after every previous spike in builder supply, begging the question, is there something different about this home builder cycle and economic cycle that's going to lead to a different outcome? And I'm going to actually answer that question for you guys in two minutes. But first, I want to show you some of the concerning warnings that these home builders are sending about the U.S. economy, about the housing market. Last month, D.R. Horton, the largest builder in America, cut their revenue guidance as their sales came in flat. D.R. Horton is saying that affordability challenges, high materials costs, and fluctuating mortgage rates continue to pressure the home building sector. Additionally, they reported that their cancellation rate increased 20% from 17% a year ago. Lenar, the second biggest builder in America, also cut their full year target, citing stubborn housing market headwinds, with their CEO saying that our second quarter of 2026 was defined by the same stubborn headwinds that have challenged the housing market the last several years, citing high mortgage rates, low affordability, consumer sentiment, and inflation as contributing factors to the slow housing market. And you can see that if we just ignore supply for a second and just focus on home sales for builders, that today's levels in 2026 are not very impressive. They're down about 40% from the pandemic peak. They're even lower than they were in 2019, and they're actually below the long-term median going back the last 60 years. And what's interesting about that to me is that those problems are still persisting for builders, even though they have cut prices 15%, going from $460,000 in 2022 to $394,000 in 2026. At the same time, builders are giving big mortgage rate buydowns on top of that. In the case of D.R. Horton, their average mortgage rate for their backlog right now is 4.9%. According to their senior vice president of communications, as of June 30th, their mortgage rate for buyers and backlog utilizing their mortgage company was 4.9% against a market rate of 6.5%. And so even with offering mortgage rates that are 1.5% below the market rate, and with builders cutting prices, they still aren't generating good sales, and the inventory is still piling up, which is proof to you about how bad a recession this housing market is in right now. You know, there's a lot of people out there who are refusing to acknowledge that the housing market's in a downturn. They keep trying to say to me that, oh, no, Nick, there's no downturn. Prices are still going up. Things are still great. The housing market's resilient. Folks, anyone still saying that is completely clueless and has their head in the sand. And the home building market is showing you why. And they're proving just how lackluster this market is and how much more prices need to fall. Because I wanted to break out the builder prices in a different way, everyone. I wanted to adjust the prices for the square footage of the homes. One of these things these builders are doing in response to lower demand and higher unaffordability is they're building slightly smaller homes. So you can see actually that the per square foot sales price from builders peaked in March 2024 at $201 a foot for a new home. That's now gone down to $180 a foot. So price per foot has dropped only 10%, whereas the nominal prices have dropped 15%, meaning that builders are building 5% smaller floor plan. You can see prior to the pandemic, the price per foot for new builder homes was around $130 to $140 a foot. And so even though there has been an improvement, even though builders are cutting prices, they're still not down to where they were in 2018-2019. Unless you're Lenar. Lenar, the second biggest builder in America, has cut their net price, inclusive of mortgage rate buy downs, by over 25% the last four years. And their most recent quarter average sale price on new orders of $377,000 is actually below their pre-pandemic average price for new orders, inclusive of the mortgage rate buy down. So there have been legitimate price cuts, but just not enough to bring enough buyers back. And prices are still above where they were before the pandemic for most of the building market. Now, I want to get back, though, to the economic story here, because I think that's the most interesting part. What are these builders signaling by their struggles? What are these builders signaling about consumer health and economic health by the fact that their sales are below normal and that their inventory is through the roof? Well, folks, if we go back to this graph, comparing the months of supply on builder lots in orange to the unemployment rate, we can see that something very strange is going on right now. That we're now in our, let's call it, fourth year of elevated builder supply. And again, months of supplies, the builder inventory divided by the new sales. And yet the unemployment rate hasn't taken off like it has in every other cycle after the builder months of supply spiked. And I suspect the reason for this delay is due to the AI CapEx boom. You could see that the unemployment rate was kind of incrementally growing in 2023, 2024, but then it started heading down about 9 to 12 months ago. And I think this is due to the fact that the AI CapEx boom and all the spending on AI is kind of propping up the economy. In the meantime, while the builders in other sectors of the economy are showing that there's huge issues, there's huge excess inventory, the AI CapEx boom and the stock market bubble are keeping this unemployment rate capped so far. However, one has to wonder how long that can persist for. There's more and more when we peel back the curtain and look at the fundamentals underneath the surface of the economy. Things aren't so good. The builders have a lot of supply. The builders are cutting prices. The builders are signaling a recession. At the same time, consumer spending in the U.S. just dropped in July and the personal savings rate for households is near the lowest level ever. Consumer sentiment is low. And so there's a lot of headwinds for the U.S. economy. It's just we're not seeing the twig snap. We're not seeing the stock market give way. We're not seeing companies do mass layoffs. And until we kind of see that point in time, we're still probably going to be in this suspension of disbelief on the housing market where even though the builders are indicating there's a downturn, we're still going to see prices appear high. We're still going to see a lot of sellers on the resale market not want to cut the price because these sellers on the resale market, everyone, are in a completely different headspace from builders. While a builder builds a house and really just wants to sell it in the next six to 12 months, someone who's owned their house for a couple of years and might have a 3% or 4% mortgage rate, they have a very different perspective. That person might be completely okay with waiting to sell their home. They might be completely okay with listing and then delisting their home if they don't get the right offer. And it might take a stock market crash and an unemployment rate spike to motivate some of these stubborn existing owners to actually cut the price of their homes to what they need to cut it for to sell. And this is the other really interesting thing is the comparison between the existing home owners and the builders on the new homes. We can see on the new home prices, they shot up during the pandemic and are now coming down. However, the existing home prices of the resale market continue trending up slightly. And you can see we're actually in this interesting situation actually entering the fall of 2026 where builder homes are now cheaper than existing homes. A builder house in July sold for $394,000 and existing homes sold for $434,000. And this is actually fundamentally shocking and concerning because we've actually never seen this happen before in US history going back to like the late 90s. Almost always the builder homes are more expensive than the existing homes, which makes sense. They're newer, they're often bigger. Now the builder homes are $40,000 cheaper than the existing homes. And when we compare the percentage differentials, we can see that on average builder homes are 17% more expensive over the last 25 to 27 years than existing homes. Today, they're 9% cheaper. And when you look at this graph, you just kind of realize how rare this moment is and how I think there's another leg down because I don't think this situation is gonna persist. We are not gonna continue to see builder homes substantially cheaper than existing homes. Something has got to give. Either the builder prices are gonna go back up or the existing sale prices are gonna go down. And what I think is happening is that the builders are showing us kind of where the true market is heading, 15% lower prices, 4.9% mortgage rates. That's what needs to happen to just get demand back to like okay levels, not even good levels. However, in the existing sale market, we haven't seen that price finding activity yet. We haven't seen that bid ask spread narrow because a lot of the existing owners still haven't gotten it into their head that their house is not worth what it was three or four years ago. It's worth 100,000 less. And so until those owners get that into their head, there's just not gonna be sales on the existing home market. Existing homes are down 40% on transactions from the pandemic peak. It's literally the biggest home buyer recession ever for existing homes. Comparable to 2008 and overall sales worse than 2008 relative to the size of the housing stock. And so you have this situation where builders are reacting to the market and are cutting prices, cutting mortgage rates and doing okay but still have tons of supply. And then you have existing homes where owners are just deciding not to cut the price and holding it. But how long is that gonna last for? Like eventually when the unemployment rate does go up and the stock market does eventually correct, many of these owners are probably gonna rush to sell. At the same time, more and more existing owners are taking on high mortgage rates and high payments. And I'm seeing examples all across the US of existing owners selling at 10, 20, 30 and 40% losses from where they bought three to four years ago. And so really the relevance of this builder story is twofold. Number one, it's telling you that the economy is not healthy and that we could be heading towards a recession. But number two, it's telling you also where the existing home market in the US is gonna be heading over the next several years as well. And that's down. We need to go down on prices. We need to go down on rates. And without that happening, we are not gonna see an improvement in demand. Of course, prices are going down already, folks, in quite a few different states. You can see these areas in blue have declining values year over year according to data available on ReVenture app. You can see if we zoom in on different zip codes, you could see some areas are going up quite a bit, like a 4% year over year decline in average value here north of Nashville. That's pretty big for an average. That means there's listings in some of these zip codes that are going down 10, 15, 20%. When you see blue on the ReVenture map, everyone, for home values, that means down. Red means up. And if we switch to our 2027 price forecast, you can see, oh my gosh, it does not look good in a market like Nashville. Actually, I mean, maybe this does look good if you're a buyer. It doesn't look good if you're a seller. We have zip codes in Nashville. We're forecasting to drop 10% in just one year, which is a massive downward forecast. Nashville is going to be one of the hardest hit markets over the next year to everyone. Get ready. We zoom in on a market like Dallas, you could see something similar. We have blue almost everywhere on this map in Dallas. Yes, there's a couple places that are in red, like we think values are going to go up in Highland Park and University Park, but almost everywhere else is blue. Phoenix, much the same, folks. Phoenix is a sea of blue. Values are already dropping. They're already down 10% at the metro level. If you cut out Paradise Valley, almost everywhere in Phoenix is dropping. Even Scottsdale, lots of supply, lots of days on market. Seattle, everyone. My goodness, Seattle is turning into a bloodbath. Supply is through the roof in Seattle right now, and we have values going down, forecast to go down almost everywhere. And a market now I want you guys to watch also is Boston in the Northeast. Boston is now a sea of blue. Boston prices are starting to go down. The Boston market is turning. Some of the suburbs are doing a little better, but the inner areas are starting to drop. Could be the first Northeast market to correct, Boston. Washington, D.C., also a sea of blue. The center of D.C., District Columbia, also going into Maryland, is dropping like a rock. What you guys are going to want to do is head to www.reventure.app right now and search your zip code so you can unlock. This forecast is going to help determine where prices are heading in your market and what your offer strategy should be buying a house, whether it's better to buy now or wait. Ultimately, you want to see a minus forecast if you're looking to buy now because that means you can negotiate. Unlock all of this data for only $33 a month on the annual plan, folks. Lock in that annual plan to get a 15% discount. You'll unlock our one-year price forecast, our overvaluation rate, unlimited usage of our listing analyzer tool to analyze listings in your market, ratings on the best month to buy or sell, long-term growth in investor scores, and downloadable market reports. This package is going to help arm you with the data you need as a buyer to avoid overpaying and secure a big discount on a house over the next year. But folks, prices are dropping in a lot of cities. Lock in this data right now, www.reventure.app annual premium plan.