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welcome to the Deerwood Realty YouTube channel I'm John Schink how are you today while are you a home builder because if you are apparently you're not in a great state right now let's get straight to the article I have for you today this is from the National Association of home Builders and it says mortgage rates well above 7% continue to hammer Builder confidence well I can I could see how that's the case now I haven't seen anything about like land and how much land is going for so I don't know about new developments right now but the high interest rates are causing massive problems in the Housing Industry if you weren't aware it says it starts off stubbornly high mortgage rates that have climbed to a 23-year high and have remained above 7% for the past 2 months continue to take a heavy toll on Builder confidence as sentiment levels have dropped to the lowest point since January of 2023 well the good news not really is that the rates are up to over 8% on a 30-year fix so a lot of people were saying that there's going to be a soft Landing I don't know I don't even know what that means uh they were saying that the if you bought a house you don't worry about it because you know six months from now you'll be able to uh refinance at a much lower rate and everything will be good that was probably one of the bigger lies that I've seen told in a long time it says this is the third consecutive monthly drop in Builder confidence and you know the way it's been lately is that the only really way to go has been buying new construction but you have to be able to afford to buy new construction now that's been a little tricky but we'll get into that in a minute let's continue it says Builders have reported lower levels of buyer traffic as some buyers particularly younger ones are priced out of the market because of higher interest rates said National Association of home builder chairman Alicia huie a custom home builder and developer from Birmingham Alabama well let's let's break this down have you ever been to a new home

development I swear it's like it's 70 % young people I don't know where they find the money okay it's 70% young people 30% people that are maybe in their 50s and older and it's just a wild thing to see uh just to see what a new development is uh at least where I'm where I'm at in St Louis I don't know where it might it might be different where you are like I would imagine in Florida it's probably not all it's probably not that way but anyway um it says some buyers particularly younger ones are priced out of the market because of higher interest rates that's fair that's fair um higher rates are also increasing the cost and availability of Builder Development and Construction loans which harm Supply and contributes to lower housing affordability yes I would think that that is problematic I don't believe that there's a fixed debt structure for development like I believe that's floating okay now I could be wrong and please if I'm I'm totally wrong put it in the comments I'm not I don't believe that I'm all knowing but with the inflation we're seeing it is it any wonder that people that are developers that tend to try and divine the future that is it any wonder that they might have problems with confidence right now um it says since late September mortgage rates are up nearly 40 basis points to 7.57% according to Freddy me well um now they're up to what 50 basis points more more it's not good it's not good it says the housing affordability crisis can only be solved by adding additional attainable affordable Supply said National Association of home builders Chief Economist Robert Deets boosting housing production would help reduce the shelter inflation component that was responsible for more than half of the overall Consumer Price Index increase in September and Aid the fed's mission to bring and inflation back down at 2% however uncertainty regarding monetary policy is contributing to affordability challenges in the market let's take the last part however uncertainty regarding monetary policy is contributing to affordability challenging challenges in the market now you may remember from one of my earlier videos that the uh National Association of homeb Builders along with the National Association of Realtors and some oh I think it's the National Association of uh The Mortgage Bankers Association those three uh Industries groups wrote a letter to Jerome po that said hey look man basically I'm I'm summarizing would you please stop raising rates and would you please lower rates or at least would you tell us what you're planning on doing ahead of time so that we can position ourselves accordingly and um to my knowledge Paul didn't write back the love letter was not was not returned um so I've I've never been I've never thought that the issue is is uncertainty regarding monetary policy okay the FED to me has been very clear that says they're going to break the inflation they're going to break they're to do that they're going to break employment and um if the commercial real estate industry banking industry and um and residential construction uh at least new homes uh are destroyed that's totally okay because we need to get inflation down down regardless of whether or not you believe that's a good policy uh it is the policy they seem to be telegraphing um now it says the housing affordability crisis can only be solved by adding additional attainable affordable Supply um this is uh where I disagree I think that there's many many pockets of Supply in the United States that are currently being used by short-term rentals um and I think that should that market collapse uh that there will be plenty of Supply uh but I'm I'm also a fan of I mean I have no problem with building more units I I I have no problem with that so as far as it

um it would help reduce the shelter inflation component that was responsible for more than half the overall Consumer Price Index look if you think that somebody just starts like you know hey I hadn't thought of this I'll just go build new houses tomorrow right if you think that that what we're seeing right now can be solved by something we do right now right today like we're like we just snap our fingers and a million new units come online if you think that that's going to fix the problem or if you think that's even doable uh we just we were in just disagreement so as a result of the high extended High interest rate environment many Builders continue to reduce home prices to boost sales now I have not seen that in my area I've seen I've seen continually high prices in new construction it says in October 32% of Builders reported cutting home prices unchanged from the previous month but still the highest rate since December of 2022 okay now that may be because I'm in a certain Market I'm in the midwest um if I was in the southwest maybe it's a little different maybe if you know that's that's certainly something to pay attention to um but what I have seen is the next um the average price discount remains at 6 % meanwhile 62% of Builders provided sales incentives of all forms in October up from 59% in September and tied with the previous Hive for the cycle set in December 2022 so for the longest time if you want to go buy a new house in the last two years you go to the Builder and you say hey man I'd like to buy a house and they're like here's the price and you say can I you know can I get free cabinets or something they're like no no no you're like maybe you know maybe some chocolates when I move in no no we're not giving you anything uh so it was very very much no incentives now um and I got to take a picture of this for Twitter I haven't gotten around to it yet but I mean even in in the developments it's close to my my home there is a a rate buy down program for I believe two years so rates right now 8 point let's go with 88.2% okay on a 30-year fixed they'll come in and they'll buy down the rate to the sixes like 6.7 6.6 for two years now the only problem with that is you still have to qualify as a buyer to the highest rate because it's just it's just going to be an interim buy down it's going to be for two years that's the incentive they're offering uh I looked the the here's how I will know that things are not going well uh in the residential market right now because what's been holding up all of real all of the residential section lately has been new construction when new construction when the when the developers pivot to lower prices uh then we'll know that things are really really bad at least in in in my area in St Louis now it may be different for you they may have already done that they may have already capitulated but anyway I wanted you to see that um article I thought it was relevant to the situation we find ourselves in today you know um many people want to buy a house but what's available is garbage uh as far as you know it's an estate home home it's it's not a home that's all fixed up because those people aren't moving right if you don't have to move right now who's taking on an 8% rate on a 30-year fixed on purpose uh I expect this to continue for quite some time um and we will track it but you know I'm always optimistic I'm always hopeful that in the future we'll see some um we'll see the market unfreeze anyway that's what I have for you today thank you for watching thank you for listening and I'll catch you on the next one one