HOME SELLERS GIVE UP AND CUT PRICES BIG TIME

Michael Zuber (0:02)

All righty, folks, according to Rezzy Club and the CEO of Lennar, we are having existing home sellers in the state of Florida and Texas simply give up. They are, what are they called? Capitulating. Sellers in Florida and Texas are capitulating. We will talk about that in a second. But first, I'd be remiss if I didn't acknowledge that we are starting this daily financial news early.

I have some husband activities to do at our normal recording time. So hence, I'm recording early. Yes, you are not, the schedule is not off.

I just have some stuff I need to do for Olivia this morning. So I thought I would get this done early, so I am not stressed later. We'll be back tomorrow at 730, our normal time. So hopefully, hopefully, you understand. I gotta be a good husband and move on from there. So back to what Resi Club and the CEO of Lennar is reporting, based on the interview with Resi Club, the CEO of Lennar says, and I quote, Sellers are capitulating in Texas and Florida, and that is slowing sales for Lennar. Think about that. What have we been hearing for a long time in the housing market today? Home builders are not really competing with existing home sales because, again, existing home sellers were having 2022 prices. And of course, new home sellers like Lennar simply don't have that behavior. In addition, we have seen new home builders like Lennar eat margin, right? We've seen them take 10, 12 points of margin, give discounts, rate buydowns. You guys know the drill. But now the CEO of Lennar is saying the existing home sellers, at least in Texas and Florida, are stepping up and selling at lower prices. This is actually great news. This is, again, how a market heals itself. This is how a market puts in a bottom. This is how the real estate market goes from a buyer's market, back to a neutral and maybe sometime in the future, a seller's market. You need to shake out the weak hands. The sellers that need to sell, they need to sell. And what does that mean? Lower prices. So again, what Lennar is telling us, really in the state of Florida and Texas, is those markets are starting to heal themselves. They're going to get rid of the weak hands, and they are going to be stronger for it.

I don't know if you guys know who Richard LaFracque is, but he is a commercial real estate legend. There's a interview with him on CNBC coming out today with Diana Olek. The line that is interesting to me is, Richard says, if I had debt, I'd be petrified. Now, of course, this is something that we are starting to see across the multifamily, really the commercial sector. We're most interested in multifamily, because again, I had a conversation with the financial institution and some investors last week. And banks, they are no longer extending and pretending.

They are getting really aggressive. They see the Fed on a rate-hiking cycle. Commercial notes are most tied to the short end, and that is going higher. So there were financial institutions and lenders that were praying, hoping for lower rates to save marginal deals. Well, that is not going to happen. As Richard LaFracque says, if I had debt, I would be petrified. And that's kind of exactly how I feel. But as someone who set up their portfolio months, if not years in advance, I look forward to the opportunity to buy some distressed assets. We got some more Fed speak. Again, we're going to get a lot of it this week. We got Fed President Cook. We are highly attentive to AIs potentially causing a temporary rise in unemployment. Fed has limited tools. Rate cuts could fuel inflation. So what is Lisa Cook telling us? She's saying even if the unemployment picture got cloudy because of AI and job losses, they're not cutting. Folks, this is just more and more talk about that October rate increase, late October rate increase coming again. They gave us a dose in September, and we're getting another dose in October.

Fed President Hammack, Fed needs flexibility in this environment, which with limited guidance. Again, they are under Kevin Warsh Tudelidge, not giving a lot of forward guidance. So they are again reacting to the data as it comes in. Muhammad Alarian, folks, if you follow the channel, you know that I respect Muhammad. He is talking more and more about the early 1980s. This is something we brought up on the channel a lot. And this is basically saying the Fed's in a tight spot. Overly reliant on monetary tightening and lack of fiscal restraint. What does that mean? That means the Fed is raising rates, again, which means overly reliant on monetary tightening and lack of fiscal restraints. The government is spending crazy money. Frankly, all of the also AI investments.