Entire housing communities are being liquidated by the nation's second largest homebuilder. We're going to talk about just that in this video with my commentary. Note: Today is December 9th which means the coupon code PP linked down below for the programs on building your Wealth does expire tonight. Remember you get lifetime access to those programs including the Zero to Millionaire course, the do-it-yourself Property Management, and Rental Renovations Course The Elite Hustlers Course for earning more income, Real Estate Agent course, or the Stocks and Psychology of Money course with a trading challenge beginning Monday The 12th.

Join any of those courses for Lifetime Access. Use that coupon code before pricing changes. All right folks, take a look at this. This in my opinion, is pretty dang intense.

Look at what we have here. Lennar The nation's second largest homebuilder offers 5 000 homes to investors with buyer demand sliding. Okay, now we're going to explain this a little bit. but what I first want you to think about is why would a home builder decide to bulk sell inventory? Usually when you bulk sell inventory like this, first of all, stuff like this sounds really enticing to House hack, but we're not buying yet.

It's too early to buy. I'll talk about when when the time devise, but usually when discounts like this are offered, they're in the neighborhood of 20 to 25 percent in exchange for the seller getting a a quick sale and number two not having to process individual deals. Home builder cancellation rates are at two to three times the level they were last year. So every deal, every individual deal they sell is a lot harder to sell.

Now, the problem with this for the home builders is for them to sell 5 000 homes on the open market. They're basically introducing more inventory to a declining market and they push prices down as they compete with each other and introduce more inventory. Put more inventory on the market quickly. Let's say you're a home builder.

You've just completed a Housing Development and you think oh my gosh, I've got to somehow get 100 of these 50 homes sold. But then I've got five other communities have all 150 homes. and then there are 10 other home builders in this neighborhood with 150 homes each. All of a sudden, if we all put our homes on the market, we'd have five to ten thousand homes on the market.

in in just a concentrated region it could be a state or the southeast or Southwest or whatever. What happens, all of those home values then start sliding even more. One of the reasons we actually haven't seen as much of a slide yet as interest rates are so un Inc or actually I should say incredibly unaffordable. One of the reasons we haven't actually seen the real slide yet is because people aren't wanting to sell.

So think about that. homeowners don't want to sell because 95 percent of them have a lower interest rate than what Market rates are today. So the people who are selling are either investors who are dumping now unprofitable airbnbs as the Airbnb bubble is popping. You've got home builders who are selling because they have to sell.

They're not landlords, They don't rent out properties, they have to sell them. That's just the way it works. Or you've got people who have to sell for other reasons divorce, death, inheritance, uh, people will downsize whatever you have the removal of housing stock or I should say households from the market leading to fewer demand for rentals and homes to live in as people consolidate into households Millennials and Millennials stay at home longer, Whatever, right? So on one hand, you have fewer people wanting to buy, rates are high, fewer household form be wanting to be formed, fewer households being formed. Then, on the other hand, with the housing market on the seller side, the only people who really have to sell right now are again the ones that we've mentioned home builders being one of the biggest cohorts of that.

The problem though, is if those home builders put their properties on the market and then you accelerate a slide of home prices which are down already say eight percent, you get into uncertain escrows that might take you another 60 to 90 days and then let's say somebody walks away in January or February After potentially the Federal Reserve has hiked another 100 basis points, right? Two more times, two more rounds of 50 basis points, we're up another 100 basis points. Inflation doesn't come down. These all just become really toxic assets for the home builders, and they're going to take a big L on them anyway. Potentially 20 percent.

Not just because home prices might be down 20, but because convincing skittish home buyers in a potentially saturated new development or new region with so much home building with homes creates more fear. And that fear itself can lead home prices to go down even more rapidly. So again, Nationwide We've seen home prices decline somewhere between 8 to 12 percent. In some areas, you've seen home prices decline a little less and some a little bit more.

But in home builder markets, you've got to be very, very careful as a buyer right now because the builders realize if we put this stuff on the market, we will crash these local housing markets. So what are they trying to do? They're trying to offload thousands of homes as package deals to institutional landlords. Let's go through the article: Lennar Corporation One of the biggest, it's the second. U.S Home Builder, by the way, is offering to sell thousands of homes to rental landlords at a time when sales to Everyday buyers have slumped.

Now again. I Don't think it's time to buy it I Think you start opening the Valley of the time to buy potentially Q3 Q4 of 2023, although the housing market might not end up bottoming until 2024 or 2025.. this is why with my housing startup Househack, we are not buying it. We are on standby and we're going to wait for various specific indicators to help us indicate when we might be at a bottom.

One of the biggest inventory or one of the biggest indicators is inventory declining. But you have to be careful because you can't just look at inventory declining alone. Because guess what's happening right now? Inventory is partially declining right now because home sellers are taking properties off the market. Home builders are taking properties off the market, trying to sell them through basically like the dark pools of real estate directly to institutional, uh, landlords.

It's really, really incredible. So what you have is: the people with cash have major purchasing power right now. Major major purchasing power. They've got a lot of pp.

Massive PP So huge. Never seen it PP that huge. Uh, it's It's really, really incredible. So if you have cash, you're you're winning right now and you're in no rush to wait.

But again, indicators over bottom would be not only inventory declining, but also fear has to decline. So you need inventory declining. Fear declining. The way you measure fear declining is by pending home sales indicating more multiple offers at competing prices.

Again, if you combine multiple offers competing prices, the speed of sale is starting to go up and those in escrow prices are starting to Trend up. At the same time as inventory is going down, you will notice where the bottom of the market is. 3 6 9 months before the National Association of Realtors realizes that in their official data. Okay, these are very, very simple things.

These are things I teach in my real estate investing course. Look, real estate is is bread and butter. For me, it's It's a cakewalk. It's easy.

I Really, really enjoy it anyway. Lennar is circulating lists of properties to potential acquirers according to people familiar with the matter who've asked not to be named because the process is private, many of the properties are located in the southwest, and Southeast this is probably like North Carolina Phoenix Vegas You know these are some of the areas that have really blown up Austin Cedar Park right outside of Austin and Texas with the builder giving landlords the chance to acquire our entire subdivisions in some cases. so in other words, you just have a hundred percent renters in an area, which that could actually create issues. Uh, when you have, let's say, a community that is owned by one large entity.

Uh, and oftentimes that entity owns more than 10 percent of the homes. Obviously, in this case, they probably would. You could actually run into financing issues with conventional financing, so you have to be careful. Generally, conventional financing requires diversity of home ownership and not like institutional control.

In one neighborhood that's deemed too risky, they want to see Very. They want to see high home owner occupancy ratios usually over 50, especially for condos and even in housing neighborhoods. Generally, they want to see, especially in homeowners associations less than 10 ownership by one entity. So these these these subdivisions could really run into some financing issues in the future unless of course they just stayed rentals forever.

But that could also then lower their value. Because generally you want to be renting property in an area that's a really heavily owner-centric because owners invest in their properties, they over improve their properties much more so than tenants. Do I mean tenants might change like doorknobs and wallpaper or whatever. and then we're converted back after they leave.

or leave it if the landlord's okay with it. But you're not talking about like, tens of thousand dollars, tens of thousands of dollars going into new driveways, roofs, facades, uh, hardscaping, you name it. all right. let's continue on with the the piece here.

A representative for Lennar said: the company offers single-family landlords a chance to buy unsold completed homes as well as homes that are nearing completion. Yeah, this is really just the Builder saying. Look, we're going to take a massive write down on our inventory, which is known as the Builder backlog. In this world, we're going to take big write down, so why don't we just sell them at a discount Now then we'll have cash.

So when when the dip dips, we're armed and ready to go buy more lots and develop again and do a better job in a better time. This is just all about deploying. Capital Some of the home builders have actually fallen so inexpensively on the stock exchanges that they've actually considered just buying back their own stock. They're like, let's just dump the real estate we have and we'll just buy back our own stock.

Uh, because we we value the assets we have under management basically higher than what we value our pipeline. which is quite crazy. But anyway, a representative for Lennar said the company offers single family landlords the chance to buy unsold completed homes as well as homes that are nearing the completion. Okay, perfect.

The most recent inventory list had about 5 000 homes. The representative said, though the number changes monthly, the average price of a home Lennar sold in the third quarter was 491 000. That gives the properties currently on offer to landlords a potential value of roughly two and a half billion dollars. Man, this like that is a huge amount of properties.

Oh my gosh, like I dream. In my lifetime, we'll be able to have billions of dollars under management at House Hack. But we're You know, we're We're starting with maybe a hundred million dollars of purchasing power, right? Gotta get that PP Up though, buyers generally demand significant discounts from retail prices. yeah again, usually you see 20 to 25.

although if if you know, I had hundreds of millions of dollars and I was in the buying mood, I'd probably be more aggressive with those negotiations. In fact, I'm really good at negotiating with real estate. Uh, so I I'm confident I get a pretty good deal for uh for investors. Uh, but again, we're not in the face of buying just yet.

It has been a turbulent year for home builders who saw frenzy demand for suburban homes slow sharply when mortgage rates soared. High borrowing costs pushed home buyers to cancel contracts, leading Builders to abandon deals to acquire land. Lennar isn't alone. In recent months, Builders have sought bids from rental operators on at least 40 000 homes.

Wow. Wow. Builders Collectively, forty thousand homes, My goodness. I Mean, on an average year, the the number of homes that sell is somewhere probably will be somewhere around four and a half million uh homes over the next year because home sales have plummeted.

But to think you know 40 000 is a lot because it's a Delta difference, right? it's it's just under one percent. Uh, but the point is, that's another one percent across the United States However, these 40 000 homes are probably almost all concentrated in Texas Arizona Nevada and probably like North Carolina I don't even know if Florida is part of that, which is which, when you put it that way, you know those markets probably only represent uh, you know what, three out of 50 and then even potentially less because you have States like California They probably really only represent uh, somewhere around four percent of Total Home Sales In which case, if those States represented, let's just even for simple math, call it five percent of Total Home Sales right? Just those States Uh, that would be let's see four and a half million times. five percent that would work out to 225 000 homes. Now all of a sudden, Now you go 40 000 homes as a ratio of 225 000 homes.

Now it's a 17 change in potential inventory. That's what I'm saying. It's because these homes are all concentrated in specific areas. That's why you're having the Panic Many of those properties had been under contract with individual buyers who walked away from purchase agreements.

Yeah, I Mean it's just it's buyers buyers suck right now because they're all fearful like you. You can't trust them as far as you can throw them, which honestly is not bad. Like, if you're a buyer who canceled the deal, you should feel proud of me saying that because you're making the smart decision in my opinion not to be buying right now. I Want to be clear? look: I Am a licensed financial advisor, but this is not personal financial advice for you.

Okay, if you need personal help, you should consult a professional directly about your specific situation. Although, if you want to learn a lot zero to millionaire real estate investing I expect would help you tremendously use that coupon code expiring tonight. Link down below: Many of those properties have been under contract. single family landlords have been eyeing Builder inventories for months with some like Industry Giant Invitation Homes seeking to raise new funds to pounce on Opera Opportunities That's true, those darn suckers are gonna just keep growing that.

Goliath I Mean you gotta admire it. They they were funded by so much. Wall Street money I Just I gotta hand it to them. they're killing it.

Uh, transactions have been muted as investors wait for greater Clarity on interest rates and for prices to come down. Lennar has raised a money to acquire rental houses tapping Alliance real estate and Center Bridge partners for 1.25 billion in equity commitments. Oh my gosh. so this is really interesting.

Lennar has raised money to acquire rental homes. Uh, okay, yeah, this is for their other subsidiary. Okay, so Lennar has a rental division, but then they have the Home Building Division So my expectation is the single family rental division is going to be a separate entity. They want to raise money for that, but why wouldn't maybe? Lennar The builders just sell to Lennar the renters uh, division because they're bad deals.

Probably He's like, come on like that should be the biggest red flag right there. Like the rental division doesn't even want the Lennar properties and they're part of the same company right now. Uh has been a cautious buyer. Yeah, exactly.

See, they're they're uh, their rental division has been a cautious fire. The company sold about a thousand rental homes in its Fiscal Court or third quarter with most of those properties going to outside investors. Wow, They've actually been offloading their rental properties too. Uh, that is.

uh unless they mean they sold a thousand rental homes for two like thousand completed homes to uh uh to to other land boards. That might be because they say here rather than to Lennar single family rental operation. but again, it just shows you those are hot potatoes. You don't want them right now.

Anyway, our program has taken a very disciplined approach to stepping back and waiting for the market to reconcile itself. Yeah, yeah, contrary to what you might have thought, we're probably selling less to our own program and more to other Sfr programs. I Know that's like so weird. It's because y'all are basically saying hey, you should buy this but we wouldn't touch it with a 10-foot pole man.

I I don't know about that. I mean like I guess on one hand I get it. but it's just that should be such a big red flag. The other company should be demanding such massive discounts.

Anyway, my thoughts: check out the coupon code link down below. Thank you so very much for watching this video! New York Stock Exchange Was such an honor today. Thank you to all those of you who came out. It was a blast! Jack Do you have anything to say bye Jack says buy don't point that in your eyes son.

All right. Thanks everyone Have a good night Bye.