Desperation Sets In With Homebuilders

Lennar announced that they are going to jump into the home rental business.   This is another way of conveying the fact that they have too much inventory and need to try and “monetize” some of their inventory.   Housing:  Look Out Below.

This is an outright acknowledgement that the market for home sales is deteriorating.  As it is, the big investment firms who loaded on buy-to-rent properties are already looking for exit strategies:

Small batches of investor-owned properties have trickled into public listings, indicating some investors may be gearing up for larger liquidations, according to Daren Blomquist, vice president at the online real estate company RealtyTrac.

More than just “small batches” have already been liquidated.  Big investment companies are finding that its more difficult to achieve acceptable lease yields, especially after expenses, than their junior analysts’ Excel spreadsheet models indicated.


The big investment firms sucked up a lot of the inventory overhang from the big bubble.  Now that there’s been a glut of apartments built and being built, the rental market is going to “soften up” significantly.  It already is in Denver.   Now Lennar is throwing in the towel on frozen inventory and will add even more inventory to rental market.  Eventually there will be a flood of unrented properties hitting the market for sale, as hedge funds rush for the exits.  This is the catalyst that will cut the housing market’s Achilles’ Heel.   It is going to get ugly.

I predicted this would happen about 18 months ago.  It’s been taking a bit longer than I expected, but it’s happening now.

I have documented in detail in my housing research reports that new homebuilders have exceptionally bloated inventories now, especially in relation to their rate of unit sales volume and their debt levels.  Lennar’s announcement confirms my view.

7 thoughts on “Desperation Sets In With Homebuilders

  1. Sell your home, buy metals, short homebuilders and AMZN and retail and rent from Lennar. I kind of wish Toll Bros starts renting

    1. LOL. Lennar homes suck. I traded their junk bonds in the 1990’s. We did a debt deal for them and I saw the management dry run presentation. They are sleazy scumbags and they run the operations a bit like a Ponzi scheme.

    2. You do not want to own or even rent a home from Toll Brothers. I spent a half hour or so sitting beside a good local home builder here in central Massachusetts waiting to go in front of a Town board while he regaled me with a detailed recitation of all the sometimes bizarre corner cutting done on Toll Brothers homes. Stay away.

      The land surveying and civil engineering firm for which I work was once contacted by a guy who had bought a Toll Brothers home. He wanted to know what he could do to fix some of the things they’d done. I visited his home twice. The second time I was standing out at the curb looking at the home under construction across the street. Something was odd about it. He pulled up and smirked at the sight of me squinting at that home. I said there was something odd about it. He said that maybe it was the fact that it had had a roof on it the first time I visited but didn’t at that moment. The building inspector looked at the slapdash way they’d built the roof and made them tear it off and do it again.

      Toll Brothers!

  2. Dave what the hell are they up to closing the indexes as soon as the start to crack (like Nasdaq today)
    They obviously blame it on “system failure” after a while they start it up again and pumps the index back up in the green (“everything is awesome”)

    Imagine if we get a situation where the stockmarket almost are falling every day.
    Then they have to close the index on a daily basis in order to break the downwards momentum.

    I attach a file with Bezos and other evil men and corrupt crooks so you can select the perfect evil laughter- enjoy!

  3. Dave, my sister _HAS_ to get a place in the Stapleton area in order for my nephew to get into the high school all his friends are going to. Should she rent a 2 bedroom apartment for $1550/month or a more expensive house that I can rent with her later in November?

    I’ve been renting since Nov 2012 when someone waived $$$ in my face and wanted my house. Took the proceeds and bought Silver Eagles in big green boxes.

    My thinking is rent ’til you’re spent and save the Argent(um) until we have something resembling a market in housing. Even if PM’s are still down we might be able to pick up a house that’s reasonably affordable one year from now perhaps.

    1. In terms of renting, base what you rent on your monthly income. I bet if you wait til November, you’ll be able to more of a house than you can now for that same $1550. I was just driving around the Stapleton area now earlier today to see what was going on in terms of development and listings and it looks like there’s a lot of spec homes going up. Also, if you walk around the local grocery store (King Soopers on Quebec), it looks like a lot of blue collar type people who stretched to buy a home in Stapleton. The homes are crap construction but look nice on the outside when new.

  4. Now obama can GIVE a free house to anyone he wants to…. via the FHA…zero down…zero payments…just move in and get your tax credit money to furnish your new ‘casa’ ……..gotta put all the ‘new’ illeagals some where…don’t you just love it when a dictators plan comes to being……what a country

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