Home builder confidence declined for a tenth month in a row in October. Climbing interest rates continue to weaken demand for real estate. Economists are warning that prices may be on the brink of collapse, according to the National Association of Home Builders.
Jerry Konter, the chair of the National Association of Home Builders, said that increasing interest rates for loans have created an unhealthy and unsustainable situation. This year will likely mark the first since 2011 to see a decline in the number of housing starts.
Chief economist Ian Shepherdson of Pantheon Macro said the disastrous numbers make it clear that the increase in new home sales last month was much more noise than a suggestion of a turnaround. The latest increase in mortgage interest rates is likely to further reduce demand.
He predicts that home prices will decline by about 15% to 20%.
Wells Fargo economist Charlie Dougherty believes that median new home prices will fall nearly 7% next year with greater losses in housing markets that boomed during the pandemic.
The Fed meets November 1-2 to decide on further interest rate hikes. With inflation still running hot, they are predicted to increase rates again.
Those who are bearish on home builders could consider placing a small, high risk, bet on DRV that is a triple leveraged ETF that is short on builders. Leverage ETFs are designed for day trading and losses can be multiplied by investors who buy and hold. That’s why only risk capital should be used for a gamble like that. DRV can go down drastically, like 10%, on days when the major indices are up.
Contact Deepak Malhotra if you need help with real estate investing. Even if you are not looking in Cheney, Medical Lake, Airway Heights, or the Spokane area, mentoring services or referrals can be provided.