The real estate market in the US is in a "big problem", warns the expert

KB Home reports a 68% cancellation rate of new home construction in the fourth quarter of 2022
As the Federal Reserve continues its hawkish market reset - which contributed to rising interest rates and mortgages - real estate experts are sounding the alarm that "big trouble" is ahead for the American market.
"When there is an increase in interest rates like we had, it's a big problem for housing. Interest rates are like the mother's milk of housing," Pulte Capital CEO Bill Pulte told FOX Business' Maria Bartiromo on Thursday. "And if you cut it off, you're in big trouble. And when there are massive increases in interest rates, it simply stops a lot of things."
"It's a tale of two cities. I hate to relate this to politics, but the redder states, places like Florida, Texas, the office buildings are pretty busy. Business is booming. There is more demand and supply", CEO of Thor Equities, Joe. Sit later said in "Varney & Co." “It's more, I hate to say it, markets like ours here in New York, Chicago, San Francisco is a ghost town. San Francisco was destroyed.”
One of the country's largest homebuilders, KB Home, released its fourth quarter report on Wednesday, which pointed to further signs of housing weakness. According to the report, KB Home has seen a 68% cancellation rate on new construction projects.
The mortgage interest also rose last week, when the 30-year interest rose to 6.48% and the 15-year mortgage reached 5.73%, compared to 5.68% the previous week. Higher mortgage rates continue to test the affordability of home buyers, according to the Mortgage Bankers Association (MBA).
The Chairman of the Fed, Jerome Powell, warned on Tuesday that raising interest rates to slow the economy "is not popular" in the short term, and may even create political opposition.
"Price stability is the basis of a healthy economy and provides the public with immeasurable benefits over time," Powell said Tuesday in remarks prepared for delivery at a conference held by Sweden's central bank. "But restoring price stability when inflation is high may require measures that are unpopular in the short term as we raise interest rates to slow the economy."
"It's going to be difficult," Polta said about the real estate market. “[KB Home's] cancellation rate… reached a peak, something like 68%, which is just huge. Typically, this number is around 10, at most 20%. So I think we have a tough road ahead of us this year, and I think you'll start to see that in earnings towards the back half of this year and frankly, into next year. I think the profits will continue to deteriorate."
Property investor CIT said it would "take some time" for metropolitan areas to see a recovery in their commercial and private housing markets.
"I think the cities are going to wake up and try to respond," Sitt said. "I would say that the rent in San Francisco is probably going down somewhere in the neighborhood of about 35%. without exaggeration. What is happening in this market is dramatic."
Real estate investments go where the money "feels comfortable," according to Sitt, who predicted that Sunbelt states may experience less volatility this year because of a boom in manufacturing jobs.
"I hate, again, to get into politics, but from a global point of view, the autocratic countries are doing the best. Singapore, Dubai, Monaco. Some people joke about Florida and Texas is part of it," said the CEO of Thor Equities. "The world order is changing, especially because of some of the conflict with China. So you have this massive wave on the beach, and so the whole Southeast is now going to get their next economic advantage. I call it the battery belt, that the battery belt market of all those jobs that are going to be created for production will have ripple effects."
Folta claimed that his company has yet to find promising real estate opportunities so far this year amid rising rate pressure.
"Not yet. It's going to be pretty interesting," Polte said. “The M&A [mergers and acquisitions] environment in housing and construction products is something to keep an eye on over the next six, 12, 18 months. The time has not yet come."