Just when the little guy and the middle class thought they found a way to get rich, someone pulls the rug out from under them. We have seen this before with the NASDAQ, and now its beginning in real estate.

Today, the homebuilders are getting whacked after Toll Brothers (TOLL -$4.67 or -11.9%)reduced their outlook for 2006. Here's are quote:

"The shortage of selling communities, coupled with some softening of demand in a number of markets, negatively impacted our contract results," Toll Brothers said. "It appears we may be entering a period of more moderate home price increases, more typical of the past decade than the past two years."

Other Homebuilders: Ryland -$3.00, Hovnanian -42.35, Beazer -$3.50, Pulte -$2.92, Lennar -$2.82, DR Hotron -$2.60, and Centex -$3.62.

This is just the beginning. I'm sure, some investors will begin to buy on the pullback believing that Toll's problems are company specific. That would be a mistake.

Eventually, higher interest rates will also begin to affect the real estate market. One thing that is sure to halt real estate speculation along the Florida coast is the availability of wind storm insurance. Large insurers are pulling out of the state of Florida due to the number of hurricanes.

Think about it. If you wanted to buy a house or condo on the water, you better have cash, and then, not care if it got destroyed because no one would insure you. For those who do not have the cash,a bank will not give you a loan unless you secured the proper insurance. In short, the ballgame is over.

A hit in the real estate market is sure to hit consumers who have lines of credit on their homes or property. As the values come down, so does the amount a person can borrow against their property. This is why you have seen a mini hit in some of the retailers this morning.