The US Census Bureau, most famous for its demographic survey of each and every person in the country (well, about that…), has come out with data suggesting that the housing market has finally taken a turn. A downturn, that is.
First, recently-released Census data shows that single family home sales fell dramatically in April by 16.5%. If the same number of homes that sold in April sold each month for the year (the “seasonally adjusted annual rate”), there would be 591,000 home sales in the Untied States. This represents the slowest rate since April 2020, only one month into the initial pandemic.
In March, the seasonally adjusted annual rate was 709,000. Interestingly enough, the Census Bureau recently revised this figure from 763,000.
This means that over the last couple of weeks, the Census Bureau has thrown some significant water onto the smoldering housing market, both reducing its previous analysis of March and posting the sharpest decline in over two years for April.
“The new home sales report released today by the Census Bureau clearly points to a housing market that has turned,” said Fannie Mae chief economist Doug Duncan.
Somewhat Fast for a Soft Landing?
It doesn’t take an economist to explain what’s happening here. The combination of an inventory shortage from delayed new home construction, rising interest rates, and absurdly high prices have finally driven people back.
As we’ve discussed regularly in this compliance blog, the Fed has increased interest rates by 200 basis points this year already, and signals that the hikes will continue until inflation is down. The slowing housing market may be one sign that it’s doing just that.
What may be surprising is how quickly and dramatically it happened.
Consider the recent poll of economists run by the Wall Street Journal, which predicted that April’s seasonally adjusted annual rate would be 750,000. Yup, they missed by nearly 160,000, or 26%.
“Today’s new home sales report is the sharpest indicator yet, with sales coming in well below both our own and consensus expectations,” Duncan said. ”The sales pace in April was similar in level to the slowdown that occurred the last time the Federal Reserve engaged in a tightening regimen in 2018.”
Credit Report Resellers and OnSite Inspections in the Shifting Housing Market
While a housing market slowdown seems like bad news for credit report resellers and lending institutions, this is not entirely the case.
It is likely, after all, that this slowdown is mostly attributable to investors and venture capital firms slowing their rapid and aggressive buying behavior. With interest rates increasing, the return value for investors simply is not the same as it was during the pandemic.
Soon, more everyday buyers will likely be able to enter the housing market as supply increases. This is echoed by recent data from realtor.com suggesting that people are prepared to sell homes “at more approachable price points” now than at the beginning of the year.
With these more reasonable price points will hopefully come a more reasonable market more hospitable to everyday home buyers. These home buyers will need loans, and those loans of course require credit checks.
Even as the housing market slows, OnSite Inspections for Consumer Reporting are an invaluable way of documenting and managing compliance during this potential surge.
Whatever your political or economic leanings, we can all likely agree that getting first time home buyers into homes is for everybody’s benefit, and that includes resellers of consumer reports.
