Last week, we shared extensive empirical evidence that the US housing market is starting to crack when we quoted regional managers from John Burns Real Estate Consulting, all of whom agreed on one (or more) of three things: i) Demand is slowing, namely entry-level due to payment shock; ii) Investors are pulling back; and iii) Ripple effect of rising rates starting to hit move-up market. Here are some excerpts:
Dallas builder: "Interest lists are shrinking or buyers are truly pausing."
Houston builder: "Many first-time buyers simply no longer qualify with the increase in interest rates, as their debt-to-income ratio gets out of whack."
San Antonio builder: "Traffic has been cut in half since the hike in rates."
Raleigh builder: "Investor activity has slowed dramatically."
Provo builder: "Investors are evaluating the investment more critically than in the past."
Washington DC builder: "Traffic half what it was in March. Worried about first time buyers. Many fewer REAL buyers than number of people collected on interest list last 6 months. Certainly more attempts [from buyers] to negotiate."
Seattle builder: "Pause by a large population of buyers. To achieve our desired [sales] pace, we had to make price adjustments. Rates starting to knock people out of qualification."
Needless to say, a housing crash would be a bad thing for the US economy for which the housing sector is of paramount importance: a house is usually the biggest asset in American's savings, comprises a large chunk of the labor force, and is a large contributor to inflation indices. That's precisely why the Fed, hell bent on tipping the US economy into a recession as fast as possible to reverse inflation, would want nothing more than a housing recession.