May 25, 2022
Good morning everyone. It's Emily. We're here with the latest on housing and jobs today, as ever. But what happened yesterday in Texas is weighing on my mind — and my heart. Sometimes there are no words.
Today's newsletter is 954 words, 4 minutes.
1 big thing: The Fed ate the housing boom
Looks like America's home-buying binge is winding down. There's a vibe shift visible in both the official data and in the anecdata from sellers, buyers and brokers, Emily writes.
Why it matters: This is just what Fed chair Jerome Powell ordered. The slowdown means the Fed's rate hikes are working — cooling demand in an overheated market.
"The buyers just stopped buying," said Shauna Pendleton, an agent with Redfin in Boise, Idaho, until recently one of the hottest markets in the country.
"Californication," as she called it, drove an influx of buyers from the West Coast, flush with cash courtesy of the also formerly booming stock market.
- Some listings now sit for weeks without even a showing, she said; like this 4-bedroom priced at $899,000; 42 days without a look-see.
- In the Dallas-Ft. Worth area, Redfin agent Robin Glaysher said five people showed up to an open house last weekend; previously there would've been a line out the door.
- "It's a completely different market now," said Glaysher, who works with homes priced around $400,000.
- The change is a boon for some buyers — like those relying on FHA loans that require only 3.5% down, she said. In the old times, they were often outbid by cash buyers, who have now vanished.
Driving the news: New home sales plunged in April, falling 16.6% from March, to 591,000, well below economists' forecast of 750,000, according to data out Tuesday. It's the slowest pace since April 2020 — when the economy froze for a minute before the boom began.
- Existing home sales — perhaps a better measure of the U.S. market because it's a much larger segment — are also trending down, falling for three straight months, according to the National Association of Realtors.
Catch up fast: The real estate market has been, technically speaking, bananas since COVID, as the rise of remote work — and super-low mortgage rates — sent more people looking to upgrade their living space.
- The surge in demand fueled bidding wars and all kinds of wild activity — buyers waiving inspections or begging to give sellers money, for example.
What they're saying: "The party is over," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note Tuesday.
- "We were going 90 miles an hour down the highway, and we took our foot off the gas," Michael Simonsen, CEO of Altos, a real estate analytics firm, tells Axios.
- "The market's shifted from "irrational to more rational," Jonathan Miller, a New York-based real estate appraiser, tells Axios in an email. What used to sell in 24 hours, now could take about a month.
The bottom line: Though the frenzy is over, "there's still a lot of pent-up demand from people who've been shopping for a year," Simonsen said.
- What to watch: Prices. They haven't started falling — yet. The U.S. median new home price ticked up in April to $450,600, an increase of 45% from two years ago. But as Matt explains below, this could soon change.
2. Chart: New housing backlog builds
The inventory of unsold newly built homes jumped sharply in April, up 8%, the largest monthly increase in 13 years, Matt writes.
- Inventories are up 40% from the previous year.
Why it matters: It suggests that the breakneck pace of price increases for new houses — up roughly 20% from last year — simply cannot last.
Yes, but: It remains to be seen whether the rise in unsold, newly built homes suggests a broader slowdown in U.S. housing.
- New home sales are actually a pretty small part of the overall U.S. housing market, compared to existing homes. And, at least through April, inventories of existing homes were still some of the lowest on record.
3. Catch up quick
4. Jobs strength
The Fed's move to slow the economy may already be trickling into housing — but polling shows it hasn't exactly started cooling the labor market yet, Axios' Kate Marino writes.
Why it matters: That's good news for workers — so far — as job loss is often a byproduct of tighter monetary policy.
Driving the news: In May, the share of adults in the most vulnerable income bracket (those in households making $50,000 or less) who reported job-related income loss hit a record low (13%), according to polling conducted for the Morning Consult/Axios Inequality Index.
- The share of those same adults who expect pay loss in the next four weeks, at 10.3%, is also at an all-time low since Morning Consult began the poll two years ago.
What to watch: The May jobs report from the government is out next Friday, June 3.
5. 🛒 Everyone loves groceries
Grocery brands like Trader Joe's, Wegmans and H-E-B are some of the most reputable companies in America, transcending generational and political divides, Axios' Sara Fischer and Emily write, from this year's Axios Harris Poll 100.
Why it matters: At a time when politics divides Americans' opinions on various companies, these grocery brands maintained trust across party lines.
- The Axios Harris Poll 100 is an annual survey to gauge the reputations of the most visible brands in the country.
Details: For the first time in the poll’s six-year history, three grocery brands —Trader Joe’s, H-E-B and Wegmans — landed in the poll’s top 10.
- Grocery brands also were the most consistently high performers compared to other sectors.
- Other grocers, like Kroger, Publix and Costco, also ranked in the top 20 most reputable companies.
The bottom line: These brands are firmly rooted in people's everyday lives — even throughout the pandemic, which changed so many Americans' habits.