Housing Affordability and Pending Sales Drop, CEO Turnover Rises, Business Indicators Show Caution
Housing Affordability and Pending Sales Drop
Home affordability took a hit along with the number of contracts for pending sales in September, the latest signs of in a steady slowdown in the housing industry.
The Mortgage Bankers Association trade group said the national median monthly payment that prospective homebuyers applied for in September rose 5.5% from the prior month to reach $1,941. This marks continued erosion in buying power relative to household income, which has not kept up with home price increases for the past several years. This affects prospective buyers, including renters now remaining in the apartment pool until buying conditions improve.
“With mortgage rates continuing to rise, the purchasing power of borrowers is shrinking,” Edward Seiler, the trade group’s associate vice president of housing economics, said in a statement. Borrowers faced heightened hurdles even as the median loan amount in September was $305,550, much lower than the February peak of $340,000.
As the banker group projected home mortgage purchase origination volume would fall 3.3% next year from 2022, the National Association of Realtors reported that pending home sales under contract dropped 10.2% in September from the prior month, marking the fourth straight month of declines.
The trade group’s monthly gauge of contract signing volume, considered a forward-looking indicator of home sales, was down 31% from September 2021. NAR Chief Economist Lawrence Yun said new home sales listings are also down compared with a year earlier because many homeowners are unwilling to give up on the historically low 3% mortgage rates they locked into before this year to buy their homes, as 7% could be the new normal for the foreseeable future.
“Persistent inflation has proven quite harmful to the housing market,” Yun said in a statement. “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers.”
CEO Turnover Rises
The number of CEO changeovers at U.S. companies rose 17% in September from the prior month, according to the latest tracking by outplacement firm Challenger, Gray & Christmas.
The Chicago-based firm said there were 74 CEO changes during September, up from 63 in August. Year-to-date, the volatile technology industry has seen the second-highest total of CEO exits with 108, topped only by the government/non-profit category with 207.
Also, 2022 is shaping up to have the youngest batch of exiting U.S. CEOs — average age 56, down from 60 last year — since Challenger began tracking that metric in 2010. The average tenure of departing CEOs this year is 9.96 years, the lowest seen since 2014.
“The churn in the technology sector could also explain younger CEOs leaving after shorter tenures, as these leaders tend to be young and leave during a new phase of growth or funding round,” Senior Vice President Andrew Challenger said in a statement.
For the first three quarters of 2022, tech CEO changeovers were actually down 12% from 2021, and overall U.S. CEO exits were down 2% to 969 through September.
Business Indicators Show Caution
A pair of indicator reports Monday showed sentiment regarding manufacturing and other business activity contracting as companies become wary about near-term prospects at a time of rising interest rates and stubborn inflation.
The Institute for Supply Management’s Chicago Business Barometer, surveying firms in that region on national business conditions with data firm MNI Indicators, reported its October activity index came in at 45.2, contracting for the second consecutive month. Numbers 50 and above denote growth.
More than a third of respondents noted lower production compared with September, “with continued issues over labor and material shortages cited,” the report said. Overall responses showed new orders contracted for the fifth consecutive month, though employment, supplier deliveries and inventories showed upticks.
The Federal Reserve Bank of Dallas, which queried Texas business operators, said its latest monthly manufacturing output survey showed production increasing after months of pandemic-related slowdowns, but with the growth rate declining in October from the prior month. The survey found new orders declining for the fifth consecutive month, suggesting decreasing demand, with capacity utilization and completed shipments showing similar declines.