'Housing Is the Canary In The Coal Mine' Hey Jerome Powell, Are You Listening?

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Zinger Key Points
  • Tri-Pointe Homes CEO Doug Bauer said there is significant pent-up demand in the housing market.
  • Bauer mentioned if the Fed would stop raising rates, the housing market would see an influx of buyers.

U.S. home sales and home price data have provided more evidence that the housing market is losing steam and could be the 'canary in the coal mine' of the economic downturn and coming recession, Tri Pointe Homes Inc TPH CEO Doug Bauer says.

Bauer said consumers are psychologically challenged by high interest rates and are choosing to sit on the sidelines while prices come down, on CNBC Friday, while calling on the Fed to listen.
Read also: Is There Going To Be A Housing Market Crash In 2023?

“I’d say housing is the canary in the coal mine,” Bauer opined. “Housing, which has its multiplier effects, is the tip of the spear of the economy. [The industry] is in a significant dislocation which is going to lead the economy to a pretty strong recession — and housing always has been that canary in the coal mine.”

The Tri Pointe Homes Inc CEO noted that orders for new builds were down 50% year over year, and said it's an industry-wide problem, and not a TPH problem as the “industry is selling at half of what it should be.”

The homebuilder executive said that there is significant pent-up demand in the housing market, with potential buyers waiting to enter. “If these rapid rate increases settle down, and there is stability in the mortgage market,” then those would-be buyers would likely become first-time buyers.

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Bauer said that he expects home builders to adjust their pricing to payment: Meaning, homebuilders will likely adjust their prices between 10% and 20% to account for rising rates, making new homes available to consumers at inflation-adjusted prices.

“That’s not bad for the industry, and a company like us [who] is going into the business with very healthy margins.”
To read about the latest developments in the industry, check out Benzinga's real estate home page.


Photo by ungvar on Shutterstock

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