Garnet Capital Advisors Blog

New home sales decreased by more than 11 percent in April, following a three-month rise.

The drop comes at a time of limited inventory and increased real estate prices. Sales of new homes dropped 11.4 percent last month to a seasonally adjusted yearly rate of 569,000, though still 0.5 percent higher than the same time last year. Prior to April, new-home sales had been on the increase for three straight months.

While this decline could be a potential sign of a slowdown in the market, economists are still maintaining a positive view that the reading from this past April is merely a correction from the March cycle high of 642,000, the highest reading since October 2007. 

Still, new home construction has been slow to grow over the majority of the real estate market's five-year recovery period. The construction of new homes decreased for the second consecutive month in April, hitting its lowest point since November 2016.

Every region across the country was hit by last month's drop in new-home sales, most notably in the West which experienced a drop of 26.3 percent, the biggest decline in that region in almost seven years. 

Auto Sales Join the Slowdown Trend

At the same time, auto sales are also down, with the biggest names in the industry reporting declines in April. 

Ford reported a 7.2 percent drop in sales last month, while Nissan's sales dipped by 1.5 percent. Similar stories are being heard from General Motors and Toyota, who have reported auto sale declines of 5.8 percent and 2 percent, respectively. Such numbers are pointing to a slowdown in the demand for cars, trucks, and SUVs after seven consecutive years of steady growth.

According to Kelley Blue Book, 2017 U.S. auto sales will mark the first annual sales decline in eight years, despite automakers offering special deals to remain competitive. The auto industry has experienced a boom over the past few years, with record sales in 2015 and 2016 thanks to an increase in jobs and wages, low fuel prices, and low interest rates.

But industry experts now believe this robust auto sales environment has plateaued.

The biggest names in the auto industry have reported a drop in sales in April after years of booming sales. 

American Consumer Debt is Up

At the same time that the housing market and auto industry has recently seen a slowdown, American household debt has peaked at $12.73 trillion over the first quarter of 2017, according to the Federal Reserve Bank of New York. 

The average mortgage debt is almost $173,000, while the average auto loan is over $30,000. 

The rate of auto-loan delinquencies in the fourth quarter of 2016 spiked to its highest level since Q4 2009 to 1.44 percent. Meanwhile, delinquencies in home loans increased for the first time since 2013 to 4.8 at the end of the fourth quarter in 2016.

What Does This All Mean For Bankers?

With a slowdown in the sale of vehicles and new homes comes an inevitable decline in demand for auto loans and mortgages. At the same time, loan delinquencies are up, putting financial institutions in a position to make some serious decisions about their loan portfolios. 

Wells Fargo, one of the biggest auto lenders in the country, reported a 29 percent drop in its auto loan originations last month for Q1 from the same time last year. The decline marked the biggest for the bank in over five years. Other big names in the banking sector also reported a pullback in auto loans, including the likes of J.P. Morgan Chase and Ally Financial.

As banks reduce their auto loan and home loan portfolios, the need for sound guidance from experienced loan sale advisors has become more important than ever. Garnet Capital has the expertise and partnerships necessary to help holders, sellers and buyers of these loan portfolios. With an optimal balance of risk and reward analysis, Garnet Capital can help lenders optimize their loan portfolios appropriately while remaining in full compliance with industry regulations.

Browse our white papers for more information about our loan sale advisory services.