The Housing Market Just Sent A MAJOR WARNING...

New home sales just shocked Wall Street.

Today the Census Bureau releases May new home sales -- and the trend heading into that number is already down 11.3% year-over-year. But nobody is connecting that data to Bank of America's call for three Fed rate hikes by December -- which could push 30-year mortgages back toward 8%. By the end of this video you will understand exactly what three hikes does to the housing math -- and why the largest store of wealth for most American families has not finished repricing.

In this episode of Wall Street Truth Bombs, we break down:

✅ The housing market's massive miss
✅ Why affordability is collapsing
✅ The lock-in effect strangling supply
✅ What higher mortgage rates mean for buyers
✅ The two scenarios investors should watch next

Housing may not be healing. It may simply be running out of buyers.

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Truthbombs videos are for informational and entertainment purposes only. The views expressed by Mark Malek or guests are their own and do not necessarily reflect those of Siebert Financial. These videos do  not constitute investment advice, an offer to sell, or a solicitation to buy any securities. Past performance is not indicative of future results. Listeners and viewers should consult a qualified financial professional before making any investment decisions.

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Transcript

SPEAKER_00 0:00

May new home sales just dropped 7.3%. Wall Street expected a gain of 3.2%. That is a 10.5 percentage point miss. And Bank of America is now calling for three more rate hikes this year. Do the math because the housing market just did it for you. By the end of this video, you're going to understand exactly what the most recent new home sales number is, not a one-month blip, why the housing market was already cracking before any hikes actually landed. And what happens to the mortgage math if Bank of America is right about where rates are going right now. Here's what the headlines are going to tell us this morning. May new home sales came in disappointing. The market had penciled in a bounce, a modest 3.2% gain after April's reading. Instead, we got a drop of 7.3% annualized. That is approximately 577,000 units. The financial media is already calling it a soft patch, one-month anomaly, a data point that will mean revert next month. Nothing to see here. That's the surface story. Here is the problem with that framing. May's number didn't come in slightly below expectations. It came in a full 10.5 percentage points below where Wall Street expected it to be. That is not a miss. That is a collapse and a number that was already weak. April's reading was 622,000 units, and that was already down from the prior month. We're not bouncing, we are sliding. And here's the part that nobody's saying out loud just yet. The market expects to bounce because that's historically what happens after a down month in housing. It's a very bouncy number. The seasonal pattern, the spring spelling selling season, all of that pointed to a recovery in May. Instead, buyer stayed home. And that tells you something critical about where confidence is right now. Let me show you what is actually happening underneath this number because the headline is just the entry point. The 30-year fixed mortgage rate now, right now, is hovering around 6.68%. At that rate, on a $400,000 home with a 10% down, your principal and interest payment is approximately $2,327 per month. That is before taxes, insurance, or HOA fees. That's the number that's killing demand, not prices, rates. And then there is Bank of America. Bank of America published a research note this week calling for three additional rate hikes from the Federal Reserve: September, October, and December, taking the Fed funds rate to a target range of 4.25% to 4.5%. Now, the Fed does not set mortgage rates directly, but mortgage rates move with Treasury yields, and Treasury yields move with Fed expectations. If Bank of America is right, a 30-year mortgage moving back towards 7.5 to 8%, it's not a stretch. At 8%, that same $400,000 home now costs you approximately $2,642 per month. That is $315 more per month, $3,780 more per year on the same house at the same price, just at a higher rate. And that doesn't account for the price erosion that typically follows when buyers pull back and sellers eventually blink. Here's the shadow data that does not make the headlines. You know, I love the shadow data. As of last month, the US personal savings rate is sitting at approximately 2.6%. That is near multi-decade lows. Credit card delinquencies are at 15-year highs. The consumer who is going to buy that home, who is waiting for rates to come down, is now being squeezed from both sides. Their savings cushion is thinner than it has been in a generation. And the rate environment is threatening to get even worse, not better. If you've been following this channel for a while, you know that I don't ring alarm bells for sport. So when I tell you that the combination of data points coming into focus right now is historically significant, I want you to click that subscribe button and stay close to this channel because what happens next in housing is going to matter to every single homeowner, every renter, and every portfolio in this country. Let me tell you what that actually means because this is where the story gets real. The housing market has a structural problem that read that predates the number that we got this week. It's called the lock-in effect. Approximately 85% of existing homeowners with a mortgage are sitting on rates below 5%. They're not selling. They would be giving up a 3% mortgage for a 6.68% one. So the supply of existing homes stays pretty tight, which keeps prices elevated, which means new home builders are the only real game in town for buyers who actually need to move. And now those buyers aren't showing up. 577,000 units annualized. That is the main new home sales number. Here is the context. In the pre-pandemic baseline of 2019, new home sales were running around 680,000 to 700,000 units annualized. We're now running roughly 15 to 17% below that baseline in a market where existing home supply is also severely constrained. Housing activity is not in a soft patch, it is in a structural contraction. Here's where I want you to really focus because the next six months breaks into two very different scenarios. Scenario one, Bank of America is right. The Fed hikes three more times, mortgage rates move towards 7.5 to 8%. May's number, which already shocked to the downside by 10.5 percentage points, starts to look like the high watermark for 2026. Builders, slow starts, prices come under pressure. The wealth effect, which has been one of the few remaining pillars holding consumer confidence together, starts to erode. Think about what that means for a consumer who's already running on a 2.6% savings rate and a maxed-out credit card. Now, scenario two: the Fed does not hike. Bank of America is wrong. Maybe inflation cools faster than expected. Maybe the labor market cracks first. Maybe May new home sales is itself the signal that changes the calculus at the FOMC. In that scenario, rates stabilize, possibly decline, and housing finds a floor. That's the bull case, and it's possible. But here's the honest read of where we are right now. The data that we got this week is not pointing toward scenario two. The data that we got is the housing market sending a very clear message about how much pain the current rate environment is already causing before a single additional hike has even landed. I want to leave you with something that puts all of this in perspective. The Federal Reserve and the financial media have spent the last year talking about the resilience of the American housing market. And in one sense, the resilience was real. People found ways to cope. They pulled from savings, they ran up credit cards, builders offered rate buy downs. The market adapted, but May new home sales down 7.3% against an expected gain of 3.2% is not resilience. It is exhaustion. And the market's telling you in the clearest language possible that affordability has hit a wall. And if Bank America's three hike calls is right, that wall is about to get a lot taller. So your truth bomb for today is this the housing market was not healing, it was waiting. And May 7.3% drop against 3.2% expected gain. Is the market finally being honest about what three years of elevated rates have done to one asset most American families cannot live without? Join me every day at Wall Street Truth Bombs. We're drop them right here before the market figures them out.