CUs Impacted by Consumers Deferring Purchases

Consumers have the means and the desire, but shortages of cars and homes are leading more of them to delay purchases, according to reports Wednesday.

As go sales, lending closely follows. Car loans and first mortgages accounted for 77% of loans on the books at credit unions on July 31, according to CUNA. While first mortgages and used car balances have grown in the past year, new car balances were down.

The National Association of Realtors (NAR) reported that sales of new homes fell 2% from July to August to a seasonally adjusted annual rate (SAAR) of 5.88 million homes.

NAFCU chief economist Curt Long said NAR’s report shows low supply and high prices are continuing to weigh heavily on the market.

“The heightened competition for limited inventory is likely keeping some discouraged buyers on the sidelines,” he said.

Cox Automotive reported Wednesday that 48% of those in the hunt for a new car said they are “extremely likely” or “very likely” to delay their purchase due to the chip shortage. Among these postponers, 80% said they are willing to wait three months or longer to buy, up from 71% in a similar survey in April.

“The lack of supply in the new market is also affecting the used market,” Cox Automotive Senior Economist Charlie Chesbrough said in another report released Tuesday.

“Used sales have slowed in recent weeks due in large part to the lack of supply in the new market,” Chesbrough said. “Prospective buyers unable to purchase a new vehicle and not trading in their existing vehicle limits the availability of used products at dealers.”

New car loans accounted for 11% of credit union portfolios in July, while used cars accounted for 21%. New car loans fell 2.1% in the 12 months ending July 31, while used car loans were up 6.4%.

The average list price for used vehicles hit a record $25,829 at the end of August — up 24% from August 2020 and up 34% from August 2019. Used-vehicle supply at the end of August was up 4% from the end of August 2020 but 17% below 2019.

First mortgages made up 45% of credit union portfolios in July. They’re up 8% from a year earlier, but much of the increase has been fed from a surge in refinancing.

NAR reported that sales declines for existing homes occurred in each of the four major U.S. regions both from July to August and from August 2020.

The July-to-August fall nationwide followed two months of increases. August sales were also 1.5% below those of a year ago.

“Sales slipped a bit in August as prices rose nationwide,” NAR chief economist Lawrence Yun said. “Although there was a decline in home purchases, potential buyers are out and about searching, but much more measured about their financial limits, and simply waiting for more inventory.”

The inventory of unsold homes decreased 1.5% to 1.29 million from July to August – the equivalent of 2.6 months of the monthly sales pace, and down 13.4% from a year earlier.

The median existing-home price in August was $356,700, up 14.9% from August 2020 ($310,400),

Long of NAFCU said some relief is coming from new construction. He cited a Census Bureau report Tuesday that showed building permits rose 6% and housing starts rose 3.9% from July to August on a seasonally adjusted, annualized basis, while housing completions fell 4.5%.

“Until they can catch up, homebuilders will limit their sales as they battle labor and material shortages,” Long said. “There are no concerns on the demand side as mortgage rates remain low and the job market is still improving. NAFCU expects sales to remain steady until new supply comes online.”

First-time buyers accounted for 29% of sales in August, down from 30% in July and 33% in August 2020.

Mike Fratantoni, chief economist for the Mortgage Bankers Association, said the decline in first-time home buyers highlights “the inventory shortages and fast-rising home prices that continue to challenge prospective buyers.”

While inventory is down now, Fratantoni said more than 700,000 homes are under construction.

“Fortunately, new inventory is on the way,” he said.