Identifying the factors impacting mortgage market trends in the economy has a lot to do with carefully studying the past. Unless you just came back from a trip to the future in your time-traveling DeLorean, attempting to predict the economy can sometimes feel like reading tea leaves in a sandstorm. However, understanding the economy and where it’s headed isn’t quite so mystical. There’s even a very non-mystical name for it: Market Trend Analysis. Looking to the future is no more complicated than analyzing the past. By understanding how employment numbers, oil prices and the housing market impact the economy, you can become a better resource for your borrowers.
[NOTE: This is an abbreviated version of the Market Trend Analysis webinar I’ll present on April 6, open to the public. This webinar will offer a more up-to-date, in-depth analysis. You’ll also have the opportunity to ask me questions.]
You have to make money to spend money. And since consumer spending is two-thirds of our economy, this whole “making money” business (i.e., employment) has a significant impact on it. Let’s take a look at the numbers:
- 2014 and 2015 were the two best years for job growth since the 1990s
- National unemployment is steadily declining: The jobless rate went from 5.7% in January 2015 to 4.9% in January 2016, the lowest since February 2008
- There are 2.1 million people under long-term unemployment, a decline of 700,000 people since 2015
These statistics are huge indicators that point to a strengthening economy, and economists expect continued growth in 2016.
We all have a personal stake in oil prices. Every day you might take a look at gasoline prices and think to yourself, “Do I fill up today, or will it be cheaper tomorrow?” As good as saving a few bucks can feel, the impact the price of oil has on the US economy is even greater than individual savings. Since mid-2014, the cost of a barrel of oil dropped nearly 70%. If we have the extra money, we’re probably putting it back into the economy, right? Not so fast:
- In the past, foreign oil producers would bear the brunt of low oil costs, but today our savings are coming at the expense of US oil producers — resulting in job losses and declined state revenues
- Fewer active oil rigs leads to reduced services and employment, which begins a domino effect: Fewer workers in the energy industries means they will have less spending money, leading to fewer purchases of housing, merchandise, food consumption, etc.
- Since oil prices have fallen, there have been an estimated 145,000 jobs lost in the US mining industry
The risks of low oil prices are many. However, from MGIC’s perspective, we have not seen any signs of stress in mortgage credit as a result of the decline in oil prices.
If you’re reading this blog, chances are you work in the housing industry, so you’re probably especially eager to learn how housing fits into the big picture. The good news is that housing continues to recover from The Great Recession. However, it hasn’t quite been the economic driver that we’ve experienced in past economic recoveries. Let’s break it down:
- The national median home sale price is around $222,700 as of Q4 2015, a 6.9% increase from $208,400 a year earlier
- There are an estimated 4-6 million homeowners who are in a negative equity position, but many of these loans are still performing
- Due to low interest rates in the past several years, there was a higher demand than usual for refinance mortgages, but these are starting to slow as purchase originations rise
Overall, mortgage performance is improving, with a downward trend of default and foreclosures that are approaching pre-recession levels.
Residential housing should experience a positive year in 2016.
In addition to attending the webinar on April 6, MGIC’s Market Trend Analysis gives you access to all the stats, charts and analytics you could ever need on a regional and state-by-state basis. Our Market Trend Analysis is published quarterly.
Check out MGIC’s recorded webinar on
Market Trend Analysis for a more in-depth look!