Three Key Indicators That The Industry Is Recovering

As we head into the second quarter of 2015, we are distancing ourselves more and more from the recession. The recovery has been much slower than many of us had anticipated and most of us had hoped. Nevertheless, we are starting to see some improvement–or signs of improvement–in the mortgage industry. And I believe that we will continue to see more improvement throughout the remainder of the year and into next year.

So, on what information do I base my judgments? How can we tell if the industry is improving or if it remains stagnant? What statistics should we be monitoring to determine our progress? Here are three indicators to look out for to determine whether or not the mortgage industry is moving forward…

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First and most importantly, we need to pay attention to income levels. It isn’t just job creation that matters–it’s also what kind of jobs are being created. We need more work that can give people promising careers and prosperous livelihoods. More minimum wage jobs aren’t going to do a great deal for the mortgage industry. We need to see wages increase. We need people to have more legitimate spending power, more liquid assets, and more net worth. Admittedly, this has been a weak point in our economy. Wages seem stuck, and that may account for a large part of the sluggish recovery. But if we can turn that around, we’ll be well on our way to a prosperous industry once again.

A second, albeit a little more unconventional, sign that the industry is on its way to recovery is the number of “quits” occurring in the workforce. The Bureau of Labor Statistics puts out the JOLTS report, which measured job turnover across industries. This would be a good thing to pay attention to. Specifically, the “quits” number helps us understand how confident people are in their careers. The more people quit, the more confident we can assume they are finding another job. The more confident they are in their careers, the more likely they will be to start making bigger investments. Since 2010, the number of quits has been rising sharply. At the same time, the rate of terminations and layoffs has been declining. People are quitting more frequently than they’re being let go–that’s a sure sign of improvement.

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One final thing we’ll need to keep an eye out for is household formation. In the past several years, the rate of household formation has been down. Fewer households are forming, relative to the population growth. More people are living together. There are more multi-family units. Over the last year, we’ve started to see a slight increase. However, most of the new households are moving into renting. Our hope is that these new households will eventually, once the economy improves enough, move into the home ownership arena. The jury is still out as to whether or not this new generation is less interested in home ownership due to a change in culture or simply due to economic uncertainty. But, regardless, we’ll want to pay attention to how new households are taking shape as time goes on.

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