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…
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.
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.
About The Author
David Lykken has garnered a national reputation as a visionary, entrepreneur and business leader within the mortgage industry. He has also become a regular guest on the FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman, Dave Asman and others. He has been a special guest of Governor Mike Huckabee on FOX News’ #1 weekend rated program “Huckabee”. He has appeared several times on the CBS Evening News, Bloomberg TV & radio, NPR and many radio shows. On matters related to the economy, housing and mortgage lending, David is frequently quoted in leading newspapers across the country as well as the Wall Street Journal and the New York Post. Additionally, David has his own national weekly radio program called “Lykken On Lending” that can be heard each Monday at Noon Central time by going to www.LykkenOnLending.com .
As co-founder and Managing Partner of KLS Consulting doing business as Mortgage Banking Solutions, David Lykken has over 37 years of management experience as an owner/operator with in depth expertise in real estate finance and housing. His knowledge and skills comprise a unique blend of technology and business strategy. Above all else, David loves helping business owners and executives navigate through extremely difficult business circumstances helping them overcome seemingly insurmountable obstacles while rediscovering themselves and their passion for life and living.
Dave is married, has two daughters and currently resides in the beautiful Hill Country of Central Texas near Austin, Texas. David received a bachelor’s degree in 1973 year from Pacific Lutheran University in Tacoma, Washington.