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This Housing Market Catalyst Is Crazy Bullish – And You Probably Missed It

Last Updated September 23, 2020 1:59 PM
Josiah Wilmoth
Last Updated September 23, 2020 1:59 PM
  • A jaw-dropping employment report wasn’t the only fantastic news the housing market got last week.
  • The mortgage industry is hiring aggressively, according to multiple reports.
  • This suggests lenders anticipate that the credit crunch roiling the housing market won’t persist much longer.

The housing market quietly flashed a fiercely bullish signal last week, but I’m guessing you probably missed it.

No, I’m not alluding to Friday’s blowout jobs report .

The fact that the U.S. employment rebound shattered economist estimates by a staggering 10 million jobs  in May is a spectacular indicator for the sustainability of red-hot homebuying demand.

But it won’t mean much if those workers can’t obtain financing when they decide to purchase a home.

That’s why what’s even more bullish than the U.S. economy adding 2.5 million jobs is where tens of thousands of them are concentrated: the mortgage industry.

The Mortgage Industry Is on a Hiring Spree – And That’s Bullish for the Housing Market

housing market
A mortgage sector hiring spree could be a leading indicator that borrowers will soon find it easier to obtain mortgage financing. | Source: gemphoto/Shutterstock.com

Several recent reports reveal that mortgage lenders have gone on a “hiring spree”  to keep pace with snowballing demand, which has virtually recovered to pre-pandemic levels.

According to HousingWire, sector leaders like Quicken Loans, United Shore, and Better.com have not only hired thousands of new employees  since the beginning of the year, but they’ve also continued hiring  throughout the recent economic disruptions.

And they’re not finished.

A quick search for “mortgage loan officer” on digital job board Indeed yields more than 10,000 postings , including more than 2,000 that offer new hires the ability to work remotely.

Why does it matter that lenders are aggressively adding new employees? Because economists have identified a lack of access to financing as one of the chief threats to the housing market.

Available mortgage credit fell off a cliff in March as banks tightened lending standards in response to the uncertain economic climate. By April, it had plunged to its lowest level since 2014 .

available mortgage credit, housing market
A V-shaped recovery in available mortgage credit would go a long way toward vindicating the housing market bulls. | Source: MBA 

So even though homebuying demand appears to be as strong as ever, economists feared that a credit bottleneck would prevent house-hunters – many of whom could have easily obtained financing before the pandemic – from getting a mortgage.

This mortgage sector hiring spree may be a leading indicator that this is about to change. After all, lenders wouldn’t be adding thousands of new employees if they expected business to slow down.

With interest rates holding near all-time lows , lenders anticipate that demand will remain strong. And there are already early indications that credit restrictions are beginning to ease.

United Wholesale Mortgage, the largest wholesale lender in the United States, has just reverted back to its traditional employment verification process . Throughout May, the company had required borrowers to re-verify their employment on the day of closing.

This Is a Welcome Sign for the Entire U.S. Economy

A rebound in available mortgage credit would pay dividends throughout the economy. That’s because the credit crunch has been particularly hard on current homeowners seeking to refinance.

Refinance application volume has declined for seven consecutive weeks , not because consumers don’t want to refinance, but because lenders have grown pickier and pickier when scrutinizing these loan applications.

Borrowers typically refinance for one of two reasons: to take equity out of their home or to reduce their monthly payment by obtaining a lower interest rate.

Either way, homeowners emerge with more cash in their pockets, which should provide a boost to the engine of the U.S. economy: consumer spending .

Unfortunately, the economy has been left without this crucial driver of spending growth at a time when it needs it most .

Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com.