Nonbank mortgage firms slash jobs as rates, home prices skyrocket

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WASHINGTON — Employment in the nonbank mortgage lender and brokerage sector is falling in the face of rising interest rates and the limited supply of homes for sale.

Nondepository lenders and mortgage brokers cut 3,900 jobs in January, bringing total employment to an estimated 337,200, the Bureau of Labor Statistics reported. The estimates for December employment were also revised down by 400 jobs.

The drop in hiring may be seasonal. However, since the first week in January, mortgage rates have jumped 45 basis points to 4.4% by mid-February — the highest level since April 2014, according to Freddie Mac.

"Total existing homes sales fell in January for the second consecutive month," and "mortgage demand sputtered to a two-month low" in mid-February, according to a Feb. 23 report by Fannie Mae economists Frank Shaw and Rebecca Meeker.

While the industry-specific BLS estimates have a one-month lag compared to the national employment data, more recent results indicate a rough road ahead for the originations sector.

The 30-year fixed-rate mortgage averaged 4.46%, the highest level in four years, according to the latest Freddie Mac data. Mortgage rates have risen every week for more than two months, pushing home affordability to its lowest level since in 2009 and cutting the potential refinance market by 40%. This week, lender Guaranteed Rate cut 180 jobs from its 3,600 headcount.

Economists at the Mortgage Bankers Association expect a "continuing slowdown in refinance originations, which are forecast to drop to $426 billion" [in 2018] billion from $600 billion in 2017," according to a Jan. 21 Forecast Commentary by Joel Kan.

But Friday's jobs report shows strong hiring in the construction trades and other sectors of the economy.

The Bureau of Labor Statistics reported employers added 313,000 new workers to their payrolls in February, up from 239,000 in January, while the unemployment remained unchanged at 4.1%.

"The strong job growth assures at least three interest rates hikes by the Federal Reserve in 2018," NAR Chief Economist Lawrence Yun said in a statement issued Friday morning.

Meanwhile, a shortage of construction workers has been crimping housing production. Friday's jobs data showed 61,000 construction workers were hired in February and 185,000 over the past four months. And half of the new hires were employed by residential construction firms, according to BLS acting commissioner William Wiatrowski.

However, the housing market remains hampered by the lack of supply of new homes for sale and rent.

"We are actually producing much less net new housing than the rate of net new household formation," according to Laurie Goodman, co-director, Housing Finance Policy Center, Urban Institute.

In 2017, the new construction of single-family, multifamily and manufactured homes totaled 1.22 million, while net new household formation was 1.15 million.

However, when obsolete housing stock that is no long livable is taken in into account, "there is a 350,000 gap between supply of housing and net new household formation," Goodman said at a National Association of Business Economists conference in Washington Feb. 27.

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Employment data Nonbank Mortgage brokers Purchase Housing inventory Mortgage rates Bureau of Labor Statistics