The latest monthly payroll estimates show mortgage bankers and third party originators have made a lot of headway in
Roughly 120,000 positions were added as government stimulus drove an unusual boom in business in 2020 after the arrival of the U.S. pandemic in March of that year. Three years later, around 80,000 of those positions have been cut, according to the Bureau of Labor Statistics.
The question now is whether reducing staffing to the level seen that year will be enough. Since monetary policy officials reversed their rate stimulus to slow inflation, putting sustained upward pressure on financing costs, there's uncertainty around how much volume will drop.
Those market conditions are a mixed blessing for home loans, according to Mike Fratantoni, chief economist at the Mortgage Bankers Association.
"A solid job market will provide support to the housing market. However, the inflationary pressures from this strong wage growth will likely prevent the Federal Reserve from cutting rates," he said in an email
And whether people are actually benefiting from higher wages is increasingly dependent on what industry they are in, Fratantoni noted.
"Job growth remains concentrated in just a few sectors, particularly health care and hospitality," he said. "Although we have seen several public layoff announcements, the job growth in these few sectors continues to offset
Overall, the United States added 253,000 jobs in April and unemployment was at a historically low 3.4%, according to the BLS report released Friday. The BLS reports these numbers with less of a lag than nonbank mortgage banker and broker employment estimates.
"The tight job market is partly due to the nearly 5 million Americans who were in the labor force before the pandemic but are no longer seeking employment. The 3.2 million net job additions over the past three years are averaging 1 million job creations per year, which is only about half of the normal annual job creation," noted Lawrence Yun, chief economist of the National Association of Realtors, in a press statement.
When employment increases, housing demand also gains. "Given the many 'help wanted' signs, more jobs will be added in the upcoming months. Should more Americans enter the labor force, an even better outcome can be achieved as more supply will lessen inflationary pressure and lower the mortgage rate," he added.
How much supply is available to meet that demand could depend on what happens to labor in the construction sector, which has experienced some annual gains but also seen some
"While the housing industry, a very interest-rate sensitive sector, has been negatively impacted by the Federal Reserve's monetary tightening, the construction labor market has not experienced a sharp decline," First American Deputy Chief Economist Odeta Kushi said in an email, alluding to monetary policymakers' ongoing short-term rate hikes, the most recent of which was a 25 basis point increase likely to be followed by a pause.
"In the April jobs report, residential building construction employment is up 1.3% year over year, while nonresidential is up by 3.4%. Residential building is up 11% compared with pre-pandemic levels, while nonresidential building is up approximately 0.5%. Both declined modestly on a month-over-month basis," she added.
