Expert warns mortgage CEOs to watch trends in housing market carefully
The housing market continued to slide despite the healthy overall economy, Caliber Home Loans CEO Sanjiv Das said in a recent article for MarketWatch.
Even with a flourishing economy and a vigorous workforce, applications are still dropping, purchase volume is decreasing, and existing home sales are sinking. Das said the housing market is a crucial forward-looking indicator for the entire US economy.
“Not only mortgage CEOs should be watching these trends carefully,” he said. “If they continue to go in the wrong direction, the housing sector may take the broader US economy with it.”
Das said that there are three factors undermining the housing market despite the robust economic backdrop – and student debt is one of them.
Millennials make up the largest customer base for mortgages. However, approximately 46% of millennials have a student loan balance of at least $25,000 and 49% said this was holding them back from getting a mortgage, according to a survey by the National Association of Realtors.
“When someone has too much student debt, they don’t have the cash to make a down payment on a mortgage, nor may they have the appetite to go further into debt,” Das said. “That the largest group of home buyers is in this tenuous situation creates a significant drag on the mortgage market.”
Student debts are just the start. Low inventory is also causing a drag on the market. An average shortfall of 370,000 units drove home prices up. This increase in home prices, in turn, turned potential buyers off.
“Moreover, because of the surge in prices, home purchase sentiment has fallen. There has been a 12% decrease in Fannie Mae’s sentiment index, meaning that homebuyers aren’t as keen on purchasing a home,” Das said.
In addition, recent rate hikes have made financing harder for most Americans.
“Now financing has become more expensive, and homebuyers are highly attuned to the increase in their payment amounts,” said Das.
