Non-bank mortgage jobs are beginning to decline as corporations report layoffs

Employment estimates for non-deposit lenders show a flattening trend through October as news of downsizing at individual companies hit the headlines this week.

According to the Bureau of Labor Statistics, non-bank mortgage estimates showed a small net profit, rising slightly to 391,700 from an upward of 391,300 in the previous month and significantly from 353,500 a year earlier. However, while some companies with cyclical growth prospects, like unqualified mortgage specialist Angel Oak, continue to report expansion, falling profit margins and layoffs at companies like Better and Interfirst suggest that home finance companies are generally seeing pressure on their profits and are therefore planning fewer staff a.

"Cost reduction is becoming a priority again for issuers and providers as we move into 2022," said Chris Whalen, chairman of Whalen Global Advisors, an NMN columnist and former senior managing director of the Kroll Bond Rating Agency, in an email. (Whalen is also an investor in industrial stocks and is short in some of them.)

With a larger number of non-deposit lenders going public during the unprecedented – but now declining – refinancing boom last year, the industry could also come under pressure as it relies in part on a stock market that has been looking less favorably recently, noted Whalen in a recently published report.

"The supply of secondary stocks to all issuers, including (independent mortgage lenders) has basically disappeared in recent months," he said on his blog, The Institutional Risk Analyst.

Overall, mortgage lending is likely to drop about a third from more than $ 3.9 trillion this year to $ 2.6 trillion in 2022, after reaching $ 4 trillion in 2020, according to the Mortgage Bankers Association. Exceeded dollars.

On the plus side, if construction hires remain strong enough, home purchases are well on the way to soaring to $ 1.7 trillion from $ 1.6 trillion next year. The latest figures in this sector, which the BLS releases with less lag than non-bank mortgage estimates, suggest it is accelerating. The month-on-month increase in housing employment was 0.46% in November, compared with a month-on-month increase of 0.12% in October and 0.32% in September.

"Builders are faced with headwinds on the supply side that make construction more difficult and costly," said Deputy First American Chief Economist Odeta Kushi in an email. “Skilled labor shortages are one of those headwinds, so today's report, which shows growth in both residential and non-residential construction, is welcome news for this labor-intensive industry and for a housing market in dire need of more supply. ”

The number of jobs in construction is expected to continue to grow to keep pace with consumer demand. This suggests that the seasonally adjusted annual rate of housing starts could rise from 1.58 million to 1.64 million over the next year, largely due to single-family homes, according to the MBA. Starts in this component of the market are well on the way to explaining much of this growth as they climb from 1.1 million to 1.2 million.

"More workers are needed to support the surge in housing construction that MBA predicts in 2022," MBA chief economist Mike Fratantoni said in an email.

Although hiring numbers were generally weaker than expected in November when variants fueled coronavirus concerns, Fratantoni assessed the long-term employment outlook as generally positive.

“The headline profit growth of 210,000 non-agricultural jobs in November was less than expected. However, as has been done several times this year, there are reasons to believe that this underestimates the improvement, ”he said. "Compared to last November, almost 6 million more people are employed."

The unemployment rate across all sectors fell in November compared to the previous month by 0.4 percentage points to 4.2%. Although this can be overstated by up to 0.1 percentage points due to a misclassification error that has been in place since March 2020 and is still above the unusually low pre-pandemic level of around 3.5%, Fratantoni noted that this is also generally good for attitude and consumer demand bodes well for housing.

“The sharp decline in the unemployment rate to 4.2%, the increase in the employment rate and the increase in the average hourly wage by almost 5% compared to the previous year illustrate the growing labor market. Coupled with the still high number of job vacancies, this suggests that the economy is approaching full employment, ”he said.

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