For mortgage professionals, it is crucial to keep track of recent data related to the housing and mortgage industries, and economics in general. However, sorting through the mountain of news on these topics can be quite overwhelming and fitting it into your daily routine nearly impossible.
To keep our partners informed, we invited Rick Sharga, President and CEO of CJ Patrick Company, to our Mortgage Insights episode. He talks with Jerry Byers, Senior Content Manager at AD Mortgage, about what brokers should watch out for and how to use market data in client conversations, emails, and social media.
Local Market vs National Trends
Large media outlets mostly cover global tendencies, which cannot be applied to local markets. Rick shares an example:
‘Home prices in the Northeast and Midwest are still going up 3%-6% year-over-year. If you look at the South to Southeast, parts of the Pacific Coast and the Pacific Northwest, there are markets where the prices are declining on a year-over-year basis.
The national average of about 1.2% year-over-year increase is nice to know, but it is relatively meaningless depending on your local market.’
We understand the struggle and are working on covering local tendencies as well as national trends. Read our latest guide on Nevada’s housing market.
Three Factors Brokers Should Look at
Whether you are focusing on a local market or exploring national trends, you should not get distracted by loud headlines and excessive metrics. Rick suggests concentrating on three parameters:
- Home Sales Volume
Understand whether market activity is rising or declining in your market. - Pricing Trends
Compare year-over-year pricing data – month-over-month trends are often not representative due to higher short-term volatility and seasonal trends. - Inventory
Check the days of supply in the market, which is calculated by the number of homes for sale divided by sales throughput. Up to four months of supply is considered to be a seller’s market, and, between four and six months, it is shifting toward more neutral territory. Then, more than six months of supply indicates a buyer’s market.
‘Nationally, we are in neutral territory right now. That is a big shift – for the last several years, we have been in one of the strongest seller’s markets in history.’
Pro Tip: If you don’t know where to find the information for your market, look at Zillow Research, Realtor.com, and local realtor association websites. These public sources provide a lot of useful data for free.
Mortgage Rates: What to Keep an Eye on
Changes in mortgage rates can be a good starting point for reaching out to your database. However, obsessing over the Federal Reserve’s activity is not an efficient approach. While the Fed sets the overall lending and credit environment, its rates do not reflect the long-term changes in mortgage rates.
‘There is no direct correlation between the Fed funds rate and mortgage rates. If you want to guess where mortgage rates are going, follow the bond market. Look at 10-year U.S. Treasury yields and add 1.5 or 2 points – that is where mortgage rates historically have fallen.’
During the pandemic, that spread went up to over three points. Recently, it has started narrowing back toward normal levels.
How to Check Local Market Trends
Understanding local tendencies is crucial for mortgage originators to serve their clients effectively and help them make informed decisions. What parameters should brokers pay additional attention to?
‘I focus on three economic-based things in a local market – job growth, population growth, and wage growth. If you are seeing positive trends in all three of those, you are going to have a good housing market.’
Rick mentions several sources for this data:
- U.S. Census Bureau for comprehensive statistics on economic, population, and demographic trends
- Bureau of Labor Statistics for labor economic data on various levels, including metro statistics
- Local business journals for news and local market information
- Local economic development office for latest reports
- Chamber of Commerce for local economy and demography – it can be connected directly or via realtor members
How Brokers Can Use the Data in Their Communications
Knowing statistics and understanding the trends is only one piece of the puzzle. Sharing the information with your customers and showing that you care is what helps you build strong and meaningful relationships.
‘Taking publicly available information and putting it into a social media post or an email that you can blast out to your database positions you as a local market expert. It also keeps you top of mind and gives your database a reason to stay in touch with you.’
Conclusion
Staying informed is key. Subscribe to Rick and AD Mortgage on LinkedIn to get the latest news and trends from the industry.
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