By David Lykken
Special to MPA
When we consider the state of the economy, we often make a grave mistake. We either assume the economy, as a whole, is either doing poorly or doing well. The reality is, however, that some parts of the economy might be doing well while others are doing poorly. Specifically in the mortgage industry, we are in such a situation right now.
At the high end of the market, the top 15% of home values, there is tremendous growth. Spending is growing steadily on homes with a loan balance of over $400 thousand. However, for the remaining 85% of the market, growth is extremely slow. First time home buyers, many of them recent college graduates struggling to find work, are not currently buying at quite the same rate as they have in the past.
What does this economic data mean for lenders? Mostly, it's a sign that we need to be careful about judging the entire market by the data on a select few. Just because people on the high end are spending more, that doesn't mean that first time homebuyers are going be looking for loans.
Based on the current data, people are going to be buying their first homes at later times than they have in the past--possibly leading to fewer home purchases throughout their lifespans. Of course, we hope this trend gets turned around and the economy improves. But, it's important to see the data for what it is. Seeing "where" the economy is growing can be just as important as seeing "how" the economy is growing.
David Lykken is 40-year industry veteran who has been an owner operator of three mortgage banking companies and a software company. As co-founder and Managing Partner of Mortgage Banking Solutions, David consults on virtually all aspects of mortgage banking with special emphasis executive leadership development, corporate strategic direction and implementation as well as mergers & acquisitions. A regular contributor on CNBC and Fox Business News, David also hosts a successful weekly radio program called “Lykken On Lending” (www.LykkenOnLending.com) that is heard each Monday at noon (Central Standard Time) by thousands of mortgage professionals. Recently he started producing a 1-minute video called “Today’s Mortgage Minute” that appears on hundreds of television, radio and newspaper websites daily across America.