US Housing Finance Recovery: What’s the magic behind it?

The trillion-dollar US housing finance industry was apprehending a low growth rate for many years. With recession having hit in 2008, the industry was facing a dull future market and sluggish growth at best. However, with Mortgage Bankers Association’s (MBA) Chief Economist Michael Fratantoni recently revealing optimism, the housing finance industry is expecting a staggering 13% growth in home sales in 2016. This follows a reported 3.4% rise in home sales in 2014-15.

US housing industry

The grueling years

Unlike the usual statistical low expected to precede a bull market, 2008 was weighed down by apprehensions and a deluge of emotional lows. Moreover, low public confidence in the housing finance industry was expected to keep things dull for a while. As a result, the consumer lending industry for housing was left with very little to be optimistic about.

Market opinions

It’s interesting to note how a little change in optimism can trigger market indices to behave favorably. When it comes to opinions taking effect, credible industry experts voicing their opinions play a significant role in the market. One might argue that they are the only factors, especially in the age of television and online news.

Fratantoni blamed the low number of first-time homebuyers primarily on the lingering credit crunch. Besides that, his arguments for a steady future of the overall industry seemed strongly grounded in recently observed upturns.

Complex buyer behavior

Buyer behavior changes constantly. It is for no one to predict what people on the fine line are going to do exactly. Even more difficult is predicting how many of them will do what they’ll do!

It is true that housing indicated an upturn in 2010-11, but it was at the mercy of moneyed investors. Capital expenditure was the only source of hope in a market riddled into stagnation.

However, unlike first-time home buyers, big borrowers are actually causing an upturn in the housing-finance stocks. Besides that, the 3.4% increase in housing sales last year has been a cause for interest.

Analytics of interest

It’s time to ask what allows an expert economist like Fratantoni to opine with confidence. What changes things for real? One should never make the mistake of thinking that mortgage bankers use some math wizardry to come up with believable figures on television news. It’s not just to make the markets work in their favor. Besides, it doesn’t work for long.

Mortgage software systems can use metrics and do as programmed. Quite plausibly, mortgage bankers used in-built customizations in their software to understand what particular segments of the market were going to do in the near future.

Predictive analytics software can use minute details of the market and interpret facts from an overwhelming gamut of behavioral and other data. While even detailed market information seemed to suggest negative or sluggish growth rates for the housing finance industry, what changed opinions was cutting edge analysis. It picked out microscopic details existing in reality.

Predictive analytics has given many housing finance companies the confidence that is shared with stakeholders and other investors. While the stocks look good, the industry seems to have gathered momentum with fantastic confidence. Unemployment in the sector is likely to dip below 5% by the middle of 2016.

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