Inflation data for Loan Officers...

Rough times for sure with interest rates rising like this and the financial markets unraveling. Clearly, we are living in a time of extraordinary stagflation, and there are no easy or quick solutions to be had.

The good news for Loan Officers is that significant pent-up demand is happening in both the purchase and refinance side of our business. Those who build the right relationships, and who can create efficient staying power will be rewarded in the end.

There's a lot of data being thrown around about inflation right now, but one of the most important data points that's not being discussed a whole lot is household net-worth. There has been an extraordinary rise since COVID, and in large part this is what is driving the demand side of the equation for inflation.

There's been a lot of talk about shocks on the supply side, and those are real, but supply side shocks can be more predictable going forward because efficient markets will find a way forward. Demand dislocation is much different because there's no easy way to suck that much money out of the economy without completely crashing it. How much money am I talking about? Check out this quote below, we are almost $40 trillion higher in household net worth than we were prior to COVID……. you think that might contribute to demand a little bit? 

“On 12/31/19, household and nonprofit organization net worth totaled $116.4 trillion, then quickly sank to $110.3 trillion by 3/31/21 due to the Covid-19 induced stock market decline. Over the next seven quarters, with the government stimulus and a rebounding economy, net worth zoomed to a stratospheric $150.0 trillion in 21Q4. It’s since fallen by $150 billion in 22Q1 and $6.1 trillion in 22Q2 and net worth is now $143.8 trillion.” Source: Elliott Eisenberg, www.econ70.com

One of the reasons inflation is likely to be very sticky is that American consumers are sitting on an absolute mountain of equity and worth, but unfortunately for our society artificially cheap money was unbalanced and disproportionately favored the higher end, those who needed it least. Cheap money in fact is driving in-equity, I think that's becoming clear. Moving back to stable pricing allows our society to get back to what we know is important, but that might take a little bit of time as we work through the huge dislocations.

Why does this matter so much to a Loan Officer? Our industry is only healthy when consumers at the lowest level can enter the housing market. They are our ‘new users’. They will build the future communities, and they are your refinances of tomorrow. What we are going through now will be better for the industry in the long term because we need to get back in balance.

Going forward, my hope is all of us in the TPO community decide on some better long-term concepts.

And hang in there, that pent-up demand is waiting for you on the other side. Cheers world 😊