Economic headlines can feel overwhelming, especially when you're focused on helping borrowers navigate the homebuying process. Yet the data behind those headlines often influences mortgage rates, housing demand, affordability, and borrower confidence long before trends show up in loan pipelines.
For those of us in the industry, understanding key economic indicators is not about becoming an economist. It is about improving conversations with borrowers, being as prepared as possible for market shifts, and making more informed business decisions.
As part of our Understanding the Economics Behind Housing Series, Jeff Bridges, Chief Economist at Enact, helps break down the economic data points that matter most to mortgage professionals and explains why staying informed can provide a competitive advantage.
Economic data is everywhere…
Every day, new reports provide information on inflation, employment, asset prices, construction, mortgage demand, lending conditions and much more. With so much data available, it can be difficult to see how each piece connects to housing market conditions.
Following a focused set of indicators can help mortgage professionals better understand what is driving changes in key variables like rates or sales activity and better distinguish short-term fluctuations from broader market trends.
No single indicator tells the whole story
Housing market conditions reflect numerous forces working simultaneously. Inflation and labor market data shape the outlook for mortgage rates while mortgage rates affect both buyer demand and homeowners’ willingness to sell. Those shifts in demand and supply influence home prices, which – along with mortgage rates – feed back into affordability, demand and sales activity.
Looking at a single report in isolation rarely tells the full story. Understanding a broader set of indicators can help housing professionals better interpret market conditions and identify emerging trends.
Follow these 8 economic indicators to keep you prepared
It’s important to know and leverage sources of data and information to keep you informed about industry changes. Some key sources and examples are listed below (don’t forget to bookmark them!), but this list is not exhaustive by any means.
While no single report predicts the future, these indicators can provide valuable insights into the economy and housing market.
1. Inflation
Over the longer run, the Federal Reserve (the Fed) targets a 2% annual inflation rate as measured by the personal consumption expenditure (PCE) price index. The PCE index takes inputs from source indexes including the consumer price index (CPI) and producer price index (PPI) which are released sooner each month and attract lots of attention from investors and commentators.
Because inflation can be volatile from month-to-month, monetary policymakers at the Fed have to assess whether inflationary pressures are persistent. Persistently elevated inflation can lead the Fed to raise short-term interest rates or to keep short-term rates elevated for longer than they otherwise would. If investors digest new inflation data and decide that the Fed will likely respond by raising the path of short-term rates, longer-term rates will rise even before any rate decisions are actually made.
What to watch: Is inflation consistently cooling, stable, or reaccelerating? Significant changes in the trajectory of inflation are often associated with significant rate changes.
Source(s): U.S. Bureau of Labor Statistics, CPI / Board of Governors of the Federal Reserve System (The Federal Reserve) / U.S. Bureau of Economic Analysis, Core PCE
2. The Employment Situation
This monthly report from the Bureau of Labor Statistics combines results from a survey of businesses and a survey of households to provide a broad snapshot of job growth, unemployment, wage growth, and labor force participation. While healthy labor markets support household income and homebuyer confidence, strong labor market conditions can also make inflation harder to bring down.
A weaker employment report may reduce rate expectations if it suggests the economy is cooling, but it can also make potential buyers less confident about their income or job security. The report is most useful when considered alongside inflation and other labor-market data.
What to watch: Is the labor market gradually cooling, remaining resilient, or deteriorating sharply? The Fed’s dual mandate requires it to pursue maximum employment AND stable prices.
Source(s): U.S. Bureau of Labor Statistics, Employment Situation Report
3. Job Openings and Labor Turnover
The Job Openings and Labor Turnover Survey (JOLTS) provides additional detail on labor market conditions by tracking job openings, hiring, quits and layoffs.
A decline in openings from very high levels may be consistent with a labor market that is gradually cooling – a backdrop that can be constructive for slower inflation and lower interest rates. A sharper decline in hiring or quits or an increase in layoffs could be more concerning for household confidence and housing demand.
What to watch: Taken together with the Employment Situation, is anything suggesting that workers are feeling increasingly insecure about their job market prospects?
Source(s): U.S. Bureau of Labor Statistics, JOLTS / U.S. Department of Labor, Weekly Unemployment Claims
4. Mortgage Applications
Mortgage application data provides an early read on borrower responsiveness to changes in the rate environment or in the macroeconomic environment generally.
Weekly data can be noisy, but the trend can show whether borrowers are responding to changes in affordability. If mortgage rates decline but purchase applications remain weak, high home prices, limited inventory, or cautious buyers may still be holding the market back.
What to watch: Are purchase applications improving as affordability improves or is demand still constrained?
Source(s): Mortgage Bankers Association, Weekly Applications Survey
5. Mortgage Rate Lock-In
The interest rate on an existing homeowner’s mortgage can matter as much as the rate available to a new buyer. FHFA’s National Mortgage Database tracks the distribution of rates and other characteristics of outstanding mortgages.
When homeowners have mortgage rates well below current market rates, buying another home can be much more expensive. That discourages listings and limits sale activity even when there are qualified buyers who want to purchase. As the gap between outstanding mortgage rates and current rates narrows, more homeowners may be inclined to move.
What to watch: How large is the gap between the rates on outstanding mortgages and the rates available today?
Source(s): U.S. Federal Housing Finance Agency (FHFA), National Mortgage Database
6. The Balance of Housing Supply and Demand
In thinking about the balance of housing supply and demand, many housing analysts emphasize months supply of housing: the number of months it would take for the inventory of homes to be exhausted in a particular market given the monthly pace of sales.
In markets where supply conditions are restrictive, prospective homebuyers bid against each other for limited inventory, placing upward pressure on home prices and exacerbating affordability challenges.
What to watch: Are more existing homeowners listing their homes, and is total inventory giving buyers more choice?
Source(s): National Association of REALTORS® (NAR), Existing-Home Sales Report and Housing Statistics / Redfin News
7. The Housing Supply Pipeline
While months supply of housing may be a good indicator of supply conditions today, homebuilding is a key determinant of future supply conditions. The Census Bureau provides statistics on privately-owned residential construction at national, state and local levels through the building permits survey.
Building permits are an early signal of future residential construction. Sustained permit issuance suggests builders expect enough housing demand to invest in expanding supply over time.
What to watch: Is new construction likely to add meaningful supply in the markets you serve?
Source(s): U.S. Census Bureau, New Residential Construction
8. Home Prices
National home price indexes provide useful context, but local data are usually much more relevant to a borrower’s decision. The Federal Housing Finance Agency covers home prices for the 100 largest US core-based statistical areas (CBSAs) on a quarterly basis and smaller geographies on an annual basis.
Home price trends affect affordability – particularly for first-time homebuyers who did not benefit from rising home prices – and borrower equity positions. Understanding price movement and underlying drivers of price is critical to evaluating housing market health.
What to watch: How are prices (and affordability) improving or deteriorating in your market?
Source(s): U.S. Federal Housing Finance Agency (FHFA), House Price Index
Use economic indicators to stay ahead of market trends
Monitoring economic indicators can help you:
- Better understand the forces influencing housing demand
- Stay informed about potential market shifts
- Have more confident conversations with borrowers and referral partners
- Anticipate changes that could impact loan volume and business planning
- Connect broader economic trends to local housing market activity
The goal is not to predict every market move. It is to build a stronger understanding of the factors shaping the housing landscape and the borrowers you serve.
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Go beyond with Enact
Continue the Series
This article kicks off our Understanding the Economics Behind Housing Series with Jeff Bridges. In upcoming articles, we'll take a deeper dive into the economic trends driving affordability, home prices, mortgage rates, and buyer demand. Drawing on insights from our Chief Economist, each article translates complex economic data into practical knowledge for housing and mortgage professionals. Cut through the noise and get clear, practical insights from an economic expert.
We also offer a suite of tools: including Rate Express®, Underwriting Resources, and other training resources to further help you along the mortgage origination journey.
Source: Jeff Bridges is the Chief Economist at Enact Mortgage Insurance who is responsible for macroeconomic and housing market forecasts and analysis. His areas of specialization include macroeconomic theory, financial economics, and industrial organization.
The statements in this article are solely the opinions of Jeff Bridges and do not necessarily reflect the views of Enact or its management. Opinions expressed are for educational purposes only. Always review sources, data, and guidance you come across and consult your legal advisors when appropriate.
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