The world's population has grown to nearly 8 billion today from roughly 2.5 billion in1950, but that growth trend actually looks set to reverse. The growth of the working-age population in the United States will fall considerably over the next few years with Baby Boomers leaving the workforce. Slower growth in the working-age population should mean slower economic growth, but acceleration in labor productivity and/or a sustained increase in labor force participation could offset some of the effects of slower growth in the working-age population.
Why should Orion’s brokers care about trends like this? Jobs and housing drive the economy in the United States. And housing, or the lack thereof given inventory issues, is a concern for our Orion, our brokers, and your clients. Industry sources are telling us that the number of homes for sale keeps creeping up as more homes are listed. Those home sellers are adjusting their price expectations or seeing their homes sit on the market. There could be even more listings coming on the market as mortgage forbearance ends and homeowners with missed payments decide to sell. And despite the uptick in late September and halfway through October, mortgage rates remain near all-time lows.
Who’s buying houses? The National Association of Realtors tell us that buyers between the ages of 22 and 39 (admittedly, a wide swath) accounted for 38 percent of purchase loans in 2020. And nearly a third of that age group who aren’t homeowners are interested in buying. People that age, in general, have good credit and are financially ready to apply for a mortgage. Brokers are reminding clients that down payments can be less than 20 percent. First-time home buyer LTVs hover around 94 percent, protected by private mortgage insurance or government-sponsored MI. And if a borrower doesn’t have the full down payment, Orion offers plenty of down payment assistance programs. And don’t forget to ask your Orion AE about gift funds!
Yes, the downshift in the growth rate of the working-age population will exert headwinds on the long-run potential growth rate of the U.S. economy, and if slow growth does materialize in the coming years, then income will also grow at a subdued pace. That would force political choices about societal priorities as it is difficult to fund different spending categories when economic growth and tax revenues are weak. But we expect strong demand for housing to continue many years into the future as families want and need a place to live, and Orion is here to help you help your clients!