JOHN CARUSONE – ‘A slowdown in activity’
The national housing market is bleeding jobs, but Connecticut’s cuts seem minor in comparison.
Across three of the market’s sectors – real estate, housing construction and mortgage lending – a total of 21,245 job cuts were announced nationwide for the first quarter of 2007, according to a report by Challenger, Gray & Christmas, a Chicago-based outplacement job consulting firm.
The national first-quarter cuts approach the total for all of 2006 – which was 22,814 – and include 13,958 cuts in housing construction, 1,149 cuts in real estate and 6,138 cuts in mortgage lending, according to the report. Data from Challenger, Gray & Christmas show 900 announced job cuts in Connecticut’s housing market for the first quarter of 2007, versus 250 for all of 2006.
The state’s losses in housing represent about a fourth of all the announced job cuts statewide, which totaled 3,527 for the first quarter of the year, according to the firm.
Of the aforementioned three areas the firm uses as a basis for the housing market, Connecticut’s 2007 losses are happening in mortgage lending.
Data from both the state Department of Labor and Waltham, Mass.-based economic forecasting firm Global Insight show a 700-job decline from December 2006 through February 2007 in Connecticut’s “finance and insurance” sector. That’s the department’s statistical market segment encompassing the mortgage lending sector referenced by Challenger, Gray & Christmas.
“From the banking industry’s viewpoint, Connecticut has certainly felt a slowdown in activity,” said John Carusone, president of the Bank Analysis Center in Hartford. “But that reduction is less severe than in other parts of the country.”
The finance and insurance sector slipped from 124,000 jobs in December to 123,300 in February, according to the stats. It was during that same period that Middletown-based Mortgage Lenders Network USA began shutting down operations, and ultimately filed for bankruptcy in early February. The company had been building a 305,000-square-foot campus in Wallingford prior to its problems.
The company, which had multiple offices throughout the United States, has reportedly let go 1,700 of its 1,800 employees nationwide.
But unlike the national trend, the state’s labor figures show gains in construction and real estate.
The state’s real estate, rental and leasing sector grew from 20,800 in December to 21,100 in February. The construction sector, which covers all types of construction – including housing – grew from 66,800 to 68,600 during the same period.
A recent report from the National Association of Home Builders suggests that Connecticut is better poised to recover its new housing market than other parts of the country. NAHB economist Robert Denk has forecast the state, coming off a sluggish 2006, will return to healthy growth in new housing in 2007 – largely because the state did not experience the explosive housing growth seen in other parts of the country during 2004 and 2005.
‘A Mixed Bag’
The forecast for mortgage lenders is not as clear.
“I think there’s a challenging market ahead for everybody,” said Michael Savenelli Sr., executive director of the Wallingford-based Connecticut Association of Mortgage Brokers.
“The number 6,000 [mortgage lending jobs lost nationally] doesn’t surprise me,” he said. “The trend has certainly been started with the subprime market going through some changes.”
MLN is one of many subprime lenders to run into trouble. Irvine, Calif.-based New Century Financial Corp. has filed for bankruptcy and reportedly has fired 3,200 employees. Kansas City-based NovaStar Financial has announced its plans to cut 350 jobs and the company is considering putting itself up for sale.
Other subprime lender bankruptcies making the news since December include SouthStar Funding, Ownit Mortgage Solutions, People’s Choice Financial Corp. and ResMae Mortgage Corp.
“That trickles down into the industry on the street – such as the brokers utilizing those services,” Savenelli said.
And subprime lenders are not the only ones running into problems with fiscal solvency. An increasing number of borrowers are experiencing the same dilemma.
A recent report prepared for the Congressional Joint Economic Committee shows the number of subprime mortgages where payments are at least 60 days late has been on the rise. In February 2005, the Connecticut figure was 5.1 percent. It climbed to 7 percent in February 2006 and hit 10.8 percent in February 2007.
The climbing number of foreclosures could scare off a timid home-shopper, Savenelli said, or it could bring out potential buyers looking for bargains.
“I think it’s going to be a mixed bag,” Savenelli said.
Despite the mortgage industry’s current aches and pains, the banks themselves appear to be somewhat shielded.
“Most banks have some level of activity with mortgage originations,” Carusone said. “But the trend in the last decade has been to outsource the mortgage lending activity.”
