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WWW.IBISWORLD.COM Loan Brokers in the US May 2019 1

IBISWorld Industry Report 52231Loan Brokers in the USMay 2019 Nick Masters

On the money: Rising interest rates and competition will slow industry growth

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

3 Additional Resources

4 Industry at a Glance

5 Industry Performance5 Executive Summary

5 Key External Drivers

7 Current Performance

10 Industry Outlook

12 Industry Life Cycle

14 Products and Markets14 Supply Chain

14 Products and Services

15 Demand Determinants

16 Major Markets

17 International Trade

18 Business Locations

20 Competitive Landscape20 Market Share Concentration

20 Key Success Factors

20 Cost Structure Benchmarks

22 Basis of Competition

23 Barriers to Entry

23 Industry Globalization

24 Major Companies24 LendingTree Inc.

25 HomeServices of America

26 Operating Conditions26 Capital Intensity

27 Technology and Systems

27 Revenue Volatility

28 Regulation and Policy

29 Industry Assistance

30 Key Statistics30 Industry Data

30 Annual Change

30 Key Ratios

31 Industry Financial Ratios

32 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]

This report was provided toSeattle Pacific University (2134440152)by IBISWorld on 03 December 2019 in accordance with their license agreement with IBISWorld


This industry is composed of establishments that arrange loans, especially mortgages, by bringing borrowers and lenders together on a commission or fee basis.

The primary activities of this industry are

Brokering residential mortgages

Brokering commercial and industrial mortgages

Brokering home equity loans

Brokering equipment financing arrangements

Brokering vehicle loans

52212 Savings Banks & Thrifts in the USOperators in this industry primarily accept and loan out deposits to provide loans for consumers and businesses.

52213 Credit Unions in the USOperators in this industry are member-owned and provide banking services to these same members.

52219 Industrial Banks in the USOperators in this industry are financial institutions authorized to make consumer and commercial loans and to accept federally insured deposits.

52221 Credit Card Issuing in the USOperators in this industry provide credit through the issuance of credit cards.

52222 Auto Leasing, Loans & Sales Financing in the USOperators in this industry provide sales financing and generate revenue through interest and fees from borrowers.

Industry Definition

Main Activities

Similar Industries

About this Industry

The major products and services in this industry are

Brokering and dealing products

Commercial and industrial mortgages

Home equity loans

Loans to governments

Residential mortgages – multifamily residences

Residential mortgages – one- to four- family residences

Vehicle loans

Other

Provided to: Seattle Pacific University (2134440152) | 03 December 2019


About this Industry

For additional information on this industry

www.mba.org Mortgage Bankers Association

www.namb.org The National Association of Mortgage Brokers

www.hud.gov The US Department of Housing and Urban Development

Additional Resources

IBISWorld writes over 1000 US industry reports, which are updated up to four times a year. To see all reports, go to www.ibisworld.com



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SOURCE: WWW.IBISWORLD.COM

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Revenue Employment

Revenue vs. employment growth

Products and services segmentation (2019)

71.4%Residential mortgages -

one- to four-family residences

0.7%Home equity loans

9.0%Residential mortgages - multifamily residences

0.2%Vehicle loans

0.1%Loans to

governments

7.1%Brokering and dealing products

6.8%Commercial and industrial mortgages

4.7%Other

Key Statistics Snapshot

Industry at a GlanceLoan Brokers in 2019

Industry Structure Life Cycle Stage Mature

Revenue Volatility High

Capital Intensity Low

Industry Assistance Low

Concentration Level Low

Regulation Level Heavy

Technology Change Low

Barriers to Entry Low

Industry Globalization Low

Competition Level High

Revenue

$13.5bnProfit

$2.4bnWages

$4.7bnBusinesses

11,410

Annual Growth 19–24

3.0%Annual Growth 14–19

11.2%

Key External DriversHouse price index30-year conventional mortgage rateExternal competition for the Loan Brokers industryHousing startsPer capita disposable income

Market ShareLendingTree Inc. 7.1%

p. 24

p. 5

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30




Key External Drivers House price indexResidential housing prices heavily influence demand for housing credit. Demand for mortgage brokers increases when home prices rise because purchasing a home is considered to be a good investment and typically requires consumers to take out additional credit. Furthermore, housing prices generally follow cyclical trends, and demand for loan brokers increases with improving

macroeconomic variables. The house price index is expected to increase in 2019, representing a potential opportunity for the industry.

30-year conventional mortgage rateThe 30-year conventional mortgage rate is traditionally the interest rate at which borrowers can receive credit for purchasing a home. When mortgage rates fall, the cost of borrowing declines, thus

Executive Summary The Loan Brokers industry is expected to expand over the five years to 2019 as access to credit and consumer incomes continue to rise. Favorable economic conditions and low interest rates have fueled consumer spending over the past five years, with purchases of homes and cars boosting demand for mortgages and auto loans. As household spending on big-ticket items increases, demand for loan brokering services is forecast to rise. As a result, industry revenue is projected to grow an annualized 11.2% to $13.5 billion over the five years to 2019. However, recent upticks in interest rates are expected to temper

demand for mortgages and auto loans this year; consequently, IBISWorld projects industry revenue to grow only 0.8% in 2019 alone.

Consumer loans activity is primarily dependent on household income levels, corporate profit and housing prices. Over the five years to 2019, household incomes have increased due to declining unemployment and recent tax cuts. Moreover, per capita disposable income and consumer spending levels, both indicative of consumers’ willingness to spend, have been on the rise during the

five-year period. The Loan Brokers industry has been a major beneficiary of strong consumer confidence, as consumer loans represent the largest source of industry revenue. Additionally, the industry has become more profitable as online loan brokering services have gained significant influence. Average industry profit margins, measured as earnings before interest and taxes, are expected to account for 17.7% of industry revenue in 2019, up from 15.4% in 2014.

The Loan Brokers industry is expected to continue expanding over the five years to 2024. Among the most prominent tailwinds affecting the industry is the 2018 passage of the Economic Growth, Regulatory Relief and Consumer Protection Act. This legislation serves to amend previously restrictive mortgage lending practices and is expected to further encourage lending activity in the coming years. However, the industry is expected to endure several headwinds. Over the five years to 2024, interest rates are expected to increase, and as a result, mortgages will become less attractive to consumers. Moreover, external competition from commercial banks is expected to continue, as certain restrictions under the Dodd-Frank Act have been pulled back. Nevertheless, IBISWorld projects industry revenue to increase at an annualized rate of 3.0% to $15.7 billion over the five years to 2024.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

The industry has been a major beneficiary of strong consumer confidence



Industry Performance

Key External Driverscontinued

increasing home purchases and demand for loan brokerage services. The 30-year conventional mortgage rate is expected to decrease in 2019.

External competition for the Loan Brokers industryLoan brokers experience competition from other mortgage brokerage institutions, including commercial banks and some government organizations. These institutions offer a wider range of services and are increasingly attempting to bypass the industry during the mortgage origination process. External competition for the Loan Brokers industry is expected to increase in 2019, posing a potential threat to the industry.

Housing startsThe number of housing starts serves as a measure of the amount of new residential construction in the United States. A larger stock of homes in the United States creates more opportunities for industry operators to provide brokerage services during the mortgage origination process. The number of housing starts is expected to increase in 2019.

Per capita disposable incomePer capita disposable income levels largely determine a household’s ability to repay a loan. Additionally, income levels influence the decision of a household to enter into mortgages or other consumer loans in the first place. Per capita disposable income is expected to increase in 2019.

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Current Performance

The Loan Brokers industry primarily engages in arranging loans between borrowers and lenders. Brokerages serve the needs of both consumers and businesses, with mortgage brokering comprising the majority of industry activity. Historically, the industry has grown in line with the US economy, despite turbulence during the housing crisis of 2008. In more recent years, the Loan Brokers industry has benefited from increased consumer confidence and favorable interest rates. Moreover, increased activity in the housing market has served as clear evidence of rising consumer demand. Over the five years to 2019, these trends are expected to bolster industry revenue. IBISWorld projects industry revenue to increase an annualized 11.2% to $13.5 billion during the five-year period. However, due to rising

interest rates and increasing levels of investor uncertainty, IBISWorld projects the industry’s expansion to slow to meager revenue growth of 0.8% in 2019 alone.

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Consumer confidence Consumer confidence plays a major role in the success of the Loan Brokers industry, as consumers’ perceptions of their wealth and income levels ultimately drive their decisions to make large purchases requiring a loan (i.e. buying a house or a new car). Over the past five years, consumer confidence has increased primarily due to strong growth in corporate profit and capital markets. IBISWorld estimates the Consumer Confidence Index and per capita

disposable income to increase an annualized 7.5% and 2.2%, respectively, over the five years to 2019. These trends have been a boon to the Loan Brokers industry, since loans to consumers account for over 80.0% of industry revenue, with auto loans and mortgages making up the majority of consumer loans. Rising consumer spending has driven up demand for loan broker services, as consumers are gradually committing to larger purchases.

Economic climate In addition to consumer confidence levels, the Loan Brokers industry is reliant upon interest rates and the overall economic climate that influences them. Over the five years to 2019, the Federal Reserve has gradually raised interest rates in response to falling unemployment and rising inflation. Demand for loans is particularly sensitive to interest rates charged by lending institutions, and loan brokers experience decreased demand for their services when the cost of borrowing increases. Nonetheless, interest rates have

remained historically low for a prolonged period of time as the Federal Reserve continues to encourage economic growth. Moreover, rates have stayed relatively consistent with the 30-year conventional mortgage rate, which is expected to remain attractively low at 4.4% in 2019, up slightly from 4.2% in 2014. Low interest rates, combined with falling unemployment and growing capital markets, have set the stage for a thriving housing market and thus strong demand for mortgages.




Housing market Low interest rates and rising consumer incomes have resulted in a burgeoning housing market. Over the five years to 2019, housing starts (or new, privately owned housing units beginning construction) are estimated to increase an annualized 4.9% to 1.3 million units. Growth in the housing market is largely representative of increased demand from US home buyers, with first-time home buyers expected to represent the second-largest market for the Loan Brokers industry. First-time home buyers accounted for 34.0% of all home buyers in 2018 (latest data available) according to the National Association of Realtors. First-time home buyers are also more likely to seek

out loan brokerage services than existing homeowners, as most existing homeowners are more familiar with the loan process and likely already have an established relationship with a lender. Overall, a thriving housing market has led to an increase in demand for loan brokerage services as first-time home buyers have increasingly sought out mortgage options.

Growth in the housing market is largely representative of increased demand

Regulation Financial regulation plays a major role in how the Loan Brokers industry receives compensation for its services. Increased regulation has historically tempered industry revenue, as new regulation imposes greater compliance costs and changes in operations that undercut revenue gains. In January 2013, just prior to the current period, the Consumer Financial Protection Bureau finalized regulations originated by the Federal Reserve Board and the Dodd-Frank Wall Street Reform and Consumer Protection Act that influenced industry revenue significantly. As of January 2014, brokers have no longer been able to receive compensation based on the terms and conditions of a mortgage; mortgage brokers are now only paid by lenders on the basis of the number of loans they

originate and the amount of credit they extend. However, the Economic Growth, Regulatory Relief, and Consumer Protection Act passed in 2018 has largely eased the regulatory landscape pertaining to mortgage lending practices. For example, the legislation amends the mortgage disclosure waiting period required in the Truth in Lending Act (TILA), enabling consumers to take advantage of lower interest rates sooner. Additionally, the act eases TILA’s ability-to-pay restrictions on depository institutions and credit unions, effectively reducing the regulatory costs associated with consumer lending practices for small lenders. Overall, as regulatory compliance costs decline, consumer access to credit will improve and demand for loan brokerage services will increase.

Industry operations The Loan Brokers industry has experienced faltering participation during the five-year period, with its number of establishments and enterprises growing only slightly. This trend can be attributed to a falling

number of nonemployers and the increasing prevalence of online loan brokerage services. Despite recent growth in employer operations, nonemployers have been shutting down their operations in droves, increasingly




unable to endure heightened external competition, severe revenue volatility and burdensome compliance costs. However, a modest increase in employer establishments has helped mitigate the effects of nonemployer exits, as larger enterprises are better positioned to handle such challenges. Overall, IBISWorld estimates industry establishments to increase at a marginal annualized rate of 1.3% to 12,533 locations over the five years to 2019.

Additionally, industry employment and wages have picked up over the past five years. Industry employment is expected to increase an annualized 4.0% to total 49,880 workers. Meanwhile, industry wages are expected to increase an annualized 9.8% over the five years to 2019. These trends are indicative of increased competition, particularly from commercial banks, as industry operators raise wages to further attract and retain broker talent.

Industry operations continued




Industry Outlook

Over the five years to 2024, the Loan Brokers industry is expected to benefit from deregulation and continued growth in the housing market. However, an expected increase in interest rates will slow consumer demand for mortgages and auto loans in the coming years. Moreover, continued competition from commercial banks offering

competitive rates will place pressure on industry profit margins. As a result of these trends, the Loan Brokers industry is expected to grow at a slower rate than in the current five-year period. IBISWorld forecasts industry revenue to increase at an annualized rate of 3.0% to $15.7 billion over the five years to 2024.

Deregulation In 2017, the Trump Administration proposed rollbacks on the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. In May 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act became law, marking the first step toward deregulation since the financial crisis. Deregulation of lenders in the United States will enable lenders to extend loans to less creditworthy applicants. Proposed deregulation will prove beneficial for the Loan Brokers industry as lenders will be able to offer a greater variety of loan products that appeal to a wider range of consumers. An increase in mortgage products, for example, will lead to an increase in

demand for loan brokers as consumers seek the best loans for their needs. Deregulation will also intensify both internal and external competition, as commercial banks will be further incentivized to increase direct-to-consumer lending activity. Nonetheless, the overall effect of financial deregulation is expected to be beneficial for the Loan Brokers industry over the five years to 2024.

Limited recovery Although the housing market is expected to continue growing over the next five years, increasing interest rates and rising home prices will curb overall growth in industry revenue. Over the five years to 2024, the house price index is projected to increase an annualized 2.3%, while the 30-year conventional mortgage rate is expected to increase an annualized 2.2% to a rate of 4.9%. Rising house prices and interest rates will likely deter some consumers. However, overall consumer incomes are also expected to increase over the next five years, albeit at a more modest pace. IBISWorld forecasts per

capita disposable income to rise an annualized 1.5% over the five years to 2024. Consumers are expected to benefit from an overall positive economic outlook, with both corporate profit and consumer spending anticipated to increase in line with housing prices and interest rates.

Although consumer income levels are expected to grow moving forward, consumer confidence is projected to weaken relative to the previous five-year period. Investor uncertainty rose in 2018 and is expected to rise further over the coming years as the interest rate

Although deregulation will intensify competition, it is expected to benefit the industry overall




Limited recoverycontinued

environment shifts. Rising investor uncertainty is attributable to a multitude of factors, with the most prevalent being uncertainty regarding interest rates and financial deregulation. Since interest rates have been historically low for a prolonged period of time, the effects of rising interest rates are drawing uncertainty about the future prospects of

capital markets. In the event that inflation begins to rise quickly, sharp increases in interest rates have the potential to cause a selloff in US stock markets and a decline in consumer confidence. Overall, weaker consumer sentiment will slow demand for industry services as certain households become more risk-averse.

Industry operations Over the five years to 2024, the Loan Brokers industry is expected to experience growth in its numbers of employer establishments, enterprises and employees. However, nonemployer activity will continue to decline, resulting in a distorted overview of the industry’s establishment trend, as nonemployers have historically accounted for less than 3.0% of industry revenue. A prolonged period of industry growth and the Trump administration’s promise of deregulation have recently resulted in new entrants and the expansion of physical operations among larger industry operators, notably

in 2016 and 2017. This trend is expected to continue over the next five years. IBISWorld forecasts industry establishments to increase at an annualized rate of 1.9% to 13,786 locations over the five years to 2024. Meanwhile, industry employment is expected to increase at an annualized rate of 2.8% to 57,306 individuals during the period.

Industry participation is expected to increase



Industry PerformanceOver an extended time frame, industry value added is expected to grow faster than GDP

The number of industry enterprises is expected to rebound over the 10 years to 2024

Enterprises experience increasing competition from other industries, particularly commercial banks

Life Cycle Stage




Industry Life Cycle The Loan Brokers industry is in the mature stage of its economic life cycle. Industry value added (IVA), which measures an industry’s contribution to the overall economy, is expected to increase at an annualized rate of 7.0% over the 10 years to 2024. In contrast, US gross domestic product (GDP) is projected to grow at an annualized rate of 2.2% during the same period. While IVA is actually growing faster than GDP during the 10-year period, this growth rate is likely overstated due to the industry’s low base in 2014.

The Loan Brokers industry is characterized by standardized product offerings and increasing levels of internal and external competition. Although the industry has contended with stringent regulation for the majority of the 10-year period, the core services provided to consumers have remained relatively unchanged. Moreover, the industry’s

essential role in the financial services sector has resulted in wholehearted market acceptance of industry services and thereby little product innovation or technological change.

The industry has been increasingly consolidating as industry operators have contended with stringent regulation that has only recently been eased. In particular, increased regulatory scrutiny and external competition has forced nonemployers to exit the industry. Nonemployers have played a large role in the industry’s consolidation as nonemployer establishments have declined substantially during the 10-year period. However, as regulations have eased, the number of industry establishments has grown at a substantial rate in recent years. Overall, IBISWorld estimated industry establishments to increase at an annualized rate of 1.6% to 13,786 establishments over the 10 years to 2024.

This industry is Mature



Products and Services

The bulk of revenue for the Loan Brokers industry is created through the arrangement of loans; industry operators bring borrowers and lenders together and extract a commission or fee for their services. Effectively, loan brokers act as liaisons between the two parties, helping to secure the best products for their clients, while simultaneously streamlining the lending process. While loan brokers are used in the origination

of many different products, they generate the majority of their revenue from residential loan transactions.

Residential mortgagesIn 2019, fees or commissions from residential loan transactions are anticipated to account for 80.4% of industry revenue. Prospective home buyers use mortgage brokers for a variety of reasons, as residential loan brokers

Products & MarketsSupply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

31-33 Manufacturing in the US Domestic manufacturers use industry operators to obtain the best financing rates for facilities and equipment purchases.

99 Consumers in the US Consumers represent the largest market for industry operators. Brokers generate fees through consumer demand for residential mortgages, home equity loans and other lines of credit.

KEY SELLING INDUSTRIES

52211 Commercial Banking in the US Commercial banks provide mortgage products to consumers and businesses. However, commercial banks have increasingly bypassed brokers in the mortgage origination process.

52212 Savings Banks & Thrifts in the US Savings banks and thrifts provide mortgages and other lending through deposits collected from consumers.

52219 Industrial Banks in the US Industrial banks provide secured and unsecured loans to financial businesses, non-financial businesses and consumers.

Supply Chain

Products and services segmentation (2019)

Total $13.5bn

71.4%Residential mortgages -

one- to four-family residences

0.7%Home equity loans

9.0%Residential mortgages - multifamily residences

0.2%Vehicle loans

0.1%Loans to governments

7.1%Brokering and dealing products

6.8%Commercial and

industrial mortgages4.7%Other




Products & Markets

Demand Determinants

Various macroeconomic variables influence industry demand, including interest rates, housing prices and consumer and business confidence indices that determine aggregate demand

for credit. Taken independently of other factors, interest rates are negatively correlated with industry demand; when interest rates rise, less people are likely to borrow. Conversely, when interest rates

Products and Servicescontinued

have access to a variety of interest rates from different lenders. Furthermore, brokers have localized real estate knowledge and professional contacts that are valuable to their clients throughout the duration of the loan process. Overall, general economic conditions, particularly the thriving housing market, primarily explain this segment’s exceptional performance. The residential loan segment as a share of total revenue has remained fairly consistent over the past five years.

Commercial and industrial mortgages and other business loansSimilar to consumers, a wide range of businesses rely on industry operators to obtain the best financing rates for mortgages on new facilities. Particularly when business owners enter an unfamiliar geographic environment, brokers can provide localized real estate knowledge and access to an array of loan products. Moreover, industry operators generate fees or commissions by bringing businesses and lenders together for equipment financing transactions. Due to improving corporate profit, commercial and industrial mortgages are anticipated to generate a growing share of revenue for industry operators over the five years to 2024; however, fees from residential loans are anticipated to continue to dominate the industry. In 2019, commercial and industrial mortgages are expected to account for 6.8% of industry revenue.

Home equity loans and refinancingA home equity line of credit (HELOC) is a loan that uses the equity in a borrower’s

home as collateral. The interest rate for a HELOC is variable and typically based on the prime rate; this represents a crucial difference from conventional loans. Coupled with low interest rates, HELOCs can be used to fund large personal purchases or expenses, including vehicles, vacations, college tuition and home improvements. Largely due to more-stringent lending standards and a sharp fall in consumer appetite for debt, home equity loans have declined substantially as a share of revenue during the five-year period. Fees from home equity loans are anticipated to account for just 0.7% of industry revenue in 2019. Many industry operators are also involved in the refinancing process. The Federal Reserve kept the federal funds rate (FFR) at the zero lower bound until December 2015, when the Federal Reserve raised interest rates to a range of 0.25% to 0.5%. Since the FFR influences mortgage rates, the 30-year conventional mortgage rate has been low and consistent throughout the five-year period, though increasing slightly since 2015. Yet, the appetite for credit among consumers has increased as consumer incomes have risen.

OtherOther industry products include various forms of consumer credit and financial products. For example, vehicle loans are anticipated to account for 0.2% of industry revenue. Vehicle loans’ share of industry revenue has increased over the five years to 2019 due largely to robust new car sales during the former half of the five-year period.



Products & Markets

Major Markets

In 2019, homebuyers are anticipated to account for 81.3% of industry revenue. Consumers are broken down into first-time home buyers, existing homeowners and consumers that demand products other than residential mortgages. Businesses and governments represent the remaining markets for the Loan Brokers industry.

HomebuyersIndustry revenue from first-time home buyers has exhibited sporadic growth due in part to changes in real estate markets and mortgage rates. Additionally, homebuyers have benefited from mortgage brokers extensively because they

rely on the expertise of industry operators to guide them through the residential loan process. The share of home purchases by first-time buyers has increased to an estimated 35.0% in 2019. Consumers who have previously made home purchases are anticipated to account for the remaining 65.0% of residential property purchases in 2019. Some consumers in this segment have chosen to capitalize on low interest rates by trading up to more-expensive property. Conversely, a greater share of the population moving to city centers and the aging domestic population have caused other consumers in this segment to trade down to smaller homes that carry

Demand Determinantscontinued

fall, there is a greater incentive to originate a loan or refinance. However, the Federal Reserve generally lowers interest rates during economic downturns, so lower interest rates do not always result in increased lending activity; the most recent recession serves as an example of this possibility.

A booming housing market more clearly benefits industry operators. Since an estimated 80.4% of industry revenue is driven by fees from residential mortgage transactions, increased housing

starts and home prices translated to growing revenue opportunities for brokers. When home prices increase, the value of loans originated and the quantity of home equity loans both rise. In addition, increases in household disposable income, either through an improving job market or declining tax rates, serve to increase demand for credit. Rising disposable income levels provide a boost to consumer sentiment and tend to increase lending for large consumer durable purchases.

Major market segmentation (2019)

Total $13.5bn

52.3%Existing home buyers

28.1%First-time home buyers

12.8%Other

6.8%Businesses




Products & Markets

International Trade Given the service-based nature of the Loan Brokers industry, exports and imports are not applicable. Additionally, industry operators primarily offer products and services at the local or

regional level. However, loan brokers are increasingly subject to both global macroeconomic conditions and external competition from commercial banks that have extensive international activities.

Major Marketscontinued

lower monthly payments. Existing homeowners are anticipated to account for 52.3% of industry revenue in 2019, while first-time home buyers are expected to represent 28.1%.

BusinessesBusinesses are estimated to account for 6.8% of industry revenue in 2019. While this market segment often enters into commercial and industrial loans that are far larger in size than home loans, there are significantly fewer commercial customers that rely on industry operators for loan originations. However, these businesses do benefit from the help of brokers during the process of determining the best loan option for land or building purchases. In addition, businesses turn to loan brokers that have relationships with many equipment financing lenders to minimize interest rate expenses.

Other Although the Loan Brokers industry derives a significant portion of industry revenue from mortgage-lending services, industry operators also offer assistance with vehicle loans, home equity loans and student loans. In particular, loan brokerage services specific to student loans are expected to account for a significantly larger share of industry revenue due to rising demand for student loans over the five years to 2019. However, demand for loan brokerage services relating to auto loans, home equity loans and student loans are expected to remain concomitant to mortgage brokering services over the next five years. Overall, non-mortgage consumer loan brokering services are forecast to account for 12.8% of industry revenue in 2019.



Products & Markets

Business Locations 2019

MO1.1

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT0.1

MA1.7

RI0.4

NJ2.4

DE0.3

NH0.4

CT1.0

MD2.0

DC0.1

1

5

3

7

2

6

4

8 9

Additional States (as marked on map)

AZ2.8

CA29.3

NV1.2

OR2.0

WA2.4

MT0.3

NE0.3

MN1.3

IA0.3

OH1.7 VA

1.9

FL7.9

KS0.4

CO4.3

UT2.4

ID0.5

TX4.5

OK0.4

NC1.8

AK0.1

WY0.2

TN0.8

KY0.7

GA2.9

IL3.3

ME0.3

ND0.1

WI0.7 MI

2.3 PA2.9

WV0.1

SD0.1

NM0.4

AR0.3

MS0.2

AL0.8

SC0.9

LA1.1

HI0.6

IN1.1

NY4.9 5

67

8

321

4

9


Mid- Atlantic

Establishments (%)

Less than 3% 3% to less than 10% 10% to less than 20% 20% or more

Great Lakes



Products & Markets

Business Locations The geographic distribution of industry establishments is largely correlated with increasing home prices and population growth in specific regions. A large percentage of loan brokers are located in the West and Southeast due to the importance of these regions as real estate markets.

WestThe West region accounts for an estimated 35.6% of industry establishments in 2019. California accounts for the vast majority of industry establishments in the West, with 29.3% of total industry establishments residing in the state. Industry operators thrive in states such as California because the high cost of housing causes prospective home buyers to take out larger loans. Sprawling cities with competitive real estate markets, such as Los Angeles and San Diego, further add to the state’s concentration of industry operators.

SoutheastThe Southeast accounts for an estimated 19.5% of all industry establishments in 2019, making it the second-largest in terms of establishment share. Florida is home to an estimated 7.9% of the industry’s establishments; while this is far

behind California’s establishment share, it does represent the second-largest state in terms of total establishments.

Other regions and their shares of establishments include the Mid-Atlantic (12.5%), the Great Lakes (9.1%), the Southwest (8.1%), the Rocky Mountains (7.7%), New England (3.9%) and the Plains (3.6%). These regions’ shares of establishments largely follow the distribution of the population, home prices and housing supply.

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Cost Structure Benchmarks

The cost structure for the Loan Brokers Industry is characterized by high wage costs in addition to high other expenses (usually resulting from transaction fees and one-time expenses). However, the industry’s profitability remains high given the industry’s low fixed and

variable costs as represented by purchases, rent and utilities.

WagesWage costs are anticipated to account for 34.9% of industry revenue in 2019, marking a slight decline from 37.2% in

Key Success Factors Must comply with government regulationsLoan brokers must comply with both state and federal legislation to operate. These regulations include the need to pass licensing exams and criminal background checks and compliance with new compensation restrictions.

Having relationships with lendersMaintaining relationships with lenders can lead to guaranteed sources of revenue and smooth fee and commission fluctuations caused by changes in the housing environment.

Marketing of differentiated productsLoan brokers of all experience levels need to expand their client lists to increase revenue. It is vital for brokers to have strong marketing skills to effectively advertise their business, expertise and services.

Having a good reputationA broker’s reputation is strengthened by the provision of honest and unbiased advice, which motivates satisfied borrowers and lenders to recommend the broker’s services. This has been particularly important since the fallout caused by the subprime crisis.

Possession of localized knowledgeAs most brokers operate on a local or regional basis, it is important for operators to have strong knowledge of the local real estate market and its trends to meet the specific needs of their clients.

Access to a highly skilled workforceIt is important for mortgage brokers to be well versed in multiple types of loans and amortization schedules. Having a formal education in finance, economics, accounting or real estate can give brokers an edge when assisting clients.

Market Share Concentration

The Loan Brokers industry operates with a low level of market share concentration; the top two companies are estimated to account for less than 10.0% of total industry revenue in 2019. The industry is highly fragmented, with an estimated 11,410 enterprises in 2019. Big banks are increasingly excluding brokers from the mortgage origination process; these trends are placing increased pressure on industry operators to consolidate. Larger brokerages can dominate local markets by attracting successful brokers that will

benefit from shared marketing costs and larger client lists. Additionally, given the damage incurred to the industry’s reputation by the subprime mortgage crisis, large and established operators have a competitive advantage with respect to borrower confidence, further explaining the continuing decline of nonemployer enterprises. Furthermore, lenders prefer to deal with larger brokerages, potentially leading to exclusive partnerships between select industry operators and loan providers.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:



Competitive Landscape

Cost Structure Benchmarkscontinued

2014. Since this industry relies on commission and fees, wages are very closely tied to revenue and subject to volatility due to the sales-based nature of industry operations. Increased external competition is expected to make the job market more competitive for brokers; as a result, wages are expected to increase at an annualized rate of 9.8% over the five years to 2019. Industry operators rely extensively on skilled labor for all their product and service offerings.

PurchasesPurchases largely include expenditure on materials and supplies that are necessary for operations. Overall, since the industry is largely service-based, purchase costs have historically accounted for less than 2.0% of industry revenue. In 2019, IBISWorld estimates purchases to account for 1.9% of industry revenue.

ProfitIndustry profit, defined as earnings before interest and taxes, is expected to increase over the five years to 2019. IBISWorld expects industry profit to increase from 15.4% of industry revenue in 2014 to 17.7% of industry revenue in 2019. However, this increase is slightly overstated given the low base year; in 2014, profit declined to its lowed level within the past decade. Overall, industry profit margins are expected to remain within a tight range over the next five years.

DepreciationDepreciation does not represent a significant cost for industry operators. IBISWorld expects depreciation costs to account for 0.6% of industry revenue in 2019, representing little change from 2014 levels.

Sector vs. Industry Costs

n Profi tn Wagesn Purchasesn Depreciationn Marketingn Rent & Utilitiesn Other

Average Costs of all Industries in sector (2019)

Industry Costs (2019)

0

20

40

60

Perc

enta

ge o

f rev

enue

80

100


17.2 17.7

39.9

1.9 3.1 0.61.9

34.9

51.6

1.4 1.51.513.9

12.9




Basis of Competition Internal competitionCompetition within the Loan Brokers industry is high as brokers are reliant upon connections with the top realtors and lenders in the area they serve. Brokers compete on the basis of connections with realtors and lenders, and thereby the multitude of loan options they can offer a client. Moreover, broker experience and expertise are highly sought after given the commission- and fee-based revenue structure of industry operations; as a result, talented brokers are paid competitive wages. Ultimately, internal competition has increased in line with growing downstream demand for industry services over the past five years.

External competitionExternal competition for the industry has increased during the five-year period. Loan brokers now experience increased external competition from commercial banks, quasi-governmental organizations and online operators. Growth in consumer incomes, a thriving housing market and low interest rates have incentivized commercial banks in particular to advertise to consumers directly. Banks bypassing operators in the mortgage origination process represent the largest source of external competition to the Loan Brokers industry. However, loan brokers are responding to this

Cost Structure Benchmarkscontinued

MarketingMarketing costs are anticipated to account for 3.5% of total industry revenue in 2018. Marketing expenditure for industry operators includes the advertisement of loan-broker services and competitive rates. Marketing costs have remained relatively constant during the five-year period.

RentRent costs represent a marginal portion of the industry’s overall cost structure, indicating the high ownership of establishments among industry operators. In 2019, rent is estimated to account for 1.7% of industry revenue, representing no change from 2014 levels.

UtilitiesUtilities do not represent a significant cost for the industry. In turn, utilities costs are estimated to account for 0.2% of industry revenue in 2019.

OtherOther costs include general and administrative expenses, data processing costs and licensing.

Transaction fees are also included in this cost segment. Specifically, transaction fees refer to the investment banking advisory and legal fees associated with mergers and acquisitions. Given the high level of acquisition activity present among some industry operators, transaction costs can commonly represent a significant cost for industry operators. However, transaction costs are typically accounted for as one-time expenses, or dispersed over a short-time period, thus distorting an industry operator’s cost structure. Additionally, the other category also includes fees associated with regulatory advisory and consulting services. Since this industry is subject to a high degree of regulatory oversight (the recent passage of the Economic Growth, Regulatory Relief and Consumer Protection Act notwithstanding), industry operators commonly enlist the services of regulatory compliance consultants to ensure adherence to current regulations. IBISWorld estimates other costs to account for 39.9% of industry revenue in 2019.

Level & Trend Competition in this industry is High and the trend is Increasing




Industry Globalization

The Loan Brokers industry operates with a low level of industry globalization. Operators are primarily domestically owned and offer products and services on a local or regional basis; the industry’s business model is deeply rooted in

relationships with local communities. Additionally, exports and imports are not applicable for the industry. As these trends are anticipated to continue over the five years to 2024, the industry’s level of globalization is expected to remain low.

Barriers to Entry Historically, the industry’s barriers to entry have been low, primarily because of the relatively small amount of capital required to start operating. However, barriers to success have increased during the five-year period primarily due to increased compliance costs under the Dodd-Frank Wall Street Reform and Consumer Protection Act. However, certain regulations have recently been eased with the 2018 implementation of the Economic Growth, Regulatory Relief and Consumer Protection Act. Additionally, the Loan Brokers industry is highly fragmented; most operators are small in size and do not account for a substantial share of the market. Capital requirements generally include some form of office space, computers, phones and other general IT infrastructure.

State licensing requirements represent another barrier to entry for the industry. These requirements have been increasing during the five-year period, largely due to the perception that the industry’s lending practices were predatory prior to the subprime crisis. Licensing requirements differ on a state-by-state basis, but

federal regulation requires licensing exams and criminal background checks to become a mortgage broker in the United States. Licensing requirements can also include fees, net worth requirements, surety bond purchases and the existence of a physical office, among other restrictions. License fees vary but are generally not excessive; for example, in Oregon, the licensing fee for a broker is $960.00. Work experience requirements also vary on a state-by-state basis, as some states do not require previous experience, while others require five or more years of experience in the financial sector.

Basis of Competitioncontinued

competition by emphasizing their local expertise and business connections as a competitive advantage.

Barriers to Entry checklist

Competition HighConcentration LowLife Cycle Stage MatureCapital Intensity LowTechnology Change LowRegulation and Policy HeavyIndustry Assistance Low


Level & Trend Barriers to Entry in this industry are Low and Increasing

Level & Trend Globalization in this industry is Low and the trend is Steady



Player Performance Founded in 1996, LendingTree Inc. (LendingTree) is one of the largest online loan brokers in the United States. The company is headquartered in Charlotte, NC, and employs 909 individuals. LendingTree primarily connects consumers with multiple lenders, banks and credit partners that compete for business by offering competitive rates on the company’s online lending platform. LendingTree generated $764.9 million in total revenue as of its latest fiscal year-end in December 2018 (latest data available).

The company operates under one reportable segment. For consumers seeking home mortgage loans, home equity loans, reverse mortgages and personal loans, LendingTree offers access to a nationwide marketplace of more than 550 partner banks and credit unions. The company also offers mortgage products in which it partners with lenders throughout the country to

provide full geographic lending coverage, forming a complete suite of loan offerings. Due to its wholly online model, LendingTree has rapidly expanded its share of industry-relevant revenue over the past five years.

Over the five years to 2019, LendingTree has initiated and completed numerous strategic acquisitions. The company acquired four online financial service companies in 2018 alone and has already acquired an online personal finance company in the first quarter of fiscal 2019. Overall, the company’s acquisition activity largely explains its robust growth during the five-year period.

Financial performanceOver the five years to 2019, LendingTree’s industry-relevant revenue is expected to increase an annualized 43.8% to total $1.0 billion. The company’s explosive growth is largely

Major CompaniesLendingTree Inc. | Other Companies

92.9%Other

LendingTree Inc. 7.1% SOURCE: WWW.IBISWORLD.COM

Major Players(Market Share)

LendingTree Inc. (US industry-specifi c segment) - fi nancial performance*

YearRevenue

($ million) (% change)Operating Income

($ million) (% change)

2014 167.4 N/C -0.5 N/C

2015 254.2 51.9 51.3 N/C

2016 384.4 51.2 31.2 -39.2

2017 617.7 60.7 19.4 -37.8

2018 764.9 23.8 109.3 463.4

2019* 1,030.0 34.7 146.7 34.2

*Estimates SOURCE: ANNUAL REPORT AND IBISWORLD

LendingTree Inc. Market Share: 7.1%



Major Companies

Other Company Performance

Founded in 1998 and headquartered in Minneapolis, MN, HomeServices of America is one of the largest real estate brokerages in the United States. Although the company operates on a national scale, it does so through 47 unique brand names that cater to local markets. In total, the company is estimated to employ

42,500 individuals and maintain 880 brokerage offices. The company’s offerings include mortgage brokerage services that are also provided through numerous local subsidiaries and brand names. Overall, IBISWorld expects the company’s industry-relevant revenue to total $255.0 million in 2019.

Player Performancecontinued

due to its heightened acquisition activity. However, organic growth of its core business remains difficult to determine and thus largely uncertain. Moreover, LendingTree has incurred significant transaction costs associated with merger

and acquisition activity, ultimately hampering its profit margins and contributing to volatile financial performance. Nevertheless, its operating profit is expected to total $146.7 million in 2019.

HomeServices of America Market Share: 1.8%



Capital Intensity The Loan Brokers industry operates with a low level of capital intensity. IBISWorld estimates that for every dollar spent on wages, the industry will allocate $0.02 to capital investment. The industry’s level of capital intensity has increased slightly during the five-year period. Industry operators rely on technology to communicate with clients and lenders and to process loan applications. As a result, capital expenditures for industry participants include computers, phones and other IT infrastructure. However, these costs generally represent small portions of industry revenue; consequently, depreciation is anticipated to account for just 0.6% of industry revenue in 2019. Alternatively, wages are expected to account for 34.9% of total

industry revenue. Industry operators depend extensively on a highly skilled workforce for each product and service

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Capital Intensity

0.5

0.0

0.1

0.2

0.3

0.4

SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit

Loan BrokersFinance and Insurance

Economy

Level The level of capital intensity is Low



Operating Conditions

Revenue Volatility The Loan Brokers industry has exhibited a high level of revenue volatility over the five years to 2019. Fluctuating levels of consumer confidence and existing home sales have contributed to the industry’s volatility during the five-year period. The beginning of the five-year period is characterized by a slowdown in industry activity due to a decline in existing home

sales in 2014. However, the Federal Reserve’s decision to raise interest rates in December 2015 marked the beginning of the end of historically low interest rates, hence the surge in home sales in 2015 and 2016 as consumers sought to lock in low mortgage rates. IBISWorld estimates existing home sales to have increased 6.3% and 3.8% in 2015 and 2016, respectively, ultimately

Technology and Systems

The level of technological change in the Loan Brokers industry is low. Industry participants generally rely on modern office technology to send and receive loan and credit information. These devices are largely limited to general IT infrastructure. Additionally, a typical industry operator uses a multiple listing service that: permits brokers to launch offers; provides an opportunity for brokers to cooperate among each other; and collects and displays crucial information for brokers and customers.

While the technology used by industry operators has not drastically changed during the five-year period, some advances have accelerated the mortgage lending process for lenders and consumers. Software tools are continually being developed to more efficiently evaluate an individual’s loan application. External competition from banks and the industry’s increasingly competitive internal environment have forced loan brokers to process loan applications faster. As a result, more industry operators are providing product advice and processing loan applications online.

Capital Intensitycontinued

offering. In addition, attracting individuals from this limited pool of skilled labor increases the industry’s average wage.

Level The level of technology change is Low

Level The level of volatility is High




Regulation and Policy Several federal laws and agencies regulate the practices of the Loan Brokers industry. In addition, industry operators are subject to the laws of individual states and licensing boards. Following the subprime mortgage crisis, an influx of new regulation concerning mortgage loans was introduced to protect consumers and facilitate more responsible lending.

Real Estate Settlement Procedures ActThe Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute that was passed in 1974. RESPA aims to help consumers become better shoppers for loan settlement services and eliminate kickbacks and referral fees that unnecessarily increase the cost of certain loan settlement services. RESPA covers loans secured with a mortgage placed on a one- to four-family residential property. These loans include most home purchases and refinances, among other products. The Department of Housing and Urban Development’s Office of RESPA and Interstate Land Sales is responsible for enforcing RESPA.

RESPA requires that borrowers receive disclosures at various intervals of time, including at the time of loan application, before settlement occurs, at settlement and after settlement. They also outline lender servicing and escrow account practices and describe business relationships between settlement service providers. Mortgage brokers are primarily affected by RESPA disclosures at the time of the loan application.

Following reforms to RESPA’s manner of disclosing settlement service costs to consumers, mortgage brokers or lenders must give borrowers information regarding real estate settlement services, an estimate of settlement costs and

information about the loan service provider at the time of the loan application. Specifically, mortgage brokers and lenders must give the borrower a special information booklet containing consumer information, which includes a mortgage servicing disclosure statement that informs the borrower whether the lender intends to service the loan or transfer it to another lender. Additionally, in late 2009, a proposal for the disclosure of the yield spread premium to borrowers came into effect, raising some opposition from mortgage brokers.

SAFE Mortgage Licensing Act of 2008Officially passed on July 30, 2008, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) was ratified to help clean up the mortgage industry after the subprime crisis. It set minimum state licensing standards and established a nationwide mortgage licensing system and registry for the residential mortgage industry. The act increased industry accountability by increasing the uniformity and transparency of the regulatory and licensing system.

Currently, mortgage brokers and mortgage businesses are required to hold state licenses to transact. Licensing is done on a state-by-state basis and states vary on a multitude of licensing requirements, including fees. However, federal regulation introduced in 2011 requires licensing exams and criminal background checks nationally.

Home Ownership Equity Protection ActNew rules came into effect on October 1, 2009 under an amended Regulation Z (Truth in Lending) of the Home Ownership Equity Protection Act. The

Revenue Volatilitycontinued

resulting in a surge in demand for industry services during the corresponding years. In more recent years, revenue volatility has

declined due to a more robust economy and the increasing normalization of gradually rising interest rates.

Level & Trend The level of Regulation is Heavy and the trend is Decreasing




Regulation and Policycontinued

rules prohibit unfair, abusive or deceptive home mortgage lending practices, and they apply to all mortgage lenders. Additionally, protections have been introduced for “higher-priced mortgage loans.” These protections include prohibiting a lender from making a loan without regard to the borrower’s ability to repay. Creditors need to verify the income and assets that will be relied upon to determine a borrower’s repayment ability. For all loans secured by a consumer’s principal dwelling, creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home’s value. Creditors must provide a good-faith estimate of the loan cost within three days after a mortgage loan application.

The Consumer Financial Protection Bureau (CFPB)In January 2013, the Consumer Financial Protection Bureau (CFPB) finalized regulatory changes initiated by the Federal Reserve Board and the Dodd-Frank Wall Street Reform and Consumer Protection Act that influence how industry operators are paid. The new rules prohibit broker compensation based on the terms and conditions of a mortgage, which represents an attempt to more closely align the interests of brokers with borrowers and lenders. Essentially, mortgage brokers can now only be compensated by lenders with respect to the number of loans they originate and the amount of credit they

extend. Additionally, brokers are no longer permitted to be paid by both the consumer and the lender in mortgage transactions. According to the CFPB, the rules officially took effect on January 10, 2014.

Economic Growth, Regulatory Relief and Consumer Protection ActSigned into law by President Trump on May 24, 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the Regulatory Relief Act) serves to rollback financial regulation imposed under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Truth in Lending Act (TILA), the SAFE act and several older bills related to consumer lending practices. The Regulatory Relief act primarily provides relief to commercial banks, mortgage lenders and regional banking organizations by increasing the significantly important financial institution (SIFI) threshold upon which banks are subject to additional (and costly) regulation. Additionally, the Regulatory Relief Act waives and exempts mortgage lenders from certain requirements imposed under previous regulation. For example, the Regulatory Relief Act amends the TILA’s required mortgage disclosure waiting period, enabling consumers to take advantage of lower interest rates sooner. Overall, the Regulatory Relief Act will serve to promote growth in the industry as consumers, lenders and brokers are met with fewer regulatory obstacles in the home-buying process.

Industry Assistance The Loan Brokers industry does not receive direct industry assistance from government entities. However, the industry receives assistance from various industry organizations such as the Mortgage Bankers Association and the National Association of Mortgage Brokers. Participation in industry associations lends credibility to industry operators, especially nonemployers.

Additionally, industry associations serve as a networking channel among other mortgage brokers, lenders, property managers and realtors. For example, the National Association of Realtors’ annual Broker Summit brings together loan brokers and realtors to discuss industry trends and strategies. Overall, however, the Loan Brokers industry receives a low level of industry assistance.

Level & Trend The level of Industry Assistance is Low and the trend is Steady



Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments EnterprisesEmployment

(People) Exports ImportsWages ($m)

Domestic Demand

Housing starts

(Thousands)2010 7,559.7 4,684.4 18,283 16,978 55,111 -- -- 3,119.7 N/A 586.92011 6,301.0 4,015.7 15,029 13,831 46,075 -- -- 2,875.3 N/A 608.82012 9,056.3 4,851.2 12,981 12,465 37,744 -- -- 2,867.9 N/A 780.62013 9,075.5 5,507.4 12,423 11,849 46,327 -- -- 3,311.2 N/A 924.92014 7,940.4 4,243.1 11,757 11,152 40,943 -- -- 2,956.7 N/A 1,003.32015 10,311.9 5,764.7 11,617 11,000 45,045 -- -- 3,867.4 N/A 1,111.82016 11,926.0 7,030.4 11,157 10,456 47,384 -- -- 4,418.5 N/A 1,173.82017 12,892.7 6,932.9 11,730 10,833 49,712 -- -- 4,663.9 N/A 1,203.02018 13,408.5 7,140.0 12,659 11,541 49,557 -- -- 4,689.5 N/A 1,242.32019 13,516.9 7,190.7 12,533 11,410 49,880 -- -- 4,721.6 N/A 1,275.62020 13,881.3 7,385.5 12,639 11,483 51,221 -- -- 4,848.6 N/A 1,305.82021 14,429.5 7,662.1 12,864 11,663 52,787 -- -- 5,005.4 N/A 1,341.02022 14,941.3 7,924.9 13,152 11,906 54,541 -- -- 5,174.0 N/A 1,367.42023 15,379.8 8,155.2 13,453 12,165 56,055 -- -- 5,319.3 N/A 1,389.32024 15,699.5 8,328.8 13,786 12,463 57,306 -- -- 5,436.4 N/A 1,407.8Sector Rank 30/31 29/31 17/31 12/31 23/31 N/A N/A 23/31 N/A N/AEconomy Rank 453/694 317/694 279/694 267/694 443/694 N/A N/A 294/694 N/A N/A

IVA/Revenue (%)

Imports/Demand

(%)

Exports/Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2010 61.97 N/A N/A 137.17 41.27 3.01 56,607.57 0.032011 63.73 N/A N/A 136.76 45.63 3.07 62,404.77 0.032012 53.57 N/A N/A 239.94 31.67 2.91 75,982.94 0.032013 60.68 N/A N/A 195.90 36.49 3.73 71,474.52 0.032014 53.44 N/A N/A 193.94 37.24 3.48 72,215.03 0.032015 55.90 N/A N/A 228.92 37.50 3.88 85,856.37 0.032016 58.95 N/A N/A 251.69 37.05 4.25 93,248.78 0.042017 53.77 N/A N/A 259.35 36.17 4.24 93,818.39 0.042018 53.25 N/A N/A 270.57 34.97 3.91 94,628.41 0.042019 53.20 N/A N/A 270.99 34.93 3.98 94,659.18 0.042020 53.20 N/A N/A 271.01 34.93 4.05 94,660.39 0.042021 53.10 N/A N/A 273.35 34.69 4.10 94,822.59 0.042022 53.04 N/A N/A 273.95 34.63 4.15 94,864.41 0.042023 53.03 N/A N/A 274.37 34.59 4.17 94,894.30 0.042024 53.05 N/A N/A 273.96 34.63 4.16 94,866.16 0.04Sector Rank 8/31 N/A N/A 28/31 3/31 21/31 18/31 29/31Economy Rank 92/694 N/A N/A 369/694 110/694 508/694 67/694 317/694

Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)

Housing starts (%)

2011 -16.7 -14.3 -17.8 -18.5 -16.4 N/A N/A -7.8 N/A 3.72012 43.7 20.8 -13.6 -9.9 -18.1 N/A N/A -0.3 N/A 28.22013 0.2 13.5 -4.3 -4.9 22.7 N/A N/A 15.5 N/A 18.52014 -12.5 -23.0 -5.4 -5.9 -11.6 N/A N/A -10.7 N/A 8.52015 29.9 35.9 -1.2 -1.4 10.0 N/A N/A 30.8 N/A 10.82016 15.7 22.0 -4.0 -4.9 5.2 N/A N/A 14.2 N/A 5.62017 8.1 -1.4 5.1 3.6 4.9 N/A N/A 5.6 N/A 2.52018 4.0 3.0 7.9 6.5 -0.3 N/A N/A 0.5 N/A 3.32019 0.8 0.7 -1.0 -1.1 0.7 N/A N/A 0.7 N/A 2.72020 2.7 2.7 0.8 0.6 2.7 N/A N/A 2.7 N/A 2.42021 3.9 3.7 1.8 1.6 3.1 N/A N/A 3.2 N/A 2.72022 3.5 3.4 2.2 2.1 3.3 N/A N/A 3.4 N/A 2.02023 2.9 2.9 2.3 2.2 2.8 N/A N/A 2.8 N/A 1.62024 2.1 2.1 2.5 2.4 2.2 N/A N/A 2.2 N/A 1.3Sector Rank 27/31 29/31 27/31 26/31 26/31 N/A N/A 27/31 N/A N/AEconomy Rank 471/694 492/694 583/694 587/694 481/694 N/A N/A 484/694 N/A N/A

Annual Change

Key Ratios

Industry Data




Apr 2017 - Mar 2018 by company revenueApr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium LargeMar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)

Liquidity Ratios

Current Ratio 1.3 1.2 1.3 1.3 1.6 1.2 1.1Quick Ratio 0.7 1.0 1.1 0.4 0.8 0.3 0.2Sales / Receivables (Trade Receivables Turnover) 122.2 59.7 20.7 97.4 278.4 88.5 67.3

Days’ Receivables 3.0 6.1 17.6 3.7 1.3 4.1 5.4Cost of Sales / Inventory (Inventory Turnover) n/a n/a n/a n/a n/a n/a n/a

Days’ Inventory n/a n/a n/a n/a n/a n/a n/aCost of Sales / Payables (Payables Turnover) n/a n/a n/a n/a n/a n/a n/a

Days’ Payables n/a n/a n/a n/a n/a n/a n/aSales / Working Capital 3.2 4.3 3.6 3.1 2.1 4.7 8.0

Coverage Ratios

Earnings Before Interest & Taxes (EBIT) / Interest 3.2 4.4 4.7 3.0 4.0 2.6 2.5

Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt n/a n/a n/a n/a n/a n/a n/a

Leverage Ratios

Fixed Assets / Net Worth n/a n/a n/a n/a n/a n/a 0.1Debt / Net Worth 2.1 2.5 2.4 2.5 1.5 4.6 5.2Tangible Net Worth 38.0 36.0 33.0 35.4 44.8 22.1 20.0

Operating Ratios

Profit before Taxes / Net Worth, % 23.6 24.0 31.9 18.8 15.8 21.2 22.6Profit before Taxes / Total Assets, % 6.8 7.1 6.8 4.4 4.7 5.1 3.9Sales / Net Fixed Assets 49.1 78.0 97.6 62.8 95.5 44.3 58.8Sales / Total Assets (Asset Turnover) 0.5 0.6 0.5 0.6 0.5 0.5 0.7

Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading n/a n/a n/a n/a n/a n/a n/aCash after Operations 15.1 13.6 18.0 16.1 15.2 20.0 14.5Net Cash after Operations 18.6 8.0 18.1 16.2 16.6 19.1 14.5Cash after Debt Amortization 3.1 n/a 5.0 -0.8 -3.0 1.8 3.5Debt Service P&I Coverage 2.1 1.6 2.6 3.3 3.6 2.3 n/aInterest Coverage (Operating Cash) 4.0 2.0 3.3 5.6 6.5 7.0 n/a

Assets, %

Cash & Equivalents 29.5 28.2 21.9 24.7 29.1 22.2 9.3Trade Receivables (net) 11.8 16.5 22.0 11.9 13.7 9.9 7.6Inventory 15.4 16.5 15.4 22.9 13.2 30.8 51.2All Other Current Assets 20.7 16.1 13.7 18.3 17.7 20.8 15.3Total Current Assets 77.3 77.3 73.0 77.6 73.6 83.7 83.2Fixed Assets (net) 6.1 4.7 4.8 4.9 6.5 3.2 1.2Intangibles (net) 2.0 3.2 4.3 2.5 2.6 3.3 0.3All Other Non-Current Assets 14.7 14.8 18.0 15.0 17.3 9.8 15.3Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0Total Assets ($m) 3,620.9 4,127.4 3,313.7 3,651.3 566.4 1,531.3 1,553.7

Liabilities, %

Notes Payable-Short Term 37.9 40.8 39.5 42.2 30.3 54.5 71.5Current Maturities L/T/D 0.9 0.9 1.2 2.5 1.8 4.8 0.4Trade Payables 2.4 3.1 2.5 1.5 0.9 2.1 2.9Income Taxes Payable 0.4 0.3 0.3 n/a n/a 0.1 n/aAll Other Current Liabilities 9.7 9.2 7.3 8.3 9.1 8.8 3.6Total Current Liabilities 51.3 54.3 50.9 54.6 42.2 70.4 78.3Long Term Debt 5.5 4.6 7.8 5.6 8.0 2.7 0.5Deferred Taxes 0.1 0.3 0.3 0.3 0.1 0.9 n/aAll Other Non-Current Liabilities 3.0 1.6 3.6 1.7 2.3 0.6 0.8Net Worth 40.0 39.2 37.3 37.9 47.4 25.4 20.3Total Liabilities & Net Worth ($m) 3,620.9 4,127.4 3,313.7 3,651.3 566.4 1,531.3 1,553.7

Maximum Number of Statements Used 113 105 78 104 62 29 13

Industry Financial Ratios

Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects.Note: For a full description of the ratios refer to the Key Statistics chapter online.



Jargon & Glossary

BARRIERS TO ENTRY High barriers to entry mean that new companies struggle to enter an industry, while low barriers mean it is easy for new companies to enter an industry.

CAPITAL INTENSITY Compares the amount of money spent on capital (plant, machinery and equipment) with that spent on labor. IBISWorld uses the ratio of depreciation to wages as a proxy for capital intensity. High capital intensity is more than $0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of labor; low is less than $0.125 of capital for every $1 of labor.

CONSTANT PRICES The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation using the current year (i.e. year published) as the base year. This removes the impact of changes in the purchasing power of the dollar, leaving only the “real” growth or decline in industry metrics. The inflation adjustments in IBISWorld’s reports are made using the US Bureau of Economic Analysis’ implicit GDP price deflator.

DOMESTIC DEMAND Spending on industry goods and services within the United States, regardless of their country of origin. It is derived by adding imports to industry revenue, and then subtracting exports.

EMPLOYMENT The number of permanent, part-time, temporary and seasonal employees, working proprietors, partners, managers and executives within the industry.

ENTERPRISE A division that is separately managed and keeps management accounts. Each enterprise consists of one or more establishments that are under common ownership or control.

ESTABLISHMENT The smallest type of accounting unit within an enterprise, an establishment is a single physical location where business is conducted or where services or industrial operations are performed. Multiple establishments under common control make up an enterprise.

EXPORTS Total value of industry goods and services sold by US companies to customers abroad.

IMPORTS Total value of industry goods and services brought in from foreign countries to be sold in the United States.

INDUSTRY CONCENTRATION An indicator of the dominance of the top four players in an industry. Concentration is considered high if the top players account for more than 70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is less than 40%.

INDUSTRY REVENUE The total sales of industry goods and services (exclusive of excise and sales tax); subsidies on production; all other operating income from outside the firm (such as commission income, repair and service income, and rent, leasing and hiring income); and capital work done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed tangible assets are excluded.

INDUSTRY VALUE ADDED (IVA) The market value of goods and services produced by the industry minus the cost of goods and services used in production. IVA is also described as the industry’s contribution to GDP, or profit plus wages and depreciation.

INTERNATIONAL TRADE The level of international trade is determined by ratios of exports to revenue and imports to domestic demand. For exports/revenue: low is less than 5%, medium is 5% to 20%, and high is more than 20%. Imports/domestic demand: low is less than 5%, medium is 5% to 35%, and high is more than 35%.

LIFE CYCLE All industries go through periods of growth, maturity and decline. IBISWorld determines an industry’s life cycle by considering its growth rate (measured by IVA) compared with GDP; the growth rate of the number of establishments; the amount of change the industry’s products are undergoing; the rate of technological change; and the level of customer acceptance of industry products and services.

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax.

Industry Jargon

IBISWorld Glossary

2-28 LOAN A loan that has a fixed rate for a certain period of years until the rate becomes adjustable for the remainder of the loan.

ALT-A LOAN A category of mortgages that have a risk potential greater than prime but less than subprime.

MORTGAGE ORIGINATION The creation of a new mortgage that involves a range of necessary legal papers and placement of the mortgage on the lender’s books.

NINJA LOAN A loan where the borrower can qualify with no income, no job and no assets.



Jargon & Glossary

VOLATILITY The level of volatility is determined by averaging the absolute change in revenue in each of the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

IBISWorld Glossary continued


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