Deeper Thoughts
Mortgage Ice Age? Or Just a Snow Day?

Although forecasters are suggesting a record purchase market in 2022 (Fannie is calling for $2.1 trillion this year), there’s a lot of doom and gloom out there right now—at least, if you focus on the headlines, social media and exhibit halls at trade shows. We’ve been pretty straightforward from the early forecasts of the end of the refinance boom that, while there will still be ample opportunity, there’s no way for the mortgage market to contract by half of its previous volume without winners and losers. 

The Coming of a Mortgage “Ice Age?”

Sure enough, between the reporting of layoffs, talk of recession and horror stories about 5+ percent mortgage rates, the outlook seems a bit gloomy. We recently came across a very interesting article in Housing Wire referring to what’s coming as “an ice age.” And while that headline may be a bit hyperbolic, the article as a whole was an interesting read.

The sense we’re getting out there is that, while the typical mindset at the moment in our industry is not exactly positive, far too many are approaching the arriving cycle as something to live through briefly before returning to the Good Ol’ Days. The author of the Housing Wire article says this very artfully: “We are looking at this 2022 market like a snow day in January. Close it down for a day or two, clean it up and get back to business next week when it warms up.” 

Instead, the author suggests—although we think this might be a tad harsh—we’re heading into a mortgage ice age, one which will bring mass extinctions (of businesses or practices or products). Where we do agree wholeheartedly with the author is that the emerging cycle is not going to be the purchase blip we briefly experienced in 2018 before the Fed “saved” us again with stimulus sparking yet another refinance wave. It’s going to be a while before we see another truly dominant repurchase market.

It Turns Out the Mortgage Industry is Still Cyclical.

The mortgage industry used to be considered cyclical. There was purchase, there was refinance and then there was the occasional “counter-cycle,” during which default, foreclosure and REO-focused businesses tended to fare the best. While some cycles were favored by certain businesses more than others, just about everyone accepted that the cycle would happen. 

Until we experienced the Never Ending Refinance Boom. There are more than a few owners and executives in our space who’ve only read and heard about purchase markets and interest rates over 4%. Now, those fairy tales and legends are about to be proven real once again.

Adapting to Change

The Housing Wire article further advises that, instead of hunkering down, the business that survive and thrive will change their mindsets. They’ll collaborate with partners and vendors to “lean into the wind together.” They’ll hone their efficiencies. They’ll revisit their workflows. They’ll update their marketing and product mixes. Hopefully, they’ll do extensive research instead of throwing darts as they make their decisions.

If we had our way, most of us would have a magic wand waved and experience another $4 trillion market. But that’s not reality. The biggest issue facing our industry at the moment is the fear of inevitable change. When that fear leads to inaction or the refusal to adapt to meet that change, it could very easily serve as an indicator of which businesses will make it and which won’t.

We don’t truly believe we’re coming into a new Ice Age in the mortgage industry. Yes, that record purchase market forecast may come down depending on war, inflation and/or the actions (or inactions) of the Fed. But there will still be opportunities out there. Instead of doom and gloom, however, we’d recommend rolling up one’s sleeves and getting to work adapting. Like the others, this cycle won’t last forever, either.