So the gates of hell have finally opened and the end of the world is nigh. We’re digging a safe bunker over here at LodeStar. After all, the average 30-year fixed rate has finally crossed the six percent threshold.
Ok. Maybe that’s a little hyperbolic.
I’ll admit this is the first time we’ve seen an average rate over six since 2008, which admittedly wasn’t the best of years for our industry. And I’m not making light of the fact that this number is having and will have a negative impact on the mortgage market, to the detriment of many people whose incomes depend on mortgages.
I just think the industry’s threshold for panic has come way down in the past few years. Remember, we also had average rates over six in 2006 and 2002, which were good years for many.
I told myself I’d leave this topic alone for a while. After all, I may have mentioned once or twice that, while the market is declining, it’s not going to be historically bad. But the apparent wave of reaction to the announcement this week reminded me that, like all markets, ours is as much psychological and emotional as it is cyclical.
It also reminded me that market dips are opportunities for some. Say….small businesses.
Hear me out. Yes, some small businesses will invariably struggle every bit as much or more than larger firms in the next six to 12 months. Most of them don’t have the capital reserves or diversified product mixes larger lenders can afford to carry.
But show me a large lender or mortgage-related firm that anyone would call “nimble.” They’re hard to find. And their decision-making process, in many cases, is slow. Really slow. Risk taking is also not something done…well, just about ever for some large businesses.
Yet these are all characteristics that entrepreneurial businesses tend to possess. Flexibility. Quick reaction times. Willingness to take a measured risk.
Small businesses are also usually young enough to remember what brought them any success they’ve had so far. Customer service isn’t a nuisance or expense. It’s the lifeline to what keeps the firm in existence in the first place. Innovation isn’t something that’s discouraged or buried. Rather, small businesses that succeed often do so because they’re innovative and brave enough to challenge old conventions and create new solutions to old (or emerging) problems. We, for example, grew out of the chaos that surrounded LOs and title agents alike in the early days of TRID.
Yes, the coming months will likely present some old and new problems for businesses in our space. Some will not be up to the challenge. But if you look back at past downturns in our industry, you’ll see quite a few small businesses who not only accepted the challenge, but also changed the game with their actions and creativity.
So while I don’t mean to mock the mortgage industry’s apparent panic, I do mean to remind everyone that slow markets create unique opportunities. The revenue isn’t nearly as easy as it may have seemed in 2021, but there is enough volume out there. And chances are that, right now, there are more than a few small businesses, armed with good ideas, great people and tremendous energy, who are building their legacies because of these conditions.
We at LodeStar are grateful to all of our clients, friends and colleagues who take the time to view Deeper Thoughts. Please consider having a look as well at some of our other great content, including our podcast, “LodeStar’s Lending Leaders,” and “A Tale of Two Mortgages: an original webcomic for the mortgage industry, presented by LodeStar.”
As always, your feedback is welcomed and appreciated!