I’ll admit it. I haven’t pulled any punches in predicting that the market downturn impacting the mortgage industry over the past six to eight months wouldn’t last forever–or maybe not even as long as many economic forecasters with far greater predictive powers than I were calling for. I simply felt we were generally overreacting to the impending correction that occurred when a once-in-a-lifetime volume spike surge collided with a global pandemic. It doesn’t take a rocket scientist to know that cyclical industries like ours are more like the roller coaster at the carnival than anything. What goes up eventually goes down; and what goes down eventually comes back up. You just have to have seen a few cycles to realize it, and then take a stab at the toughest question: “How long will this cycle last?”
Don’t get me wrong. I’m also not here to declare the end of the latest downturn. But there are some early signs that the worst may be behind us. CNBC just recently reported that mortgage demand jumped nearly 28% in one week. Yes, mortgage volume was down year-over-year. And yes, we remain volatile on a week-to-week basis. But when’s the last time we talked about applications climbing at all.
One well-regarded industry economist recently went so far as to declare that interest rates may already have peaked. It’s common knowledge in our industry that stability is the ultimate ingredient to a positive market environment. People will buy homes and even refinance with a rate between 5 and 6%…if conditions are reasonably stable or predictable. People will always need places to live, and it’s a pretty bad time to rent right now.
Maybe we have a few false positives on our hands. But maybe, just maybe, this roller coaster has bottomed out.
If my hopeful diagnosis does prove to be correct, it’s probably time for the industry to look around and, more importantly, take a good hard look in the mirror. No business owner loves a down cycle, but it does afford us something we don’t have during great markets: time. The problem is that, while some will do just that, others will choose to visit the distorted mirror in the funhouse, telling themselves about how well they do things because, well, that’s the way they’ve always done it.
So what did we do with the time we had, if the slow market is about to give way to increased order volume and activity? Did we take a hard, objective look at why we do what we do; what we do best and what we can improve upon?
Did we address those weaknesses or, at the very least, build a plan to address them when revenue rebounds? Or did we explain them away like some deranged carnival barker?
Did we take a fresh look at things that rarely make the headlines when the market is active? Did we take stock of important issues like workplace culture and the necessity to acknowledge and support mental health in the workplace? We’re coming off months of massive layoffs. These actions aren’t just “cost cutting tools” designed to exorcise financial “inefficiencies” from the budget. These are traumatic events affecting human beings and their families as well as those remaining in their positions. Yes, layoffs are a necessary evil in the business world. But behaving as if nothing happened to impact morale is anything but.
It doesn’t take the best fortune teller on the carnival circuit to tell you that, if you haven’t addressed or even assessed such issues as things improve, the recruits you wish to hire later will be choosing between you and firms with reputations for fostering healthy office cultures. You’ll be fighting for market share against competitors who did improve their throughput capacity, efficiency and overall reputation with clients. And you’ll undoubtedly run into other detrimental, unexpected operational surprises you could have addressed earlier. And you’ll be forced to address them then, instead of processing the maximum volume of business possible.
In other words, you’ll be leaving money on the table. And that will have started by wasting the time you had when you had it.
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!