TheMReport — News and strategies for the evolving mortgage marketplace.
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26 | M R EP O RT COVER STORY "If you're a mortgage professional and you want to succeed, you have to keep your head down, stop focusing on market conditions, and focus on what you can control." —Ron Vaimberg, President of Ron Vaimberg International ter single-family production in January is a sign that the housing sector faces further challenges, as elevated mortgage rates and high construction costs continue to put a damper on the market," the National Association of Home Builders said in February. Overall, housing starts decreased by 4.5% to a seasonally adjusted annual rate of 1.31 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The January reading of 1.31 mil- lion starts is the number of hous- ing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased by 4.3% to an 841,000 seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased by 4.9% to an annualized 468,000 pace. "Housing construction weak- ened in January as ongoing affordability conditions fueled by high mortgage rates and build- ing material costs challenged the market," said Alicia Huey, NAHB Chairperson. "While a recent two-month upturn in builder sentiment indicates a turning point for single-family construction could take hold in the months ahead, policymakers need to fix the supply chain for building materials to ensure builders can add the additional inventory the housing market desperately needs." Builders were burned by building too many spec homes in the past, so they are only building homes under contract, so little new supply is coming on the market, Isaacs said. A related issue is that with the cost of labor and building materials up substantially, except for lumber, which has fallen in price in the last year, builders can't profit from building starter homes, which further constrains the inventory at the bottom of the market, Isaacs said. "In Columbus, Ohio, where I live, you can't build a new house for under $400,000." Student loan debt is also impacting the ability of younger people to buy a house. Though the debt payments on government student loans have been suspended for more than two years, those payments are now set to restart in the summer. Even if some of that outstanding debt is forgiven, which depends on a pending Supreme Court decision, many younger consumers will still have substan- tial college payments remaining, impacting their ability to save for a down payment and make mort- gage payments. On the positive side, people are earning more today than they did 10 years ago, Isaacs said. Plus, there are down payment assistance pro- grams that can help some potential homebuyers. But there's still a sub- stantial financial shortfall for many who would typically be looking to purchase their initial homes. For those who have the finan- cial means, the limited supply means that, like last year, many homes are selling for over list price, a trend that Isaacs expects to grow into the spring and summer. "The inventory problem won't be fixing itself any time soon," Isaacs said. Keys to Success T o succeed in this challenging market, mortgage lenders need to recruit new loan officers to add to volume while also retaining the loan officers they have, Isaacs said. Lenders that cut support and resources are in danger of losing their best staff. "Find loan officers in markets where you think you can take market share and increase volume, then give them a compensation structure that makes sense in the current environment and continue to take market share," Isaacs said. "To succeed in this environ- ment, we all have to work a lot harder than we've worked in the last 10 years," Isaacs added. Lenders will have to look harder to find the top-producing real estate agents to partner with—the 80-20 rule has become the 90-10 rule, or even the 95-5 rule, with the top five or 10% of real estate agents doing the lion's share of business in the local market. Cost-cutting is important as well, Isaacs said. "Build your model around what you are doing today, not what you think that you will be doing in 90 days. It might not be better 90 days from now. Hope is not a strategy." "If you're a mortgage profes- sional and you want to succeed, you have to keep your head down, stop focusing on market conditions, and focus on what you can control," Vaimberg said. "As long as you work on your sales skills, work on your marketing, and out-prospect your competitors, you don't have to worry about anything. But you may have to work three, four, or five times harder for the same amount of business." Looking Forward A sthana expects a good refinance market once rates do drop. "We've already seen $1.8 trillion in mortgages originated at rates north of 5.5%. Banks are sitting like hawks, watching this game. That's where the indepen- dents have to get much smarter and leaner because in the next eight to 10 months there will be a [refinancing] opportunity." PHIL BRITT started covering mortgages and other financial services matters for a suburban Chicago newspaper in the mid-1980s before joining Savings Institutions magazine in 1992. When the publication moved its offices to Washington, D.C., in 1993, he started his own editorial services room and continued to cover mortgages, other financial services subjects, and technology for a variety of websites and publications.