The year under review…and what to expect from January onwards – we ask mortgage experts
How would you sum up the year in a paragraph, or even in one sentence? And what’s your outlook for 2023? How will high rates impact your business?
These are just a few of the questions Mortgage Professional America (MPA) posed to mortgage experts now that the year is drawing to a close.
What is undeniably true is that 2022 will go down as one of the most tumultuous years in recent history, not just for the global economy but for the US housing market (let’s forego the well-worn euphemism, ‘challenging’).
Few saw it coming, though. The end of the COVID pandemic brought renewed optimism for the world’s economy, even though the mortgage industry enjoyed a boom during this period, thanks to record low rates and sky-high home prices.
However, 2022 was also a sobering reminder that you cannot make surefire predictions about anything – the war in Ukraine made sure of that.
As for next year, despite the upbeat message coming from lenders and mortgage companies about the bloated size of home equity and the rock-solid belief that ‘people will always need a home’, the sad fact is neither borrowers nor lenders will be able to dictate the narrative.
There’s sufficient evidence to show that high interest rates are having a detrimental impact on the housing market. Elon Musk - admittedly a hugely controversial figure - tweeted for the umpteenth time this week that the Fed’s rate increases “might go down in history as the most damaging ever”.
And if economic conditions worsen - say if the war in Ukraine drags on throughout next year and beyond, or if there is a new and unforeseen global event - the US and others will be staring down the barrel of something far worse than a minor recession.
This is still conjecture, however.
On the flip side, the rate of inflation has been slowing down and seems to be moderating, and there are signs that the US could avoid the worst of it and endure only a mild recession by the end of 2023, mostly due to a slowing of demand for housing and goods brought on by those pesky high interest rates.
The final word, as ever, is nonetheless yours – the brokers, lenders, mortgage advisers and analysts who follow the markets with obsessive zeal.
Kirk Tatom, president of Dallas-based Tatom Lending
On debt and the economy:
“We’ve got roughly $2 trillion on student loans and they’re going to have to start making payments on that at some point in the coming year. You’ve also got credit card debt that’s higher than ever in the history of the US, so you’ve got people maxing out their credit cards. And although we have a booming labor market, we have more jobs than people to fill them, so companies are having to pay through the nose to get people, and that’s inflationary as well.
“Interest rates are so high that the point of entry is undoable for most on the commercial and residential side. I don’t think people realize that’s 18% of the US economy - that’s almost a fifth. We’re going to hit a fairly deep worldwide recession. It’s going to be tough, but at least that’s what I am preparing for over the next nine to 12 months - I’m making sure that we survive, and we will. Failure is not an option.”
Housing market prospects:
“As the owner of a business, I am far more concerned with my boat than the other boats, so we’re trying to figure out the things we can do - if your costs are low, you can ride out the storm, but I think we’re on the verge of seeing multiple companies stepping back or going under.
“I’ve always felt like it was going to be maybe the middle of 2023 before we had any sort of relief, but it might be longer, especially after Wednesday when the Fed raised rates again. Texas is doing significantly better than other states. We still have a lot of economic growth and companies are moving here every day.”
On home equity:
“It does allow some safety for the first quarter in 2023, (but) we’re going to see the consumer, which is like two thirds of our economy, shrink significantly. It’s the Christmas season and everyone’s out spending, but we’re about to have a sit down with Jesus and it ain’t going to be good.”
Joe Mellman, SVP and mortgage business leader at Transunion
“It was a great year to be an existing homeowner (but) 2023 will be a challenging year to be a prospective homeowner.”
Elizabeth Renter, data analyst at Nerdwallet
“In the second half of 2022, higher mortgage rates really undid any price benefits that buyers were seeing. But there’s a reason to look forward to 2023 in that there will be less competition for them to face when it’s time to purchase a home.”
Patrick Stoy, owner-broker of Wilmington-based MC Mortgage Group
On market downturn:
“We knew it was coming, it’s not a surprise, (but) it definitely came a lot quicker than all of us were anticipating. I know some people that were doing 20 (mortgages) a month are now doing about one or two a month.”
On high interest rates:
“Mortgage rates definitely have an influence on what we’re doing because it doesn’t make the market as fluid for people to be able to afford to move. Even if people are not happy with their home, it makes no sense to buy another property when they have rates in the twos and threes - the value would have to go down 25% just to keep what they’re paying right now.”
Market outlook for 2023:
“It’s going to get ugly. I’m a very optimistic person, but I’ve been doing this for a long time and if you’re in the mortgage business facing this and you’re determined to continue, then you’re looking at cutting back on expenses and trimming down your costs. I anticipate that jobs will also be lost next year.
“There’s no doubt about it, 2023 is going to be a year of hard business decisions for mortgage companies.”
On home equity:
“People are going to burn through that equity. People are still going to travel, they’re just going to leverage their assets. They want access to that home equity line because they need to pay off credit cards - they’ve gotten themselves into debt.”
On interest rates:
“Coming into 2022 and coming off low rates, we’re trying to stay optimistic that people are going to keep buying properties, no matter what the rates are, because they’ve got to live, they’ve got to have shelter and it’s still cheaper than paying rent. But it has definitely gone from a seller’s to a buyer’s market because all first-time homebuyers can’t afford to pay $350,000-$400,000 for a first-time house on one person’s salary, and, sometimes, even if it’s two people buying a house, they run into down payment concerns.”
Yury Shraybman broker at Innovative Mortgage Brokers, Philadelphia
On 2022 and the year ahead:
“It’s definitely been a tough year. The last couple of years have been really good, but I don’t think anybody really expected it to slow down as quickly as it did. Increasing rates so many times within the last 12 months…that’s been huge. However, I believe that 2023 is looking very good.
“We just got our positive monthly report for the month of November and inflation’s coming down - there’s a feeling that the Federal Reserve has control over it. Because of that, the bond market - the long-term market - is causing rates to start coming down, and the more that inflation comes down, the more the rates are going to come down.”
On interest rates and house prices:
“Seeing that rates are in the fives is not great. They’re definitely far from what they were a year-and-a-half to two years ago, but they’re also much better than they were a couple of months ago. So I feel positive for the mortgage business looking forward to 2023. A lot of people should be able to refinance to lower rates - hopefully a couple of percent lower - maybe sometime next year.
“Rates are going to start decreasing, and I think that house prices will start increasing because demand is also going to increase.”