If you follow Barry Habib and the team at MBS Highway, you should have a good idea of what the market is going to do for the remainder of 2022. Long story short, inflation will likely look bad throughout the summer, which doesn’t help rates. But, once we go into recession territory and inflation starts to cool, mortgage bonds start to look really nice as a safe haven for investors, which in turn brings mortgage rates down. As you’re all aware, the housing market is set up to weather a recession well. There is still plenty of demand to mop up any increase in inventory that is created.
So what should you be doing now? Building! I don’t mean building homes, I mean building your pipeline for the next cycle. Don’t neglect first-time buyers that are priced out of the market today, they still want and need a home, and they will get one. We are seeing a trend of first-time buyers reducing revolving debt, who then in turn start a mortgage transaction in the following months.
Why? It may be that they tried to get approved and a bank told them their DTI is too high. Or they may realize they are going to have to stomach a higher mortgage payment and want to reduce other debts to offset that. Whatever inspired them to make good decisions, it all really comes down to ability.
Revolving debt runs as an inverse to free cash on hand. If a homebuyer had an excess of cash in the bank, they are less likely to have high balances on credit cards. So higher revolving debt means no cash on hand for a down payment, generally speaking. When we see revolving debt decrease, it’s less likely that someone woke up and decided to make better financial decisions and more likely that they have had an increase in income.
More income gives them the ability to pay down revolving debt, and the ability to finally get into a home. Ask any business owner what inflation has done to their business and they will likely tell you it has put pressure on them to increase payrolls in order to keep their best team members. It’s happening all over the country.
Sellers, I believe, are the Holy Grail to a successful mortgage operation. Not only do you get a mortgage client, but if you can identify sellers before they list their home, you can influence who they work with to list their home, i.e. your favorite agents. When you bring a seller to your referral partner or use that referral to create a new referral partner, they will reciprocate. I’ve talked to many of our users and they tell me, you will get multiple transactions in return from a referral partner to whom you bring a deal too.
Both sellers and first-time buyer alerts are happening every day in the form of inquiry and predictive alerts in MonitorBase. If you see one of your contacts take out a home equity line or call you about a cash-out, ask them what their plans are for the next year. You will find that some are remodeling and plan to stay put, but we are also seeing in the data that many homeowners are tapping their equity to make improvements and list their homes for top dollar. Don’t overlook that soon to be listing! This is increasing at the moment as homeowners watch the news and feel we are at the “top of the market”.
If mortgage applications are declining, how do you get more business from your MonitorBase account than you did last month? The simple answer is, to go deeper into the database of people that you “know” (your contacts). Many users only monitor past clients, meaning people they have worked on a mortgage for in the past, but you know far more people than that. Just last week we launched a new feature that will make this possible called Contact Enrichment.
Contact Enrichment lets you go deeper into your sphere of influence and monitor contacts with that you may only have an email or phone number on. For example, all of your phone contacts, your email inbox over the years - personal and business. CRM contacts that you don’t have a street address for, leads and referrals from referral partners, etc.
It’s just a numbers game. Approximately 2% of the contacts in your MonitorBase account will be in the market for a mortgage every month. So if you want to increase your purchase volume, increase the number of contacts that you monitor.
Now, looking forward to late 2022, and early 2023. Those of you that had predictive alerts enabled over the last couple of years should know that when refinance times come, predictive alerts will put you in front of the contacts that both have the ability and high likelihood of pulling the trigger on a refinance. I would suggest getting all of the contacts imported that you possibly can now so that when the rates drop even 0.5% you will know exactly who is in the market. The mortgage market is planting a lot of corn right now that will be ready to harvest in the not too distant future.