You can rest assured that no animals were harmed in the making of this commentary! But the harm felt by stockholders during the last several months has not been trivial, and not only confined to lenders. As has been discussed in this Commentary, just because the open market can see their stock prices fall doesn’t mean those companies are faring any worse, or better, than non-public companies. And other companies in related industries have not fared much better. For example, Redfin (a full-service real estate brokerage that owns lender Bay Equity) hit a high of over $95 a share and hit a low a few weeks ago of $7.13. Put another way, if you had sunk your life savings of $1 million into Redfin stock in February of 2021 your life savings would stand at $75,000. Ouch. The speed and magnitude of the rate move in 2022 has hurt many, but to keep things in perspective remember that the highest interest rates were in October 1981, a whopping 18.45 percent. Fortunately, no one is talking
One topic of conversation at the MBAH conference is the quote making the rounds, “Marry the house, date the rate,” a nightmare for capital markets and servicing groups engineering hedging programs. On a larger scale, no central bank wants to engineer a recession, of course, but the press seems consumed with the idea of a recession in 2023 or 2024… which would mean a) we’ll hear about it for another year or two while many lenders are just trying to survive, and b) it would probably lead to lower rates. Household balance sheets are currently still in fine shape. Corporate balance sheets are as well since many companies that issue debt regularly refinanced their outstanding debt during the last few years, lowering their obligations. just like millions of homeowners did around the nation. What isn’t as good is the daily operating budgets, especially for companies whose only income is residential lending. The implied year-end Fed funds target is now around
Plenty of folks in our biz can be accused of having aprosexia. (No, I didn’t join some “Word of the Day” club.) But lenders and originators have to be pay attention long enough to figure out how to adapt to changes and trends. For example, while building affordable housing is a hot topic, new buildings only account for about a quarter of the affordable housing market. The rest is comprised of Naturally Occurring Affordable Housing, or NOAH, which falls between subsidized housing and high-rent buildings and it often makes sense to preserve it rather than build it. I spent some time in Chicago this week where unfortunately 10% of NOAH housing was lost from 2012-2019. Need leads, not stale ones (always be closing!)? Josh Friend with Insellerate, known for its CRM and lead management, recommends, “Don’t forget the most important thing when buying leads is having real time lead distribution and automated calling, texting, and emailing.” Dealing with
As the nation ruminates on the court ruling on the mandatory mask mandate, remember, “You do not need a parachute to skydive. You only need a parachute to skydive twice.” It is a safe bet that the Federal Reserve will raise short term rates more than twice before summer. This month’s STRATMOR blog is titled, “A Primer on the Federal Reserve and Mortgage Rates.” Here in Atlanta, in the MBA-STRATMOR Peer Group Roundtable meetings, much of the conversation revolves around interest rates, as one can imagine. The Federal Reserve is going to have a hard time bringing down inflation without triggering a recession, according to Goldman Sachs Group who believes that there is about a 35 percent chance the U.S. will fall into a recession over the next two years. Another topic is the population migrating due to tax reasons. Property taxes aren’t good, but fall into the “interesting” category as some states’ taxes have been rising while