Roller Coaster - How Long's the Ride?
The consumer residential real estate mortgage industry is cyclical. How many times have you seen that in the paper? Since I have witnessed four (4) of these cycles during my career, I wanted to get into some detail about this today.
It’s actually like a pendulum – swings one direction for a while; most folks do not accurately predict for how long, by the way. As I recall, this last swing direction started just after Black Friday in late1998 and pretty much began to fizzle out in the fourth quarter 2005. What we all saw, were mortgage interest rates sinking, and real property values going through a hype-inflation era. For all who entered our industry during that period, they experienced the blessing of a growing income stream, and borrowers falling off trees into their laps, life was sweet. This cycle hit an all time historical low in rates, and an all time high in appraisal values. Industry employment numbers expanded, and there were big production numbers and easy money for originators and funding sources.
Today we’re at the beginning of the swinging pendulum going back the other direction, property values softening (sinking in many areas), and rates generally moving upward. No more soaring property values, and decreasing rates. Will we hit another record, like in the last cycle? Nobody knows that answer. Instead of the absolute highest home values ever, will be see the lowest ones? Instead of the lowest mortgage rates in history, are we facing the highest ones in decades? What I can absolutely assure you, is that I don’t know. Will it follow this new track for as long as it did the other way? I doubt it, but I strongly believe it surely will continue this new direction for a long time, since that is the nature of the swinging pendulum and what ‘cyclical’ means.
Countrywide's founder and CEO recently told equity analysts in a conference call, "I've never seen a soft landing in 53 years in the mortgage business. I think we have a way to go here for this thing to level out." He also expressed some concern about home prices that are flat or even falling in some places. And to that I say, 'even though he's been in the industry a dozen more years than I; Angelo seems to agree with my own viewpoint.
Survival is an essential thought which needs to be at the forefront of your mind these days. Here’s a couple of suggestions for your consideration. Invest in your career by seeking out some serious industry training, education and information to supplement what you already understand – another viewpoint could be just what you’ll need to make it through this cycle direction, especially since you don’t know how long it will last or how deep it may become. You need to think in terms of ‘years’ not ‘months’ – the swing back this other way won’ be short, just like it wasn’t short when it was going the 'funner' way. Another idea is to close your shop if it’s small or medium sized, and you take a job with one of the major financial institutions, where you’ll receive a low salary and a small bonus/commission but a truck load of training. This way you won’t starve, and you’ll come out the other side stronger and ready to face you future.
With either suggested idea, you end up being better for yourself, your family, your customers, and a better industry citizen as well.
Roller Coaster - How Long's the Ride? 
