Here is the original question: "I am reading that a recession is on the way. With higher rates and real estate sales falling, I believe a recession could be devasting to our business. What is your take on what a recession would mean for loan officers?"
In my previous column, I contemplated as to whether there might be a recession and moved to the question of how a recession might affect our business. We ended with a look at the Great Recession, which started in 2008.
Fast-forward to the recent pandemic-induced recession. Real estate halted for a month or two, but it not only rebounded, real estate soared because of multiple factors. And not only did real estate get hot, but ultra-low rates spurred a refinance boom like no other we have seen. Two recessions, two different reactions, but both times mortgages played a part in the recovery.
The bottom line? While we can’t predict the future, a recession does not necessarily mean hard times for the mortgage industry. Of course, this recession, as well as every recession, is likely to be different. Why?
What factors might cause this “possible” recession to be different from previous recessions? For one, any new recession might spur refinances as interest rates fall from these levels. However, because so many Americans refinanced in the previous two years, it is not likely that this boom will be anywhere near as large as the previous two years. Perhaps a “pop,” rather than a “boom.”
Because of inflationary concerns, the Fed is not expected to push down rates as quickly as they did during the pandemic-induced recession. As a matter of fact, if inflation persists, we might well have a very shallow recession which might be akin to a form of “stagflation.” This is a state of stagnant growth coupled with inflation. Again, rates are not likely to fall as much if inflation is still a concern.
While refinances may not be as big a part of such an economic climate, they should contribute to more volume and the purchase market could hold up better than it did during the Great Recession of 2008. Again, this is all speculation, but it does consider factors that are logical based upon what we have observed. Any prediction is just an opinion. Who predicted the pandemic and furthermore, predicted a real estate boom while the pandemic was in full bloom? Not many.
Dave Hershman is Senior VP of Sales of Weichert Financial and the top author in the mortgage industry. Dave has published seven books, as well as hundreds of articles and is the founder of the OriginationPro Marketing System and Mortgage School – the online choice for expert mortgage learning and marketing content. His site is www.OriginationPro.com and he can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..
