Recession.
It’s the economic buzzword of 2023. No matter where you go or what you listen to, folks are talking about the threat of a looming economic recession.
The stock market is all over the place.
Inflation is on the rise.
And analyst data increasingly says we’re in the midst of an economic downturn.
Fabulous! So, now what?
Introducing…
6 reasons that adding a mortgage brokerage could help you weather today’s economic wildness and build a recession-proof real estate business.
1. People will always need mortgage loans.
Everyone needs to live somewhere, and that typically means they also need a mortgage loan.
Interest rates may be all over the place, but history shows us that the number of new mortgage loans needed stays relatively steady throughout booms and busts.
In fact, after the last big recession and housing market crash of 2008, people still bought homes. And home purchases mean… new mortgage loans.
Some even see recessions as a good time to buy a home – a unique opportunity to get more house for less money.
Do economic downturns spook some buyers? Of course.
BUT lower demand may open up more choices and more inventory for eager buyers. It also might give them more power to negotiate over prices and seller concessions as it relates to repairs or included items. There may be less fear of having to bid thousands of dollars over asking price just to get something.
2. Changing mortgage rates? More potential opportunities for you to cash in.
You probably already knew #1. You’re in real estate after all! So, where does a mortgage brokerage come in?
You likely also know that interest rates typically rise and fall along with the economy. And recently, interest rates have been going up and down more than the market typically sees.
The great thing is, these fluctuating home loan interest rates could make way for more refinance demand in the future. So, even if home purchase activity slows, you could have a refinance revenue stream.
This not only means more potential business for you, but you’ll look like a hero to your clients!
3. Cash-out refinances are more popular than ever.
Nervous homeowners deciding to stay in their current homes rather than buying?
No problem! If you’re just in the real estate game, this could be a losing roll of the dice. But with a mortgage brokerage on board, you could be stacking up those chips.
Many homeowners currently have more equity in their homes than ever before. U.S. homeowners with a mortgage have continued to gain near-record equity since the second quarter of 2021 – an increase of 27.8% year-over-year, equaling a collective gain of $3.6 trillion.
What this means for you is that cash-out refinances could be more viable and attractive options than ever for borrowers needing extra cash for things like:
- Bridging unexpected income gaps…
- Consolidating high-interest debt…
- Improvements or repairs to their current home…
- Or even paying for college, trips, or new career training.
As interest rates fall, a cash-out refinance can even be a much cheaper option than carrying high-interest balances on credit cards.
More refinances might equal more revenue for you, if you add mortgage services to your real estate business.
4. The Feds have the mortgage industry’s back.
Today’s market thankfully isn’t a repeat of the Great Recession.
After the crash of 2008, congress passed the Dodd-Frank Act, which overhauls the mortgage approval process and protects mortgage professionals with tougher lending regulations.
It’s now harder for borrowers to get a mortgage loan without a down payment, higher credit scores, and proof they have the ability to pay back their loans. The rate of mortgage loan defaults has also declined.
The number of mortgage-backed securities has also fallen in favor of much more stable and secure conventional and government-backed loans. (Mortgage-backed securities are a potentially more risky financial product, and were one of the main culprits in 2008’s market collapse.)
Fewer risks, fewer defaults, and more loan security mean a more stable lending industry.
Even in a possible recession.
5. Job changes can mean new jobs in new places…
…which may mean a need to buy new homes.
But haven’t many jobs shifted to a remote work model?
Yes, but there are still as many or more that are location-based, leaving new hires to potentially tackle home shopping in a new city or state. And then, there is the adventurous crowd who take the freedom of their remote job to settle in a brand-new locale.
6. Be the business everyone knows, likes, and trusts.
Let’s face it, a mortgage loan is the largest expense in a typical household.
As a real estate professional, this puts you in a unique position to establish yourself as a trusted and valuable financial advisor and partner. You have the opportunity to become the go-to source for help with rebalancing debt, understanding options, and navigating challenging financial times. And that’s even before you consider your opportunity to become a convenient and reliable one-stop homebuying shop — expanding your repeat customer opportunity.
Cue the referrals and glowing reviews!
The verdict on whether or not mortgage is a recession-proof business?
There are no guarantees that any industry is immune to economic downturns.
For mortgage professionals, borrower job losses can mean loan defaults and possibly foreclosures. Tough economic times can mean more conservative loan underwriting decisions, making it harder for borrowers to get their loans approved.
That said….
The mortgage industry may be more recession-proof than most.
Expanding into mortgage lending as a brokerage can:
- Help balance the inevitable highs and lows of your primary home-sale revenue stream.
- Help diversify and protect your business against changes in the economy.
- Provide you with a way to expand and grow your business.
- Open up new revenue opportunities that can add to your bottom line.
- Establish your business as the go-to source for home-related financial help.
- Provide opportunities for your business to be the real-estate hero to your clients.
Who knows… with mortgage lending rounding out your suite of services, this may be the year you could build a more recession-proof business.
For savvy real estate entrepreneurs like you, that sure sounds like a win to me.
Published on June 8, 2023
