We’re only halfway through 2022 and we’ve already seen layoffs and job losses in the mortgage and real estate industries, the likes of which we have not seen since the Great Recession. What’s Going On???
Higher mortgage rates and sparse housing inventory will result in loan originations and home sales falling to about half the volume seen in 2020 and 2021. This has already resulted in thousands of job losses in the mortgage lending and real estate sales industry. Hundreds of lenders, including some of the largest, such as Wells Fargo, Chase, PennyMac, LoanDepot, Guaranteed Rate, Fairway Mortgage, Movement Mortgage, New Residential, and Better.com have already gone through a series of layoffs. Others, such as the latest, Sprout Mortgage, have shut down all together!
Lenders aren’t the only ones feeling the pain. Real estate brokers such as Compass, Redfin, Zillow, and California-based Side, have all experienced massive layoffs this year.
While the contractions of these industries might raise fears of another housing crisis as experienced from 2007 through 2010, allow me to put your minds at ease. There were a number of contributing factors to the last housing crisis. Back then, mortgage underwriting guidelines were lax. Today, borrowers must document their qualifications and their ability to repay their mortgage. In the decade leading up to the Great Recession, housing prices were driven up by speculation. Novice investors were buying houses with the intentions of selling at higher values. (After all, housing prices only go up; right??) However, housing prices have risen these past few years due to strong demand to purchase primary and second homes (not investment properties), while the supply of inventory has not kept up with this demand. Lastly, when the great recession hit, we saw a huge wave of defaults and foreclosures hit the market from all the homeowners and investment owners who purchased with mortgages they could not afford. This created more supply than demand, thus pushing prices lower. Today, we are already seeing foreclosures rising. However, the numbers are still well below pre-pandemic levels. Besides, demand to purchase homes, even in this current recession, is still strong enough to absorb this added inventory.
While some would view these mortgage and real estate industry job losses with concern, I have a different view. The barriers to entering the real estate and mortgage industries are still quite low compared to other professions. During good times, this naturally attracts salespeople with questionable qualifications and integrity. However, during hard times, these people tend to leave in search of greener pastures.
The mortgage and real estate industries are again in need of a cleansing. If this downturn shakes out much of the incompetent, unethical, and dead wood, our industries will be better for it.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.