In some markets, it may not yet seem like it. But even as some lenders continue to ride the refinance wave, the forecasts for the coming year are fairly aligned in agreeing that the refinance boom will be receding soon. For some, it already has. For others, maybe in a month? Three months? Five months? Obviously, we don’t really know. But it seems likely that, barring some incredibly impactful and unexpected event, we’ll be doing much more purchase business in the coming year than we will be refinance.
The forecasts also agree that volume will be high again in 2022. The downside is that, like most boom markets, the mortgage and title industry expanded to meet the historic demand we saw in 2020 and 2021. That means there are more mouths to feed. And while the proverbial “pie” is still ample, it will be smaller than the giant feast we’ve been enjoying.
So what does that mean for you?
If you’re a REALTOR or loan officer, you already know what you need to be doing. You’re shoring up your relationships, scrubbing your leads and double-checking your CRM. A competitive purchase market is built upon leads, marketing and sales. But if you are a lender, you’re probably also becoming more and more aware that 2022 will likely be more expensive for lenders. “Margin compression” may end up being the phrase of the year, and with good reason. When volume is sky high and a product lends itself naturally to streamlined production processes, we don’t talk too much about margins. But the purchase transaction takes longer to close, comes with more complications and can be costlier to produce.
So, REALTORS and lenders, the service providers you choose on the title and closing side can make a difference in a purchase market as well. Turn time is a great example. If your provider helps shave a day or two (or three) off of the closing process because it’s already positioned for efficiencies, your closing process is that much shorter as well. Your staffs are more productive as they move on to the next file or next sale. And, as an added bonus, you’re likely to have a happier borrower on your hands when the closing process is smooth and quick. Can’t hurt the repeat or referral aspect of marketing, right?
For title companies and other service providers, now is also the time to revisit your production and service processes as well. How automated are you? Are there costly, way-too-manual elements to your workflow that require more labor than your margins can bear? Outsourcing has long been a Business 101 solution for shrinking margins for a reason. It works. Simply being able to eliminate some fixed expenses for a provider able to scale its services is a classic and effective way to relieve some of the margin pressure.
This isn’t the first posting we’ll do about the coming purchase market and it likely won’t be the last. But we haven’t truly seen a more-or-less nationwide purchase-dominant market in years. Here’s the best news. All indications are that the opportunity will be there. And a little competition never hurt, right? It’s time to get prepared and have a plan!