Faulty Predictions Make Planning More Difficult

This spinning crystal ball called 2023 poses many challenges

BY DAVE HERSHMAN, CONTRIBUTOR, NATIONAL MORTGAGE PROFESSIONAL MAGAZINE

At the beginning of the year, I wrote a column about helping your loan officers plan for 2023. While the concepts are still valid, we need to acknowledge how hard it is to plan in this industry because the future is so uncertain. For example, we expanded our staffs exponentially in the period from 2019 through the first part of 2022.

If someone could spell the word processor or underwriter, we hired them and paid quite a premium. Everyone knew that eventually, these good times would end — and they did. Few predicted they would stop on a dime as they did. Thus, we spent most of the rest of 2022 shedding those hires. Lean and mean has become the key phrase of 2023. Yet, now rates have come down a bit (a few times) and the Spring has brought some buyers out.

With staff pared, pipelines are quickly filling up. Should we start hiring again? Hard to know what the answer is when you can’t predict what is going to happen next month, let alone next year. Certainly, the average employer is gun-shy at this point. And if it is hard to predict what we should do, how do you think our loan officers feel? Should they bring back their assistants? Will you help them? What if things die back in the summer?

Changing Forecasts

We are now over one-third of the way through the year, and you can see the forecasts that came out just a few months ago are already being revised. For example, Fannie Mae predicted a recession to start in the first quarter of this year. After the economy produced 800,000 jobs in the first two months of 2023, they shifted the forecast to a slight recession during the second half of the year.

Since the economy is stronger than predicted, mortgage rates should have risen higher than forecasted. Yet, the Realtor.com housing forecast predicted average mortgage rates of 7.4% in 2023, with a peak during the first half of the year. In reality, mortgage rates have not risen to these levels, so unless they spike from here, we are not likely to reach these heights.

In addition, we went back and did a review, but did not see many predictions of a banking crisis and certainly did not see a specific warning about the largest bank that went down. Silicon Valley Bank was the second-largest banking failure in history. Some are now predicting that the concerns in the banking sector are what may finally tip the economy into recession.

Time and time again, we have indicated that predicting the future is futile. If any of these high-paid prognosticators could actually predict the future with some accuracy, they would be investing in financial futures and making a fortune.

Beam Me Down

So, let’s go back and misquote Star Trek — predictions are futile. No one predicted the pandemic. No one predicted the pandemic would cause the biggest real estate and refinance booms in history. And few foresaw the party stopping on a dime. The ability to plan in an ever-changing environment is a key to our success and a key to the success of our loan officers. It is a skill that we must convey. Our leaders should not be always asking — what are you doing to produce today? Our leaders, at times, must be asking — what are you going to do if ____ happens?

Welcome to the world where change is the only constant! n

Dave Hershman is a top author in this industry with seven books published as well as the founder of the OriginationPro Marketing System and the OriginationPro Mortgage School. He can be reached at dave@hershmangroup.com.