Mortgage lenders talk market slowdown after years of chaos

as any I’ve ever seen,” said the lender, who has been in the mortgage business for more than 40 years. “The only other time that was close was in the ‘80s when we were still trying to come out of that into a corner – whether it’s work-related, personally, whatever – you get to address those things (when the market cools).”

And cool the market has. Mortgage rates peaked at more than 7% in November 2022 and are sitting at about 6.5% right now – more than double where they were at the beginning of 2022.

That shift has essentially stalled refinancing activity and has slowed buying and selling, too – with northern Michigan’s small inventory of available homes exacerbating the latter issue.

Great Recession, that only worsened amidst stay-at-home orders; global supply chain kinks; and massive labor shortages.

All these factors and others combined to set the housing market on fire. And as bidding wars, skyrocketing prices, and record sales numbers made headlines in northern Michigan, local mortgage loan originators found themselves on the chaotic frontline.

“I was never busier than I was in 2020 and 2021,” said Dave Durbin, a mortgage loan originator at West Shore Bank.

“And I’ve been doing this for 18 years.”

Nagy agreed.

“That 2021 market was about as wild period of historic-high double-digit rates. When we finally broke under 10 and got into the 9s, and then the 8s, and then the 7s, you’d often be refinancing the same person three times in the space of two years.”

According to Durbin, every mortgage lender knows that their industry is cyclical – and that periods of feast are always followed by periods of famine.

“Even when you get that busy, you know it’s not going to last forever,” he explained. “That’s just how it works. So, for all those 14-hour days and seven-day weeks you worked in 2020 and 2021, and into 2022, everything that you pushed

The result, for mortgage lending professionals, is that the past three to six months have been a relatively “boring” time.

“I’m definitely taking this time to educate myself on different products, and on what’s coming down the pike that we think customers are going to be looking for,” Durbin said.

Durbin predicts that the construction loan will become a component, due to the country’s awareness of northern Michigan and the subsequent shrinking of existing home inventory.

“We’re already seeing that, actually, and with the purchases of vacant land, people are applying for construction loans,” he said. “That seems to be a higher percentage of business. Those loans are more time-consuming, and when they come through, they give us a lot more to do (than a traditional mortgage), so it’s important for us to sharpen those skills.”

Construction loans aren’t the only piece of business that is growing for local mortgage lenders even as more traditional services remain slow. Mary Burgin, a mortgage loan originator for TBA Credit Union, confirmed the general assumption that traditional mortgage refinancing is virtually nonexistent right now – aside from divorces, deaths, or other situations where owner have no other choice. But she also said that the dropoffs in refi and buy activity have been balanced out slightly by “a steady influx of home equity loans.”

“A lot of people refinanced back when the rates were low, so they don’t want to touch that rate they have,” Burgin said.

The result being that homeowners are staying in their homes for longer periods, choosing to upgrade what they have through home equity loans.

“The home equity loans are a really good option for them to be able to use their home’s equity for upgrading their home or even for a down payment on the purchase of a new home, all without changing those 3% rates they have on their current mortgages,” she said.

Mortgage lenders aren’t just using this lull in the market to educate themselves, though, or to get more comfortable with the less common products that exist in their industry. For Nagy and his team at State Savings Bank, one of the big focuses at the moment is on educating others through “how to buy a house” classes they give to high schoolers.

“Because they don’t do that much in schools anymore, and who better to teach it than people who’ve been doing it for 40 years?” he said.

Getting out and teaching youth is important for those in his line of work for various reasons.

“You can’t just sit in your office and wait for people to come to you. You need to get out in the streets,” he said. “There are so many opportunities out there to build awareness and relationships around what we do.”

Burgin and her team also get out in the community, hosting several first-time homebuyer education courses in conjunction with the Northwest Michigan Community Action agency.

“...(T)hat’s a really good opportunity to educate buyers about what to expect from the mortgage process,” she said.

They also visit with local real estate offices to educate the new agents on what to expect on the mortgage side of things.

“That also gives us the benefit of building relationships with referral partners, which can be helpful during slower times,” she said.

Of course, even though mortgage experts can and do find ways to busy themselves during lulls in their business, they’re all ultimately waiting for the next market boom. When that boom will come, Durbin said, is anyone’s guess.

“Right now, it looks like by the end of 2023, rates will have dropped to somewhere in the low 5s,” Durbin said.

With that drop, Durbin says homeowners could be on the hunt to sell and buy again, but that in a market like Traverse City, it’s hard to predict.

Plus, construction has its limitations, because builders are limited in number and booking up, he said.

“So, we have this bottleneck in our area right now, and that could keep housing prices high,” he said.

Though increased interest rates normally cool a market down, that’s not what is happening in northern Michigan.

“...(O)ur area is so different from the rest of the country,” he said. “I don’t think anyone has a real crystal ball for what’s going to happen here.”