I wrote an OP ED back in December 2011 about the
relativity of a recession and the best course of action based on my data
supported by 3 recessions. Now the recovery top view. http://southeastmortgage.blogspot.com/2011/12/low-country-view-of-recessions-from.html
As we move into the 8th year of the recovery, a DOW 20116,
Commercial Flights Full, Malls Full, Restaurants Full, New Car Dealer Lots Over
Flowing, and everyone on your street doing home renovations, everyone should
govern their actions by data vs. the euphoric feel of a recovery.
With respect to the Mortgage and Real Estate Industry, I
am still confident we are in the 15th month of a 60 – 72 month cycle
expansion. I am confident to the tune of
investing millions in a 30,000 sq. ft. operations and life balance center at 3575
Koger Blvd in Duluth. The growth for the
past 15 months is ahead of my projections which provides a large enough sample
to proof that my hypothesis is correct.
Now for the Yang to the Real Estate cycle Yin. The financial markets, various stock markets
and other financial derivative instruments, can falter without an impact on the
Real Estate Market. Why? The primary participants or the 80% of the
underlying trades in the above markets are institutions and traders. When it corrects and it will, the retail
consumer in general will not be hit the way they were in the last financial
crisis because they are not in the markets as deep as they were in
2008-2009. As a result, they will be
unaltered in their euphoric quest for Real Estate. Whether their need is trading up, trading
down, or new home creation for families this trend has 4-5 years left before a
plateau.
My low country view is we all have to navigate the
same rivers in a low tide (2011) that we navigate at high tide (today). Anyone who has been at the helm of a boat
knows rivers can be a mundane transit or a harrowing experience depending on
tide and weather. No matter the size of your boat, the outcome is the same.
This is relevant in
that although there looks like more water and routes to take at high tide,
beware that the tide cycle and that route outside the normal river may be mud
at a lower tide. The only constant is the Captain (leadership) must know the tidal
pattern and govern voyages based on that data. Financial Markets are no different. You just need the tide table.
Most of the Mortgage Lenders that went out of
business in 2008-2009 were all navigating in areas that were not part of the
average safe tide and were not paying attention to the data that determines our financial tide table.
My advice to MLOs and other professionals related to the
Mortgage Industry is although low score, high LTV, and limited documentation
products fit a specific need for a very narrow segment of clients; be careful
when a Mortgage Company leads with these unique products. If they do, be prepared for a change in
career.
The safe river is clearly defined by
the regulations and directives of our elected officials. Fannie, Freddie, FHA, and VA products. Yes, FHA has some low score parameters and
should be ingested carefully given Neighborhood Watch reflects gluttons and common sizes them given
low scores correlate to higher default and delinquency. Prudence dictates moderation and sell to
client need which is always a fiduciary's safe path for industry participants and clients at all tides.
Cal Haupt
Chairman and Chief Executive Officer
Southeast Mortgage of Georgia, Inc.
770-279-0222
