Danny Meier had one of the busiest years of his career in 2021.
The 36-year-old closed roughly $799 million worth of loans at Academy Mortgage Corp., ranking him among the top producing originators in the US. Now, he’s bracing for a 20% reduction in business and recently had to cut several staff.
“It’s scary,” Meier said in a phone interview. “We have sellers panic listing, and then you have buyer fatigue and buyers stepping out altogether really fast.”
Business has started to evaporate across home-lending firms in recent weeks, after the Federal Reserve boosted borrowing costs to tame decades-high inflation. US mortgage rates are at levels last seen more than a decade ago. That's hurting affordability for first-time buyers, slowing down sales of previously owned homes and making it unattractive for existing owners to refinance.
Already, the fallout is cascading across the industry. Wells Fargo & Co. has warned that income from its mortgage-lending business may drop significantly in the second quarter. Employees at the bank’s home-lending division and its rival JPMorgan Chase & Co.’s unit are being laid off or reassigned to different areas. Real estate brokerages such as Compass Inc. and Redfin Corp. also announced plans to cut their workforces earlier this month.
“Layoffs are happening everywhere,” Meier said. “People are cutting rates, cutting costs, with desperate attempts to gain business.”
It’s an abrupt shift for a sector that was just recently experiencing a hiring boom. The latest jobs report showed there were 1.8 million Americans working in real estate in May. That’s the most on record and almost double the available inventory of existing single-family homes in the US. That jobs figure doesn’t include all the people working in housing-related roles throughout other industries like finance.
The pandemic, paired with historically low mortgage rates, spurred a massive wave of demand for homes and a refinancing boom. Prices soared and mortgage lenders set records. Now, the rise in rates has tempered the frenzied pace of the market.
“As firms tried to meet that demand, they, of course, hired up quite a bit,” Svenja Gudell, chief economist at jobs website Indeed Inc. and former chief economist at Zillow Group Inc., said in an interview. “We’re seeing this sort of normalization in a lot of areas of the economy. And I think housing is one of them.”
Just last year, mortgage loan originator Joanna Yu closed roughly $522 million in loans. In the past month, she’s only executed about $10 million.