Moving from a volatile rate environment in the latter half of 2022 to a market with lower, more stable rates, optimism is spreading across the industry that buyers will return. Just two weeks into 2023, Guaranteed rateBen Cohen’s senior LO and general manager has also seen an increase in calls from buyers wanting to get pre-approved mortgages.
While a lack of inventory continues to be an issue, Cohen expects first-time buyers to return to the market now that they are more realistic with mortgage rates Rents are on the rise.
Cohen said in an interview with HousingWire. You have a 3% home [and] Want to go buy a new home at a rate of 6%? You probably wouldn’t do it unless you had to.”
After creating $1.66 billion in 2021, LO is the third largest in the country Scotsman’s HandbookCohen’s production volume fell by 60% in 2022, to about $647 million.
Cohen said lower production volumes mean staff cuts and restructuring to better focus on the procurement market. Training LOs and getting on sales calls with real estate agents, insurance agents and wealth managers is what Cohen prioritizes to increase sales in a market where he expects rates to be in the 5% levels.
Read on to learn more about Cohen’s business strategies for 2023, what he thinks of the housing market and what mortgage products to watch out for this year.
This interview has been condensed and lightly edited for clarity.
Connie Kim: There seems to be optimism in the mortgage industry at the start of the new year. How was the first two weeks of January?
Ben Cohen: I’ve definitely seen an increase in calls from people who want to get pre-approved to buy a home. The psychological component of doubling interest rates – everyone understands it. [They’re asking] What can I take? What does my payment look like? I really think that until we see inventory move in our favor, it’s still going to be a tough buyer’s market.
If you’re buying a downtown Chicago apartment, there’s plenty of inventory; There may be more deals to be made. If you’re trying to buy a suburban single-family home, wait in line, right? The moment this house comes on the market there will be 10 people who want it and three or four of those 10 will probably overpay because there is nothing else to buy.
Kim: Would you say it’s a seller’s market now? I ask because we’re seeing a lot of seller concessions, such as tentative-to-buy quotes given to buyers.
Cohen: At the end of the day, there are markets that have low inventory. I would almost classify it as a seller’s market, because sure, they might not have 20’s wanting to buy this house like they did 18 months ago. But now they might still have five people who want this house. Everyone yells because again, when this one comes home, it goes fast because there’s not a lot of inventory.
So until you see the inventory stabilize, I don’t necessarily know if I still think it’s a buyers market again. Every city and state is different, so depending on where someone contacts me and where they’re looking for a home, I change my tune according to what I know about the demographics of those areas.
Kim: There is widespread expectation that the Federal Reserve will raise interest rates by 25 basis points in February. It’s not quite as high as the 75 bps we’ve seen in the past months, but how do you think it will affect potential buyers?
Cohen: I don’t think it will have any effect. I think you’re going to see a much larger boost to first-time home buyers than anything else because of the effects of closing prices. 3% own a home [and] Want to go buy a new home at a rate of 6%? You probably wouldn’t unless you had to.
So I think you’re going to see an increase in first-time home buyers, [and] why? Rents are more expensive. Landlords call them saying I’m collecting $2,500 to $3,000 in rent. they’re just going to buy a house; They can cut 3%. It just makes more sense. So I don’t know about the current homeowners because I think they are all sitting on such cheap cash. They will stick to this house [or] keep it as rent.
Kim: Lenders are putting out mortgage products that make them more affordable to buyers. How many buyers did they choose? Temporary price cutsAnd what other products do you expect to gain more traction?
Cohen: Maybe 25 or 30% of people will take it (temporary price cuts). Some people say they don’t want to inflate their purchase price just to get credit for a lower purchase. So I would tell you that the more sophisticated borrowers who dig deeper into the numbers, the less apprehensive they are probably going to be. [temporary] purchases. Or the biggest problem with the buying process is that a lot of people buy a house and then try to make the purchase, so you have to renegotiate the deal. So unless you are prepared and educated about the purchase, a lot of times it doesn’t work because people don’t want to go back to that seller.
The most popular now exists Fannie Mae And Freddie Maca program [for low income or first time homebuyers]. It used to be geographically based. Now it’s based on a certain income, and again, depending on the city and state you’re buying in, that number will change.
Kim: All the higher LOs I’ve talked to who’s done $1 billion in the past and didn’t make it this far last year. Is this the case for you too?
Cohen: I think I finished the year with about $647 million. You have to set the record straight, right? Pre-pandemic, it made $1.7 billion in 2021. Sure, that was amazing. About 53% of it was driven by refinancing. I don’t base my numbers on that. Am I going to try to make a billion dollars this year? Certainly, that will always be my goal. This is where I try to model my business and where I try to grow things.
Kim: How big is your team and how is it structured? Has that changed with the way you try to do things differently this year?
Cohen: This number (team size) changes from week to week at the moment. We are hiring, we are reorganizing, [and] We’re putting people back. It’s no secret that we’ve had to lay off workers. We standardize. We have two processors instead of four [on my team]. Now I’m focused on Team Ben Cohen rather than just being Ben Cohen. My focus now is helping creators get in the game, helping them, helping me, helping my business and I’ll focus on working relationships.
I am responsible for sales and construction, [production manager] Mike Day is the chief operating officer [focusing on] How do we make and get a loan from A to Z, how do we integrate what Guaranteed Rate offers from a technology point of view, [and] How we communicate this to our clients and referral sources.
Kim: As with many other LOs, you focus on building your brand, with an eye on relationships. How does your day to day look like?
Cohen: Mix of sales calls – be it with clients or [to] Help manage existing relationships from a referral source, or get new ones there. This is the kind of thing my day is divided into. He spends time with my team, making sure our mission statement is in line and [determining] What we want to achieve from that day and that week. Then, I’m just on the phone, you know, selling mortgages and talking to referral partners and trying to generate new referral partners.
Kim: Who are your main referral sources?
Cohen: everybody. The great thing about my business is that everyone is a referral source, whether they’re a previous customer [or] neighbor. Specifically, my referral partners are obviously real estate agents, wealth managers, and insurance people. I do a lot of corporate stints where I try to become the lender of choice for an organization to bring value there so they know they have a reliable source that the company has already vetted.
Kim: Are you optimistic about a better year with lower prices?
Cohen: I am always optimistic. I am a very positive person. My job now is to be a buyers therapist and my real estate agent. I have to point out to them that a 6% mortgage rate is not insanely high. We don’t know what the high interest rates are, right? Is it high compared to 3%? Sure, but at the end of the day, I have to bring people back to reality.
I think we have seen a peak in inflation. Rates may go up a bit again, but based on everything I’ve read, all predictions are that rates will come down. They’re not going to go down to 3% again, but I think if the rate gets to 5% — whether it’s the mid-five, the low five-year or the low-four-year, that’s a very healthy interest rate for the home, quite frankly.