Residential Magazine

Q&A: Barry Habib, MBS Highway

A rate drop could nudge some borrowers off the fence

By Jim Davis

Picture a slow-moving roller coaster climbing a steep incline and getting ready to start the rapid rush downward. That’s what mortgage interest rates should do this year as the inflation rate begins to fall, said Barry Habib, CEO of MBS Highway.

Habib, whose company forecasts interest rates and the housing market for real estate professionals, believes that mortgage rates closely follow inflation numbers. And inflation, he believes, has peaked and will start heading downward just in time for the beginning of this year’s home purchase season. He’s not predicting a return to sub-3% rates, but the drop will be enough to entice movement in the housing market.

“This is the time to be aggressive in showing people the opportunity and getting the message out there, because all opportunities come from chaos.”

Habib spoke with Scotsman Guide about his sunny outlook on the housing market. He also circled a magic date on the calendar when he thinks interest rates will gain downward steam.

With the housing market uncertainty, how do you think things will fare this year?

Some of the most searched terms on Google trends are “housing bubble,” “recession,” “the Fed,” “inflation.” People are nervous. Real estate agents, mortgage professionals are all concerned because we’ve seen (sales volume) drops, certainly on the refinance side but also on the purchase side. Now a lot of people want to compare this to 2007 and 2008, but you really can’t do that.

Why not?

First of all, housing is going to be sensitive to interest rates. And interest rates are not going to be governed by what the Fed does but by inflation. Mortgage rates do what they always do: follow inflation up, follow inflation down.

And you expect rates to fall as inflation falls?

We’ll have a little bit of fluctuation, but rates should start to move lower on May 10th (with the release of the consumer price index that has April’s inflation numbers.) That’s when we’ll get that big tailwind and we will see a big drop in rates that will create a much better environment for buyers.

What happens if there are not enough homes for sale?

Prices go up. More buyers doesn’t mean as many as when rates were 3%, but more buyers than there was when it was 7%. [If I have a dream home], I’m not going to give up a 3% interest rate to go up to 6.25%. When rates were 7%, forget it. I’ll sit tight. But if rates start to come to 5%, maybe 4.75%, you know what? I’ll give up the 3% so I can put my family in the home of my dreams.

And you expect interest rates to go down to 5% this year?

I do. I’m not hanging my hat on 5%, but within a reasonable level, a quarter percent either way, yes.

Do you believe any mention of a housing bubble is nonsense?

We know what sells — sex and fear. So, it’s a version of fear porn. It has no basis in reality. Why is it a bubble? Because prices went up? That would mean everything would be a bubble.

What should mortgage originators do to position themselves in this market?

This is the time to sharpen your skills. This is the time to prepare yourself with tools. This is the time to be aggressive in showing people the opportunity and getting the message out there, because all opportunities come from chaos.

What are your thoughts on the stability of banks and other lenders in this market?

I feel for the people who have been let go. It’s awfully painful for a lot of companies to see this huge overall drop. From an originator standpoint, if you were doing eight transactions a month, you were doing great, but if that’s been cut to two, you still make more than 85% of the population in the United States, because only 15% earn a $100,000 a year. If you do two loans a month, you probably are earning $100,000 a year. ●


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