Mortgage Banker Predicts the Seller’s Market in the U.S. Isn’t Changing Anytime Soon | Ezine Daddy

​​Melissa Cohn has been in the mortgage brokerage industry for nearly four decades. In 1985, just three years after graduating from college, Ms. Cohn founded her own company, the Manhattan Mortgage Company. The company became one of the leading mortgage brokers on the East Coast, generating more than $5 billion in revenue per year.

In 2012, Ms. Cohn sold her business and transitioned into the mortgage industry before joining William Raveis in 2020 where she was regional vice president specializing in brokering mortgages for high-end clients in New York and Florida.

Mansion Global spoke to Ms. Cohn about how she got her start in the mortgage business, how rising interest rates are affecting second home buyers and how the war in Ukraine is affecting US housing markets.

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Mansion Global: How did you get into this industry?

Melissa Cohn: When I graduated from college, I was offered a job at CitiBank. I was put into the retail banking system on the Upper East Side of Manhattan and the gentleman who was my boss basically told me that mortgage lending was going to be the future of bank profitability and that I should watch out for it. So I did. And I loved mortgages because it’s a mystery. How do you take someone and help them qualify to buy their home?

MG: In 2020 you switched to William Raveis Mortgage. How was this transition?

MC: Well I had to sell [my company, Manhattan Mortgage Company] Because of the stricter regulations. Most major lenders have eliminated their mortgage brokerage programs. Bank of America was one of the first to exit, and then CitiBank went out. And the real nail in the coffin was when Wells Fargo decided to give up the wholesale business and just stay in retail and correspondents, which they still do to this day. And so I was forced to sell Manhattan Mortgage. In 2020 I came to William Raveis, who I like very much and [I’m] another great year.

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MG: The Fed hiked the federal funds rate last month and mortgage rates jumped to over 4%. This is something most people expected. What reaction did you see in the market?

MC: Bond yields have continued to rise. That was initially the focus of the war in Ukraine [it] would depress the economy and that theoretically this could mean that it would slow the economy down and interest rates fall. When Russia invaded Ukraine in late February, 10-year government bond yields fell. But then, as oil prices shot up, the bond market completely turned around and started edging higher, as those higher oil prices mean higher prices, higher costs and the harder the Fed has to fight. So we’re in a time when everyone fears higher interest rates and therefore higher bond yields, and mortgage rates have just gone up tremendously.

MG: Have you seen any impact on high-end luxury buyers?

MC: None at all. In the Hamptons of Manhattan, South Florida, no customer has ever told me that I decided not to buy because the prices are so high and I can no longer afford to buy. We deal with many people who buy second homes. I think people are aware and don’t like the fact that interest rates are higher. But first, jumbo rates are actually lower than compliant rates today. And second, people who shop on the jumbo marketplace will say, “Well, maybe I won’t take a 30-year fixed rate of 3.5% because that rate is higher now.” I’ll take the 10-year adjustable 3.5%.” They’re more sophisticated, they’re more willing to take any extra risk by taking out an adjustable-rate mortgage versus a fixed-rate mortgage, and they’re confident they will continue want to buy and finance. I think one thing that’s happened is that there are a lot of cash buyers in the high-end market, especially with all the cash fortune that’s accumulated over the past few years.

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MG: Can you comment on the impact this would have on the average home buyer or first time home buyer?

MC: Today’s first-time homebuyers tend to be older in urban areas simply because real estate is more expensive. Many of them are in their 30s, have two incomes in the household and actually have quite a lot of purchasing power. We’ve been in a period of 3% or below for the past two years. Therefore, it is very difficult to get people to adjust their expectations to 4% or higher in today’s market. If interest rates go to 5% or 5.5%, things could change. That will have a bigger impact, probably more psychologically at first than in terms of a buyer’s ability to actually qualify [for financing].

MG: Would that be even among the higher quality second home markets?

MC: It will stop people for a moment. Unfortunately for me I think it will get more people to pay cash than to take out financing. But at the same time, higher interest rates usually mean prices start falling. Or we’d hope they’d just stop going upstairs. We are in a unique time where inventory is so limited that even higher rates are not slowing people down.

MG: How long do you think this seller’s market that we’ve seen will last?

MC: You must include war in the equation. Think of all the people who thought they were going to travel to Europe or do other things this summer. And now, with the war in Ukraine, I think more people are saying, “Well, maybe I’ll just stay in the Hamptons.” And it seems to have reinvigorated shoppers. I don’t see any weakness in activity. There is certainly not enough inventory. And the question is: what does it take to achieve healthier inventory levels? And will we ever get out of the seller’s market? Well we will. But I don’t think it will be over the next year.

MG: What do you expect for the rest of the year in terms of further Fed rate hikes?

MC: Unfortunately, mortgage rates will rise by spring. But if oil levels stay high, higher oil prices will act like a tax on the economy. If it costs you more to fill up your car to go to a restaurant, eventually everything will cost more money. There is speculation that these higher rate oil prices will severely impact the economy and we could be headed for a recession sometime later this year. And if the economy does go into recession, that means the Fed needs to turn around and actually start cutting rates to revive the economy. So we seem to be in a time frame where things are moving at lightning speed. What will have gone up so quickly, you can flip and go back down pretty quickly too.

This interview has been edited for length and clarity.

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