What will the housing industry look like in 2023?

It’s hard to look into the future without the proverbial looking glass. The top executive at Maxwell, a digital mortgage platform, took a shot when asked by Mortgage Professional America to offer insight on what’s ahead for the housing industry next year.

John Paasonen, CEO of mortgage tech at Maxwell, weighed in on five categories during a telephone interview with Mortgage Professional America:

• Americans still want to move despite volatile interest rates. “Housing affordability is at the lowest levels ever in history,” he explained. ‘While the level may not be sustainable, it could be a key reason why market conditions will change to increase loan demand to new home purchases in 2023 from the current levels. Pent-up demand will drive homebuyers seeking to upgrade, downsize or enter the market in 2023, he insisted. “I’ve talked to a number of realtors over the last few months,” Passonen said. “They have buyers, but they’re saying ‘we’re going to wait until the market stabilizes; we think housing prices will come down’ we think interest rates will come down.’ What’s driving all that is uncertainty. What we can all look forward to in the industry is stabilization coming into play, and stabilization is what is going to drive the economic activity. Once rates stop being volatile, once we have more confidence in the trajectory of home prices, people can start making decisions again.”

Read more: Which major city is seeing home prices go through the roof?

• Despite current challenges, Paasonen said, this is no Great Recession. What’s more, he said, 2023 could see a fast recovery as homebuyers sitting on the sidelines won’t do so for long. Loan defaults and foreclosures aren’t occurring at the alarming rate they were in 2008, and while interest rates have risen, borrowers have been advancing careers and savings. Newfound purchasing power could help trigger a recovery, he said. “Foreclosures are low, servicing portfolios are healthy,” he said. “Prospective homebuyers are sitting on the sidelines, and their net worth is higher – higher than it was back then.”
  
   
• Millennials will drive the housing recovery, he noted. “Millennials are the largest generation since Baby Boomers. The peak homebuying age in the US is 34. So, if you look at the curves of the age of the millennial, the bulk of them are moving to homebuying age this year and over the next couple of years. That’s going to create a lot of demand for housing. That’s going to drive tremendous demand. All of us in housing should be excited about that.”

Read next: Home prices increase nationwide, overvalued in 37% of metros

 

• Despite the positive signs ahead, Paasonen said mortgage lenders must focus on financial education. Home buyers aren’t being told about the vast array of loans and financial structures available to them. Financial education to match financial realities must be a top priority in 2023, he added. “I want to really encourage the industry to be creative in creating programs that cater specifically to gig workers,” the CEO said. “Those offering more diverse loan products will find opportunities to reach new borrower groups and drive homeownership access for gig workers, buyers seeking lower down-payment options, and borrowers with less-than-perfect credit,” he added.
  
   
• Tech is the weapon of choice in the battle of the banks, he noted. “Mortgage origination costs are higher than ever,” he noted. “It currently costs lenders as much to build a loan as it costs Toyota to build a car,” noting the price tag of $11,016 to construct an automobile. “As margins matter now more than ever, the long overdue tech overhaul will come to the mortgage industry. Providers must deliver results, not expenses for lenders in 2023’s challenging market,” he said.