Texas Housing Tango: Rising Rates and Shifting Strategies

As high-interest rates shake the market, originators redefine their game plans, tackling challenging terrain with innovation and resilience

Insider

By Sarah Wolak

Staff Writer

Even though 2023 started with a bang, Texas’ home sales still diminished by over 20% compared with last year’s numbers. But high-interest rates and rising mortgage rates are threatening the housing market in the Lonestar state, causing LOs to change their strategies.

The year began with a false start: the market seemed promising– inventory began to correct and homes spent more days on the market, causing anxious would-be buyers to come off the sidelines. Although home prices in the state are trickling downward overall, the unexpectedly cool industry is compelling LOs to revisit the fundamentals and devise innovative strategies to stir up business.

Aaron Canales is experiencing a market downturn for the first time in his short career as a mortgage loan officer. Canales, based out of Austin, decided to make a career shift and obtained his license in May 2022. He started originating at CrossCountry Mortgage but, two months later when the market shifted, he was promptly laid off with minimal contacts and practically zero business. “It was a tough time for me,” he said. “My wife and I just had our second child and I was unemployed. Although we had prepared for my career shift and saved up money, I was left on my own to build leads and get my name out there.”

Charting The Course

Canales has been weathering the storm on his own. Previously, Canales held a sales position at a tech firm and wasn’t used to a commission-based career. “As time has gone on, it’s been a blessing [to work on commission and be on my own] because in this industry it takes a while to start making headway in a commission position,” he reflected. “Bouncing around between companies after being laid off gave me time to make relationships with people.”

Now, Canales is originating at Geneva Financial and is finally completing his first loans nearly a year into the business. “I’m in my 40’s and I feel like a high school freshman,” Canales quipped. “Luckily now I’m at a company that coaches me. I have a lot of help, but I’ve also been able to pave my own way.”

So how did he do it? Canales says that he relied a lot on his personal network, especially agent friends. “At the beginning, I had one agent that I was working with,” he admitted. “But compared to six months ago it’s been a huge difference, now I’m working with seven agents instead of just one.”

Canales described the period of unemployment as a dark time and a lot of “boots on the ground” work. He had a house-flipping project on the side that he was relying on for money while he spent time making phone calls, shaking hands, and trying to reinforce connections with real estate agents. “I had to learn how to market myself and reach out to people through my network or referrals. I even met a financial planner that is going to send me referrals,” he said. “I’m in farming mode: planting seeds and expanding my reach for when the market comes back.”

Canales also added that he’s focusing on making himself an educational resource to borrowers. “I’m making myself available to do refinances down the line and trying to offer tips to customers who need an extra step to compete in the Austin and Central Texas markets,” he said.

A Change of Audience

For industry veteran Jennifer Wolf, the Texas market has seen higher points. Wolf originates for 1st Alliance Mortgage, which is based out of College Station – just a hop and a skip away from Texas A&M University. She’s been in the business for over 21 years and says that 2023 is far from the ideal market that she saw in 2021. “2021 was perfect because… the market was hot. However, 2022 was much tougher and 2023 is bouncing back a little bit but is nowhere where it was two years ago,” she said. “A lot of people are looking for homes and questioning purchasing, but a lot of applications haven’t quite turned into contracts.” Wolf cited slow inventory as a contributor to the tight market. “We’re not seeing people want to refinance from the 2% or 3% rates that they got a few years back,” she explained. “Even investment properties, which is what I see a lot of in College Station, are slowing down.”

Wolf says that right now, her main customers are primary residences between $325,000 and $350,000. She also described working with a lot of first-time buyers in the market – more than she’s worked with before. But Wolf’s bread and butter around the springtime is usually parents purchasing investment properties for their kids going to a Texas university. This year, however, she’s seeing less of those investments due to high-interest rates.

“I’m hearing that prices all over are coming down. But it’s tough to generalize what the Texas market is going through because each city and geographic area is its own ecosystem,” Wolf explained. “Right now, the real estate agents dictate the activity. They have to work a lot harder to solicit the buyers out there, especially pulling first-time buyers out of the weeds and incentivizing those loan products designed for first-timers.”

“I’m in farming mode: planting seeds and expanding my

reach for when the market comes back.”

Aaron Canales, loan originator

Geneva Financial

Keeping up with Customers

Toni Shopp tells a different story, even though she and Canales work for the same company. Shopp, who has been an LO since 2019, says she personally isn’t seeing first-time buyers pursue homeownership. “The rates are scaring them because they expect to get the same rates that COVID-19 shoppers did,” she said. “I tell them that you marry the house and date the rate. Rates historically go up and down, and you can refinance down the road.”

Shopp is licensed in five states but does most of her business outside of Austin. She says that the influx of tech companies – Tesla, Dell, etc – is impacting homebuying, albeit to an extent. It’s been a tough market for her to be resilient in, but Shopp has a different angle. Prior to originating, Shopp held a real estate license and says she’s kept in touch with the renters. “I’m trying to sway them into homebuying and keep up with their journeys,” she said. “I tell them that when you rent, you’re paying 100% interest. They have to think of real estate as an investment, not just a place to stay.”