Lack of a consistent political plan could lead customers to halt all mortgage activities
With potential homebuyers and refinance customers are in a holding pattern due to the current market volatility, a veteran loan originator believes that if things don’t stabilize, the economy could be heading toward stagflation.
That phenomenon arises from persistent high inflation combined with high unemployment and low economic growth, causing rising prices and a lower ability to pay those high prices.
Jim Black (pictured right) is a mortgage industry expert and strategic adviser to Calque. He’s been a loan originator for more than 20 years and is the chief lending officer at Revest Homes. He sees his customers' economic challenges firsthand.
“There are many struggles homeowners and potential buyers are navigating,” Black told Mortgage Professional America. “The biggest theme I see right now is where to go to escape the volatility and unknown outcomes of global economic conditions. These are at the forefront of any large decision.”
Buyers hesitating to move forward with mortgage purchases has a trickle-down effect on the local economy. According to Black, it hurts brokers, appraisers, inspectors, and other workers involved in a home purchase.
“People are either holding off or remaining in a current lifestyle situation that is not optimal,” Black said. “It is putting strain on the local customer confidence and hurting local small businesses who count on the support of spending.”
The falling knife effect
By buyers sitting on the sidelines, it could impact not only their livelihood but also the local economy and the financial security of mortgage brokers. Black said there are three effects to homebuyers putting off purchasing a new home and cutting back on discretionary spending.
“It will be less income for self-employed borrowers who are normally high-wage earners in their neighborhoods,” Black said. “Plus, less consumption means less tax revenue for cities and counties to make good investments in schools, infrastructure, jobs, and community housing. Finally, less activity means less revenue for professionals in the housing, or affiliates to the housing market, which are large spenders.”
As affordability decreases due to outside financial pressures, borrowers may find loan qualification even more difficult.
Miki Adams of CBC Mortgage Agency highlights rising downpayment costs as a major hurdle for homebuyers, particularly first-timers, and stresses the importance of federal and private programs in overcoming affordability challenges.https://t.co/z3UIhaeTTI
— Mortgage Professional America Magazine (@MPAMagazineUS) April 21, 2025
“This cycle will lead to less qualified borrowers, more inventory, and a ‘falling knife’ effect,” Black said. “Families will be hesitant to do anything as they feel the market will go lower and that they are buying at a bad time.”
An increase in inflation caused by tariffs may make it hard for the Federal Reserve to consider rate cuts. Black believes worse economic conditions may be ahead if those same tariffs also tighten household budgets.
“These are all signs of stagflation, which is the worst condition we can be in,” Black said. “There are little to no effects that fiscal and monetary policy can make to get us out of higher price durable and non-durable goods.”
A consistent, stable, believable plan needed
It is a challenging time for customers looking to buy a home or refinance a mortgage. This is especially true for self-employed business owners on both the supply side and customer side of the homebuilding industry.
“The economic uncertainty has caused some major second-guessing of larger financial decisions in housing,” Black said. “Self-employed business owners cannot accurately predict pricing and supply chain issues that may come from tariffs.”
One small bright spot caused by buyer hesitation is that some markets have become buyer’s markets.
“The buyer really has to find the ‘dream home’ to make an offer,” Black said. “Even after making the offer, it seems to be a buyer’s market with requests and demands that would not have been able to be negotiated two years ago.”
But the market fluctuations and rate changes still leave brokers and their customers searching for answers. Black notes that these fluctuations have major impacts on buying power.
“We are seeing a lack of confidence in the financial markets,” Black said. “With large swings of 0.75% in interest rate movement in a week, potential buyers throw up their hands and cannot predict the payment or affordability of a home when the index changes about 8% buying power in a week. Every 1% change in interest rate equals 11% change in buying power.”
Black believes this volatility will continue until the government's overall financial and monetary policy becomes consistent and predictable.
“Until we see a settling down of the volatility in both interest rates and the financial markets, we will have sporadic and inconsistent market outcomes,” Black said. “Until the current government has a consistent, stable, and believable plan, the uncertainty will create a downward activity outcome. Even with interest rates moving higher or lower, the activity of a consumer will be timid for the near future.”
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