Ryan Birtel is one of the most intriguing and insightful thought leaders in today’s financial services world. He is a former portfolio analyst at GE Mortgage Insurance, a vice president at Banc of America Securities and Deutsche Bank, and an executive vice president at UBS Investment Bank. In 2007, he created Eolith Advisory Ltd., based in Charlotte, N.C., which provides economic and financial advisory services related to the real estate and structured finance markets.
Q: What is your opinion on the overall health of today’s housing market?
Ryan Birtel: That’s a deceivingly difficult question to answer because health is such a relative term and we all have a unique perspective. From where I sit, I believe the housing market is in very poor condition, yet I understand how that may seem to be a minority position so let me explain.
First of all, while it may be tempting to lose oneself in the popular economic statistics, lauding their recovery from historically severe troughs, it’s likewise hard to imagine a happier person than a drug addict who has just been handed a fresh supply of their preferred intoxicant. Since artificial ‘highs’ are not permanent, nor a positive sign of health, a straight comparison of statistics may not reveal anything deeper than an improvement in symptoms as opposed to an improvement in the overall health. Nobody would suggest, in hindsight, that the financial markets were healthy from 2005 to 2007 notwithstanding the statistical peaks achieved, right?
When I think of “health,” I think of the vitality of an entity, be it a person, an institution, or as you suggest, a marketplace. If one subscribes to the definition of vitality as the capacity for the continuation of a meaningful or purposeful existence then that would imply considering the capacity and purpose of the people and institutions that comprise the housing market in order to assess its overall health. From that perspective, I would suggest that the financial crisis evidenced some mismatch between capacity and purpose, somewhere, within the system and, in my opinion, that mismatch has not since been addressed.
While I might be tempted to believe that individual preferences have changed for the better – e.g. first-time homebuyers being more conscientious about long-term affordability and less focused on short-term profit – it’s not clear to me that institutions have changed similarly. Centralization of housing policy, along with the government’s continued sensitivity to lobbying from entities more concerned with volume than sustainability, has perpetuated in function, if not form, the same processes that existed pre-crisis. I fear the system is setting itself up for another inevitable, yet avoidable, collapse.
However, as to not seem like such an alarmist, I must admit that such a collapse is only as imminent, or likely, as the threat of Congress defaulting on U.S. Treasury bonds. That’s the one benefit of having the government explicitly back the entire housing market. Unfortunately there is also a downside to this type of support. Government centralization takes the authority and accountability away from those who are on the front-line of risk assessment and who are actually paid under the pretense of having that authority and accountability. That’s a big mismatch between capacity and purpose.
Q: We have seen more than a few layoffs in the current mortgage banking industry. Do you believe that this is still a good industry for pursuing a career?
Ryan Birtel: My thought is that there is a certain conservation within the market, as such, jobs are not really created or destroyed, they may just transform. For example, folks who helped originate mortgages or mortgage related securities during the pre-crisis market found their skills applicable during the post-crisis work-out. In rising markets there is relatively greater demand on the brokering and sales side, while in receding markets the demand shifts to monitoring or “clean-up” functions. If one stays flexible, and current, in their skills and mindset, I think it is possible to stay gainfully employed through all of the economic cycles.
One caveat: real estate is all about “location, location, location,” so the willingness to relocate geographically to follow the demand for service is important.
Also, since the economic recovery is now a few years seasoned this is the time to expect new business models, innovations, etc. to take hold and create demand for those still interested in a career in housing yet wanting, or needing, a less conventional role.
Q: There seems to be a low number of interesting start-ups in the mortgage banking industry. Do you believe that this is still a good industry for pursuing a career?
Ryan Birtel: It really depends on what one is trying to start-up – i.e. how do you define “interesting”? I can’t imagine it’s prudent, or easy, to try to put together a bank or mortgage origination platform in this economic regulatory environment, but the real estate market is enormous, requiring many types of services.
Just look at how much Zillow has grown on the premise of increasing clarity on housing prices (something sorely needed). I even consider periphery housing related businesses like HGTV and Houzz(.com) as indicative of the staying power of the real estate business overall, even if not strictly speaking “mortgage banking.”
Q: What advice would you give to new college graduates that might be looking at the mortgage banking world for a future career?
Ryan Birtel: Make sure your efforts are always related to earning or learning. Yes, it sounds simple and obvious, but it’s easy to forget after your first couple years in the business…which is about the time you’ll most need to remember it! Good luck!
Ryan Birtel can be reached at Ryan.Birtel@EolithAdvisory.com.