Successful Development and Innovation



The last decade of the XXth century created a favourable background for housing business. With economical conditions that provided for stable progress in economy and low mortgage rates, increasing demand for buying houses in this period created a favourable condition for housing business and mortgage companies. The other important issue was that the financing those who buy homes was changed by commercial banks and loans and savings from individual mortgaging to new level of mortgage originations that become usual at the market of housing business by the end of the XXth century. According to the data provided by the experts, “At year-end 1996, mortgage banking companies held a 56 per cent market share of total industry originations, compared with only a 35 per cent market share in 1990. And of the estimated $809 billion in total originations in 1996, $458 billion were secondary market transactions, compared with $276 billion of secondary market transactions in 1990.” (Lereah, p. 3) The housing business and its financial sector underwent some more profound and fast changes that influenced real estate credit firms and householders significantly. The process of consolidation within the industry, new findings in technological sphere and narrow margins are the key issues that characterized the atmosphere at the housing market at the end of the 90s and determined further development in this industry. (Doggem) While speaking about the future of this industry the specialists usually express positive views on the situation. Current conditions and economic situation are likely to provide mortgage banking firms with efficient business and households with various mortgage alternatives. The experts now speak of the housing industry as a branch of industry that now has the most favourable conditions for successful development. However, various challenges are also to be taken into consideration, and now these obstacles are clear and evident. As the experts’ state, “as in most mature industries, the surviving companies will be the low-cost producers, and heavy investment in technology may help companies accomplish this objective”. (Doggem) As the historical perspective demonstrates, the most important factor influencing the housing industry was changeable nature of interest rates. This branch of industry experience the same stages of development as other industries: “: downturn, trough, recovery, expansion, and peak”. (Doggem) Accordingly, interest rates are also determined by the process and are influenced by the same circular way of development, and all this thus affects the background of various branches of industry in general and the housing industry in general. It is well-known that the availability of mortgage loaning depends upon changes in mortgage rates. According to the statistical data, “Total mortgage origination volumes averaged about $97 billion annually during the 1981-82 period when thirty-year mortgage rates peaked at around 16 per cent. Conversely, total mortgage originations volumes averaged around $900 billion during the 1992-93 period due to mortgage rates falling to a cyclically low of 7.3 per cent.