2020 was a tough year...hard to find things to celebrate and think positively about, outside of making it to 2021. One bright spot was the housing market. This same housing market that is shedding its light into the first half of 2021. Although many homeowners needed to exercise the need for forbearance programs, we did see anxiety in the economy push mortgage rates to record lows. This spurred one of the hottest markets for mortgage products in history. Record activity due to low rates, leading to increasing property prices and ultimately now, a shortage of inventory.
This some would say is the perfect storm, and a hell of a perfect time to be in the housing, real estate, and mortgage business.
Now, there is an interesting mix of circumstances present today. Rates are rising ever so slightly. But...still drastically low from years ago, thus still making it an opportunistic time to buy. While housing demand has risen, the supply chain has not kept pace. Builders and suppliers have been compromised, thus limiting inventory. What does this mean, a market of high prices and buyer frenzy as many many buyers compete for the little inventory currently on the market.
This is both good and bad, as written originally by Jim Gay in his article "Mortgage Matters: It's a great time to sell, and buy". Here are some thoughts to think about in relation to that:
Rates head up! - The 30-year, fixed-rate mortgage will see a slight rise in rates as the year progresses. Freddie Mac predicts that rates will hover around 2.9 percent and possibly go to 3.2 percent in 2022. This will slow mortgage originations and refinancing, causing property values to moderate.
City migration to suburbs - Remote working will enable families to move to the suburbs and spend more time at home. Single-family housing starts in suburbs will increase. Due to the pandemic...with everyone not being able to go to the office, and forced for the most part to set up shop at home...now working at home, living at home, the smaller spaces of the usual city home become more and more cramped....like the feeling you have when you've been on a very long road trip. Space...what you desire...what you need. We are not suggesting a mass exodus, but migration out of expensive cities to less costly metro areas and, yes, suburbs will continue to play out.
Sell Now - Experts across the board are predicting that home values will continually increase through November. But as construction ramps up again and the COVID vaccine becomes more available, prices will eventually decline. Hesitant sellers should listen up, get on the proverbial ball and realize this time is indeed a perfect storm.
Mortgage origination slow down? - mortgage originations are expected to fall from the unique high in 2020.
So what does the above mean for the mortgage advisor?
2020 allowed mortgage originators "reactively" manage their new business. So, much activity promoted in some cases abandoning the investment and efforts into marketing, networking and customer retention as so many opportunities were flowing in. Every market corrects itself, and a slow down is inevitable. Now, that does not mean one cannot thrive...but the return to the fundaments, proactive execution to grow your business, get more relationships, retain current customs will be necessary to minimize if not eliminate the negative impact of a slowing market.
As buyers head out from urban settings...mortgage advisors will need to be aware of this migration. Impact of this would be very apparent in the networking and often best referral resources such as real estate partners. Seeing that the city real estate teams are starting to slow down...suburban teams are heating up. Making relationships over a wider geographic spectrum, working to establish partners in the suburbs, will be needed now to follow the market. This will allow a mortgage advisor to sustain the referral lead flow from their real estate partner network as a whole.
A slow down in demand for mortgage origination will be a reaction to the over abundance in need of 2020. With less demand, each and every opportunity will carry with it a premium. Will be that much more precious. Costs to acquire new customers could be back up to what they were before 2020...thus more expense, time and energy in competing for the smaller amount of borrowers. Additionally, a mortgage advisor should know that their current and past customers could be their saving grace...one that has the fraction of the costs (because of being current relationships) of acquisition, and if nurtured correctly and attentively their past customers can and will indeed provide the stability needed to continue to thrive in an otherwise slowing market. Customer retention will become the essential need. These customers will be on the market, who they work with is the questions. Good mortgage advisors know this and will put in place the right strategies and right solutions to capture these opportunities.
2021 will be a very different year, but should indeed be another exciting year. For the mortgage industry, it will definitely be an interesting one! For the mortgage advisor...the goal is not just to "survive" the waves of the economy...but instead truly "thrive" in any and all situations.
Stikkum was designed and built to enhance the communication and connection a loan officer has with their customers, marketplace, and referral partners. We've built tools to help LOs indeed stay visible, valuable, and continuously top of mind. Visit our website atstikkum.io, to learn more about the solutions helping LOs executing their successful business plan. Or, reach out to us directly to schedule a time to with one of our associates to personally chat about your business and the success we can build together!