The mortgage purchase market is poised for a comeback. In its October 2024 Mortgage Market forecast, the Mortgage Bankers Association projected $1.79 trillion in loan originations this year. That’s not a bad year. It just doesn’t compare to the boom during the COVID years. But the market could roar back to life if the Federal Reserve continues to take action to reduce rates. Federal Reserve Chairman Jerome Powell announced a significant reduction in interest rates in September, cutting them by half a percentage point. The move marks the first rate cut in a series expected to continue into 2025. The Fed made a 25-basis point cut in November and a third one was potentially planned in December.
The financial markets were quick to price in potential rate cuts, reflecting a broad consensus that the Fed will need to lower rates to support the economy. If rates fall further, as many expect, it could breathe life into the market. The rates won’t have to fall much further to bring the real estate industry back. But are the industry’s mortgage originators prepared?
Pent-up demand
Homeowners with a mortgage at or near 6% won’t need much urging to rush back to the closing table for a refinance when the rates fall. But what about home seekers? There is strong evidence to suggest the existence of significant pent-up demand in the real estate market, which is expected to influence the market dynamics positively in 2025.
Middle Tennessee, to take just one example, has been seeing job growth, housing affordability and an influx of high-earner renters. The region is expected to see increased homebuying activity, especially as mortgage rates are anticipated to decline, making homes more affordable and enticing both local buyers and newcomers.
There are similar markets spread out across the country. According to the National Association of Realtors (NAR), several markets across the U.S. are positioned to outperform others due to pent-up housing demand. This demand has built up over years of underbuilding and was exacerbated by recent economic challenges and high mortgage rates. As conditions improve, these markets are expected to experience a surge in activity as more buyers enter the market.
National trends also reflect this pent-up demand. Increased construction and shifting seller sentiment are starting to release some of this demand, leading to a gradual expansion of inventory and potentially stabilizing home prices. This suggests that as the economic environment becomes more favorable, this latent demand could quickly translate into increased home sales.
The landscape of real estate sales has shifted dramatically with the recent NAR settlement, altering how agents and buyers interact. There will likely be fewer real estate agents bringing their homebuyers to the market, which will be a challenge for brokers and loan officers.
In this new environment, listing agents have become more influential than ever, guiding homebuyers through the preapproval process. This means that originators who are not already integrated into the channels where these agents operate are at risk of missing out on a significant slice of the market.
Buy zone
If you’re an originator looking to capitalize on the upcoming market resurgence, now is the time to double down on your efforts. Originators need to systematically mine their past client database for refinance business and build stronger connections with real estate agents.
The only way to do the former is to stay visible to past borrowers. The only way to do the latter is to add significant value to real estate agents. When homeowners refinance, they’re looking for the best deal they can find at that moment in time. So, smart brokers and loan officers find out when their past clients are in the moment.
Can you find clues in the data that would point to borrowers in the “buy zone”? Yes, you can tell which borrowers in a portfolio are looking to buy a new home or refinance an old loan. But you have to be looking for it.
Once you know who those prospective borrowers are, you can begin offering them value, in the form of information, great offers on their next loan and social proof that you, the loan officer or broker, are willing and able to serve them effectively.
When rates drop, there will be a great many homeowners in the buy zone. Smart originators will employ marketing automation to guide borrowers into their office and to the closing table like they were on autopilot.
Adding value
The industry’s best originators already do this effortlessly. It’s second nature to them, but the other 80% of a typical lender’s origination staff doesn’t have the same skill set.
With the right technology, that won’t matter. By setting up marketing pipelines that guide all originators down the best-practices trail blazed by the company’s leading originators, everyone will begin operating like a top closer.
When it comes to winning over the real estate agents, who will control the buy side of the business, it all comes down to adding value. Inviting agents to a lunch meeting will not impress them when they get busy. That relationship needs to be in place before rates fall. Good agents will be chasing listings and negotiating agreements with buyers. This will take time away from their other marketing efforts.
Smart originators will see an opportunity there and partner with these agents. It will take a strong social media presence and a deep library of marketing content, but it’s the kind of value that will benefit both the agent and the mortgage lender.
Relentless pace
Originators should start by strengthening relationships with the agents they already know. Regular, value-driven communication is essential and automating these touchpoints will get the job done without overwhelming the mortgage professional’s schedule.
Next, dive into the past client database. The originator should reach out to every borrower they’ve ever worked with to let them know they’re still in the business. Because this is time-consuming, start with the ones your technology tells you are already entering the buy zone.
Finally, streamline all marketing efforts with dedicated pipelines for different loan products. By automating and organizing outreach, every originator can efficiently target new sources of business without missing a beat. The tools exist to make this process seamless — use them to your advantage.
The market will return. When it does, the pace will be relentless. The time to fine-tune your marketing engine is now.
