Mortgage Market Offers Mixed Bag of Opportunity

Ser Tech can help you identify consumers to support your strategic growth and business development initiatives

Sarah. Cooke, Tuesday, March 5


The mortgage market has been hot ever since the economic recovery, and while 2019 will experience slowing growth, opportunities continue in first mortgages and home equities.

For the past several years, it’s been a sellers’ market across much of the US, however as rates are increasing, expected to hit 5.5% by yearend according to USA Today , sales growth will slow. But it will increase nonetheless, and opportunities exist for those who are willing to snatch them up.

Rising inventory means home prices, which have grown at double the rate of inflation and wages Reuters reported, will soften. So, millennials who bought their first home during the frenzied, low-rate market are now improving their professional and financial positions and may be looking to upsize for a planned or growing family. They will not be as rushed to make a buying decision either, because inventory is predicted to increase 10% to 15% in 2019, per USA Today. The available homes will be skewed toward homes worth more than $250,000. That scenario will give your financial institution time to attract and really engage with the potential borrower, plus it will likely be for a larger mortgage.

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Connecting with millennials will be critical as they are expected to comprise the largest portion of homebuyers in 2019, representing 45%, according to Forbes . By comparison, Gen Xers will be 37% of the mortgage market and 17% of baby boomers. Millennial homebuying will peak in 2020, Chief Economist Danielle Hale told Forbes. While most of those millennials are forecast to be moving up from a starter home, some will be taking advantage of lower cost opportunities this year as they purchase their first home.

Townhomes and manufactured home sales are forecast to increase. Manufactured homes in particular are ripe for growth as they cost a fraction ($70,600, compared to $257,900 for an existing single-family home and $309,700 for a new home) of other options but still offer ownership. Is your community bank or credit union prepared to enter this market?

Others who do not have to move will be staying put because pricing is still high, but after they’ve been in a home for five or 10 years, when pricing and rates were at incredibly low, they have built equity and may want to upgrade and update their kitchens, bathrooms and other rooms in their home. Equity loans and lines of credit make perfect sense for these homeowners!

The new tax laws could be important to your marketing messaging. Prior to last year’s changes, mortgage interest could be deducted mortgages up to $1 million, including home equity loans and HELOCs, and used to reduce taxable household income. Under the new law, only $750,000 in interest can be deducted, but home equities can only be deducted if they were used to fund home improvements, USA Today reported. So, if you’re located in a high cost of living area, this point can help direct your aspirational messaging and imagery of beautifully remodeled homes to reel borrowers in.

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Finally, larger banks are lending less and less to low-income homebuyers. Part of this maneuvering has its roots in regulatory restrictions, intended to quash unsavory nonprime lending tactics, but it’s created a chilling effect overall. Not only were nonprime mortgages down in 2017 to 26.3% of borrowers versus 36.6% in 2009, according to CNN Business , but big banks are getting out of mortgage lending entirely. Mortgage specialist lenders are picking up the slack, but the good news is your community bank or credit union can offer so much more than a decent mortgage, all in one package. Take advantage of that! Show your community support and pride by giving a hand up to those who need it most. Ser Tech can help you identify these consumers to support your strategic growth and business development initiatives. Contact us to learn more about our credit data-driven programs today!