March Mortgage Rates Level Off, Inventory Woes Keep Buyers in the Cold and Cash-out Refinance Opportunities Heat Up
March came in like a lion and out like a lamb, at least in the mortgage lending industry. Mortgage rates started the month by continuing a six-week climb that began in mid-January. By the mid-point of March, rates clocked in at their four-year high (4.46%) before starting to descend. This dip came as a relief, as many economists projected rates would increase past 4.5 percent by the end of Q1.
According to Freddie Mac’s Primary Mortgage Market Survey, the month’s end showed more positivity for consumers. During the last week of March, average rates for both fixed and adjustable loans fell in response to Treasury dips from Federal Reserve actions. (The Fed raised its key interest rate on March 21.)
The first three months of 2018 have been less erratic than expected. And even if more increases come from the Fed, rates are comparatively a bargain compared to what they were during the Great Recession. (30-year fixed rates averaged 6.03% in 2008.)
Inventory Is Tight
As reported by NAR’s Chief Economist Lawrence Yun, inventory continues to be a challenge plaguing first-time home buyers and limiting the number of applications. The country’s lack of affordable housing is resulting in price point increases.
Originators still heavily relying on industry partners, such as real estate agents or brokers, to deliver prospective leads may see a dip in volume. If you decide to maintain your focus on the purchase market, we recommend developing a strategy that uses targeted scripts to overcome inventory, price and rate rebuttals.
Sellers Are Confident; Buyers Are Not
Current consumer sentiment could be a deciding factor in the marketing strategy for many lenders in the second half of the year. In its Housing Opportunities and Market Experience (HOME) survey published March 26, 2018, the National Association of Realtors (NAR) reported growth from 69% the year prior, to 77% in 2017 in current homeowners feeling confident about selling. Conversely, according to the survey, “non-homeowners have anxieties about saving for a down payment and qualifying for a mortgage.”
Buyer Education Is Needed
The 20% down myth continues to pollute the market, presenting an opportunity for loan originators to position their knowledge as a consumer resource. A content marketing strategy paired with rate advertising across lending sites may be the driver needed to push new leads into your funnel.
Cash-Out Market Looks Strong
According to the Freddie Mac House Price Index (FMHPI), home equity is at a record high with nearly two-thirds of homeowners on a “winning streak.” This data may be an indicator of the continued popularity of cash-out refinance loans.
If your purchase lead volume has dropped, now may be an opportune moment to transition your focus to the cash-out refinance niche. Invest time and possible money into a re-engagement strategy to better connect with borrowers you’ve worked with before. Communicate the benefits and options for cash-out refinances and promote the many reasons this product has been popular among other clients as a financial solution.
2018 Outlook Is Positive
Even with mortgage rates slightly up from than a year ago, economists from Freddie Mac and NAR suggest the housing market should post modest growth in 2018.
No matter the rates, pivoting is key to long-term mortgage marketing success. If you have questions about where the mortgage market is headed or how you can reposition your strategy to win in today’s economy, call the Best Rate Referrals team at 1-800-811-1402. Our consultative, mortgage-focused team can help you assess your business and work with you to find an affordable and smart solution to keep your portfolio growing.