Weathering Changes in the Housing Market: How Originators Can Deal with Mortgage Industry Forecasts

In the coming months, with the presidential election looming and the Federal Reserve eyeing rate cuts, promoters will closely examine how shifting fiscal policy could impact the mortgage industry and the economy as a whole. A new administration could impact markets and the economy as a whole, with potential policy changes and market fluctuations that could impact U.S. citizens and their purchasing power. Markets are already pricing in an expected rate cut at the next meeting of the Federal Open Market Committee. But what impact will these changes actually have on mortgage lenders and the borrowers they serve?

As originators face changing dynamics in the economy and housing market this fall, many will be asking important questions about how to approach their practice, identify opportunities for clients, and prepare for what lies ahead.

What happens if an interest rate cut remains unchanged?

The housing market generally welcomes interest rate cuts because lower interest rates can stimulate homebuying activity. However, the current economic climate presents unique challenges that complicate this dynamic. Two pressing issues threaten to perpetuate reduced lending activity for originators.

First, there is the severe shortage of housing supply, combined with rising prices that are pushing homes beyond the affordability of potential buyers. Even with lower interest rates, the demand for homes far exceeds the available supply, leading to an overheated market where many buyers are overpriced. And second, while a rate cut would generally be a boon to homeowners, many remain trapped in historically low COVID-19-era interest rates.

How will changes in the White House affect homeowners?

Election cycles can disrupt the broader economy, yet the housing market has historically remained relatively stable when a new president-elect takes office. Potential homebuyers and sellers deterred by the uncertainty of this year’s political race will likely enter the market next spring during the real homebuying season, when current policies will have the most impact. There’s one thing we need to pay attention to in this political climate: Depending on who wins the election, we could see changes in first-time homebuyer programs and tax policies for homeowners.

How can initiators respond to the housing forecast for the autumn of 2024?

In a market where lending volumes have declined and competition is fierce, mortgage providers cannot count on a boost in activity as a result of a possible interest rate cut. When the borrower pool is small and the market is competitive, originators must be proactive in finding ways to differentiate themselves from their competitors and serve customers in unique ways.

Non-QM loans continue to grow in popularity because they provide an alternative solution for potential borrowers who cannot meet strict conventional lending standards. This market encompasses more than 16 million self-employed borrowersopening up a remarkable pool of business for originators well versed in non-QM loans.

With home equity at an all-time high of more than $11.5 billion, HELOCs also offer homeowners a way to access a significant amount of untapped capital. Originators can often use HELOCs effectively to attract borrowers who are hesitant to refinance their primary mortgage but are looking for other ways to leverage the value of their home.

Stay calm and prepare for change

Whatever happens in the coming months, the best thing initiators can do is keep a cool head. By staying agile and aware of changing economic conditions and borrowers’ changing needs, they can better equip themselves to deal with unexpected outcomes. By focusing on customer service and embracing innovative mortgage products, originators can strengthen their businesses while maintaining a sense of stability, even in a tense market.

Tom Hutchens is the president of Angel Oak Mortgage Solutions.

This column does not necessarily reflect the opinion of HousingWire’s editorial staff and its owners.

To contact the editor responsible for this piece: [email protected]