Sales activity will remain sluggish and price growth will slow – but there are still opportunities in the mortgage market, according to an industry CEO
Prospects may be looking brighter for the US mortgage and housing markets in 2025 – but anyone expecting activity to shoot through the roof should think again, if Fannie Mae’s latest forecasts are anything to go by.
The government-sponsored enterprise (GSE) polled 100 housing experts on their outlook for next year, with the survey revealing expectations of largely unchanged existing home sales and a slight uptick in new home sales.
About 80% of respondents to the poll believe home price growth will slow next year thanks to the likelihood of persistently high mortgage rates and a jump in for-sale inventory. The pace of overall price growth is expected to increase by 4.7% this year – but fall to 3.1% in 2025 and 3.3% in 2026, according to the Fannie Mae Home Price Index.
Anthony Casa (pictured top), president and chief executive officer at UMortgage, is among those calling for mortgage professionals to take a grounded and measured view of how the housing market is likely to play out in 2025.
He told Mortgage Professional America that a better year than 2024 was probably on the way, although it would fall far short of the red-hot market seen during the COVID-19 pandemic.
“I think a lot of people think it’s going to be like it was in 2020 and 2021 where people were bidding 30-50% over the listing prices and there was a massive level of buyer interest,” he said.
“The economic conditions are very different than they were in 2020 and 2021, and I would expect a moderate rate of improvement will result in an increase in demand – but I don’t expect it to be anywhere near what we experienced before. I expect the home values and the impact on home prices to be gradual, not substantial.”
Kevin Leibowitz, founder of Grayton Mortgage, advises clients facing fluctuating mortgage rates to lock in their rates if they’re near the qualification cutoff. https://t.co/A9d1UiDwPp
— Mortgage Professional America Magazine (@MPAMagazineUS) December 4, 2024
What’s next for US mortgage rates?
Mortgage rates have reversed course in the final quarter of 2024, climbing again after sliding at the end of the summer. But the average 30-year fixed mortgage rate dipped last week to 6.69% and is expected to see a further mild decline by the end of 2025 to 6.3%, Fannie Mae’s Economic & Strategic Research (ESR) Group said.
Casa expects a drop in rates next year to spur an increase in demand for housing, even if it’s likely to be steady rather than spectacular.
“Right now, homes are staying on the market for an extended period of time, so I think [rates falling] will bring down days on market and create some level of increase or upward mobility in where home rates are going,” he said.
“But I expect it to be very much consistent with the historical year-over-year increases of five to 10% to 12%. I don’t expect it to be something like 2020 and 2021, where we saw 25%, 30%, 40% year-over-year home pricing increases in certain markets.”
That means brokers and loan officers are almost certain not to see the same explosion in volume witnessed during the pandemic, when low borrowing costs and pent-up household savings helped bring about a housing market surge.
But there are still opportunities for those mortgage professionals who stay in front of their past clients and make it a part of their weekly sales activities to connect with those individuals and check if they have any mortgage needs on either the purchase or refinance side, according to Casa.
“Even if rates are not there yet to decrease their rate on a refinance, it’s really [encouraging] to see that the economic conditions and the Fed’s monetary policy are telling us that rates are going to come down in the next 12 months,” he said. “It’s about planting that seed [for clients]: ‘We’re thinking of you. We’re on top of making sure that we’re monitoring rates so that when an opportunity to save money does come up, we’re going to reach out to you.’”
Refinance opportunities coming to the fore in 2025
What’s certain is that large servicers are going to speak with those borrowers to refinance, meaning borrowers who aren’t proactive will lose out on business.
A new approach to growing business is also needed, Casa added: focusing on individuals who aren’t currently sourcing or referring business to a broker, and actively prospecting to those people to start sending deals in the future. “Even when the market has shrunk, we’ve really stayed laser-focused on expanding the number of referral sources that are sourcing business to our loan originators’ business, and that’s been super successful,” he said.
“Staying in front of past clients is step number one. Number two, prospecting new referral relationships to drive the growth of our business forward.”
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