Industry gears up for better times ahead
Hopes are high that the US housing and mortgage markets are about to turn the corner, with mortgage rates on a steady journey downwards and confidence seeping slowly back into the housing outlook.
The Federal Reserve lowered its own funds rate last week in a 50-basis-point cut, suggesting its battle against too-high inflation – which saw a flurry of aggressive rate hikes in 2022 and 2023 – is nearly over.
Still, mortgage professionals should take a longer-term view on the market when weighing up future opportunities, according to a top executive who advised brokers not to focus solely on the coming year.
Praveen Chandramohan (pictured top) of financial services giant CoreLogic told Mortgage Professional America that while the company was predicting a market “upswing” in 2025, spurred by growth on both the refinance and purchase sides, the outlook for the years ahead is even brighter.
It’s important to focus on that opportunity, he said. “What’s getting lost in these quarter-by-quarter projections is the long-term horizon of the mortgage market,” he told MPA. “We’ve been calling it the convergence of opportunity.
“If you really think about the three legs of the mortgage ecosystem – one being purchase, the other being refi, and the other being home equity – we’re at a point in time where all three are peaking, and all three are converging for a perfect opportunity for the next five years.”
Purchases and refis alike set to see growth in years ahead
A significant catalyst for market growth looking ahead, according to Chandramohan, is set to be the first-time buyer cohort. The average age of that segment is about 36 – and one of the main buyer types entering the market is Americans between 26 and 33 years old. “That’s the largest cohort of the population in the US census,” he pointed out.
“What that means is, over the next five years, that’s the population that’s going to be shopping. And there are close to 15 million people in that cohort – so that’s 15 million people that are potentially going to be shopping for homes over the next five years.”
That’s not to mention the refi space, where activity could spike. Rapid gains in interest rates during the past two years meant most buyers during that period purchased with a firm view on refinancing the mortgage as soon as rates started to fall again.
Potentially three to four million homeowners will be in the refi market imminently, Chandramohan said, while he also highlighted home equity as a sector with plenty of opportunity at play.
He said CoreLogic estimated about $34 trillion of untapped home equity within the US housing market. “If you think about just the ones that have an outstanding mortgage, that’s $17 trillion,” he added. “So imagine the convergence of opportunity now. There’s no shortage of opportunities.”
Opportunities also growing in the near term
While mortgage rates lingered stubbornly above the 7% mark throughout much of this year, they began ticking downwards over the summer as the economic outlook worsened and speculation of impending Fed rate cuts began to intensify.
Melissa Cohn of William Raveis Mortgage noted that a more moderate cut than the Fed’s 50-basis-point reduction could have averted the unexpected uptick in bond yields that emerged after the decision.
— Mortgage Professional America Magazine (@MPAMagazineUS) September 24, 2024
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By the end of the week, the average 30-year fixed-rate mortgage was down to 6.09%, according to Freddie Mac, a precipitous decline from the highs of earlier in the year and its lowest level since February 2023.
That’s helped bring some homebuyers off the sidelines and boost interest in refinance opportunities as borrowing costs finally begin falling.
Mortgage Bankers Association (MBA) president and chief executive officer Bob Broeksmit, commenting on the dip in mortgage rates seen in recent weeks, said the market had received a “much-needed boost” as a result.
He noted that overall mortgage applications – both purchase and refinance – had increased for four consecutive weeks and in six of the previous seven. A further drop in rates is likely, he added, “helped in part by the Federal Reserve cutting short-term rates for the first time in four years, with the likelihood of additional cuts to come at its upcoming meetings in November and December.”
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