BLOG VIEW: With the New Year looming, it’s time to rethink some of the dated perceptions of the housing market and how it will behave. Surviving as a lender in 2017 may require looking at homeownership from the new perspectives of today’s potential borrowers. Instead of dwelling on where interest rates are headed or contemplating the impact a new administration may have on housing, lenders’ time may be better invested trying to understand how a potential borrower views homeownership as we enter 2017. That understanding could impact how the mortgage industry welcomes the New Year and how successfully it navigates through it.
Something has changed the perspectives of consumers that the industry needs to more fully appreciate. Whether they are looking to refinance or in the market to purchase a home, there are socioeconomic influences weighing on the thought processes of consumers. That change in perspective is not likely to be reflected in the data relating to the housing market and the economy – or even what consumer and homebuyer sentiment surveys are currently telling us. Those in the industry need to be careful about the inferences they make, in order to avoid becoming disconnected from consumers in what will be an incredibly competitive market.
For current homeowners, that perspective seems to be more about actually “owning” a home, at some point. Gone are the days when a home was collateral to finance life’s less meaningful endeavors. Many homeowners are more educated or at least intent on making better financial decisions to build equity. It is sort of a throwback to a perspective homebuyers had a long time ago. It is a perspective lenders have not had to deal with in at least two decades. Regulation and underwriting guidelines keep just about everyone from potentially making really bad financing decisions. As homeowners gain equity, decisions to use that equity will likely be more reasoned and more practical when considering amounts borrowed. Understanding this and offering products and services that permit a lender to distinguish itself in what will likely be a crowded market place will be critical to success in the coming year.
Currently, the mortgage industry doesn’t seem to have a good understanding of the perspectives of consumers considering home ownership. While the industry still struggles to understand what millennials are thinking, a post-millennial generation is about to start graduating from college. It seems that for many of these younger generations, owning a home “would be nice” – but it is not as “necessary” as it may have once been.
Lack of income, student loan debt and lack of down payment are factors weighing on entry into the home buying market. But what about other factors? Many young people might not be so convinced that a home is a good investment. It is not what they have experienced in their lifetimes. Homeownership may not be part of that natural progression through life the way it once was. Or, at the very least, it is not happening as early in life as it was for previous generations. There seems to be a more calculated, practical approach among many young people.
The industry going to need to solicit these potential home buyers directly and not wait for them to come to us. That means the industry needs to learn how to market to them where they are (online) – while create an exceptional – and transparent – mortgage experience that is consistent, educational and device agnostic.
Lenders can’t control interest rates, home prices or the numbers of “affordable” housing units available. Those are just realities that the industry needs to accept at any given time. What the industry can do is adapt and position itself to reach as many consumers as possible, regardless of the market or what the economy brings. To be successful, lenders need to see home ownership from a perspective borrower’s perspective.
Kristopher Barros is the regulatory audit manager for Embrace Home Loans, a direct lender for Fannie Mae and Freddie Mac, approved by FHA and VA, and an issuer for Ginnie Mae.