As the anomaly that is 2021 goes deeper into the second half, demand for mortgages has once again picked up. The Mortgage Bankers Association reported that applications for home purchases increased in August, and in an area that might be a bit of a surprise with the inflated home values we’re seeing.
Speaking of results in the first full week of August, MBA economist Joel Kan said, “The higher level of purchase activity last week was driven by more government purchase applications, including a 3.3% increase in FHA loans. With low for-sale inventory keeping home price appreciation in many markets at record highs, the jump in FHA purchase applications is potentially a sign that more first-time buyers are finding purchase options despite the high prices.”
Low interest rates offset high home loan values
For months, the red-hot housing market has been a turn-off for those who might’ve otherwise been interested in buying a home. In many areas of the nation, homes are on the market for less than a week, giving cautious new shoppers precious little time to act. More often than not, a bidding war can sideline budget-constrained first timers.
However, interest rates have been sitting near all-time lows and there’s no sign that mortgage companies will be jacking up rates anytime soon. Although the average home price is inflated, the monthly mortgage payment stays relatively steady on a property compared to a year ago. That’s beginning to draw out shoppers who have been on hiatus for the past 18 months, many of whom have been renting instead.
Plenty of room for growth among first time homebuyers
Inman reports that many millennials – the segment most likely to be first-time home buyers – have put off their aspirations of owning a home. At age 30, 48% of GenXers and 51% of boomers owned a home compared with barely 40% of millennials today.
What that means to real estate agents is this: there will be a catch-up period for home-buying millennials very soon. It’s on the radar, but they’re going to need guidance to achieve the milestone.
Target renters
As many as 20% of millennials expect to be lifelong renters, but the vast majority want to build equity by owning their home. Real estate agents can use this desire to establish financial security among renters of any demographic. Market your services with targeted messages and calls-to-action that inspire renters to make the move to ownership. It’s up to you what medium to use, but it has to be a precision approach.
Prepare them for fast action
It’s common for first-time home shoppers to be outbid on a property they love by playing it slow and cautious. It’s a peril that generates regret. As part of the coaching process to prepare shoppers for the home-buying process, set them up for success by identifying the steps before they happen.
Let them know that they may need to make an offer without conditions or that their bid may need to be 10%, 15%, or even more above the asking price. Help them understand the full costs of homeownership including down payment, private mortgage insurance, homeowner’s insurance, estimated utility costs, and an understanding of the credit scores and income verification that mortgage lenders expect.
Bring a mortgage solution to the table
Fully ready your clients for battle by entering the real estate ring pre-approved for a mortgage. While many shoppers will have a bank or lender they’ve shortlisted, they may look to you to suggest a lender that fits their needs. That’s especially true if their pre-approval falls short of the required bid to win a war.
As a realtor, MBANC’s loan programs can be the perfect solution to help your clients get approved whether they’ve been rejected by their own lender or they’re looking to you for help selecting one for a pre-approval. With product listings as diverse as the clients you serve, we’ll work hard to get them approved for the property they choose.