Recently, Mark Fleming, the chief economist for First American, commented that he believes a slight interest rate hike by the Fed would not have any major negative impact on (Rate Hike). One more opinion… This one because a rate hike would be the result of a stabilizing economy with an improving labor market and that is beneficial to the housing market. Do you agree?
A recent Fannie Mae study revealed that many consumers believe that now is not a good time to buy because consumers are concerned about their future. However, just prior to that report, the MBA increased their forecasts for mortgage originations in 2016 because of a rosier outlook for home sales. Who’s on first?
I’m not sure if a rate hike will help or hurt. That remains to be seen if, and when, it takes place. Just the talk of an impending rate hike seems to have the effect of a brief continuation of refinancing. Some consumers want to take advantage of the lower rates and Realtors are telling potential buyers that the time to pull the trigger is now, before the rates go up. Could the Fed be “jawboning” the market? If so, does that do anything to improve the labor market? I dunno, who’s on first?
The fact remains that rate hike or not – people will continue to buy and sell homes. People need to live somewhere. The equal and opposite reaction of people not buying is a rise in those renting.
Using the rules of supply and demand, the more people that rent, the higher the rents. The higher the rent, the more affordable it becomes to own a home. So, people will buy. When people are willing to buy, there are those willing to sell. Obla Dee, Obla Da, life goes on…
Lenders can’t control rates or rents. But, they can do a little something about the cost of homeownership. They can also help educate consumers on the benefits of owning a home and how they may qualify to do so in any rate environment.
To do this, lenders need to be prepared to meet the needs of prospective home buyers through ease of access to loan pre-qualifications and education material clearly outlining and explaining their financing options. It amazes me to learn that many consumers, especially the Millennials, still believe they need a large down payment, with perfect credit, to buy a home. Lenders need to get the word out otherwise.
I can confidently predict that rates will go up, go down, or stay the same. In each case, people will buy, sell and rent. Lenders will do what they do best, lend. To do so profitably they need to be sized right, with the flexibility to service the needs of a myriad of home buyers, have specific products and the expertise to offer niche type products to select consumers.
Each lender must decide their business model and prepare accordingly. I believe success will depend on training, teamwork, technology, and careful expense management. Each person in the organization must understand the mission and properly execute the company plan. To borrow a slogan, “Quality is job 1.”
Rates will rise sooner or later. What changes might be needed in your business model when they do? Are you preparing to do so? Don’t be stuck wondering who’s on first?