A just released survey of 200 mortgage lending professionals found the vast majority of lenders (94 percent, up from 62 percent last year) expect an increase in mortgage purchase production. These results are from the second annual Lenders One Mortgage Barometer conducted by The Lenders One® Cooperative, a national alliance of independent mortgage bankers, correspondent lenders, and suppliers of mortgage products.
The current mortgage market isn’t without challenges. Housing inventory remains limited and interest rates have increased sharply since the presidential election. The higher interest rates are certain to dampen refinance activity. According to Bryan Binder, chief executive officer of Lenders One, “To be successful in this environment, lenders need to focus on the purchase market and new innovation to replace lost refinancing volume. Lenders must also focus on tools and solutions to help them improve operating efficiencies within their businesses.”
The demographics most frequently cited as offering robust opportunity in 2017 include Generation X (86 percent) and millennials (85 percent, up from 79 percent last year). Following closely are nontraditional buyers, those who are in the rental and vacation home markets (84 percent, up from 70 percent last year); boomerang buyers, those people who can now qualify for a mortgage after undergoing a short sale, foreclosure, or bankruptcy (83 percent, up from 68 percent last year), and baby boomers (82 percent).
Lenders identify ongoing strong Jumbo Loan Activity. A full 93 percent of respondents report that they already originate non-qualifying mortgage (non-QM) loans – commonly known as Jumbo Loans. Bolstering one part of the non-QM market is continued home appreciation, especially in higher end markets, which has created demand for jumbo loans. A robust 91 percent of lenders project a significant increase in jumbo loan origination volume in 2017 for their organization. Given the growth of the sharing economy and services such as Airbnb, 82 percent of mortgage lending professionals anticipate an increase in people looking to finance larger homes to take advantage of rental incomes.
Still, the size of jumbo loans and lack of federal mortgage guarantees (non-qualifying mortgage loans) means that the majority of business will remain in the traditional markets. The populations that are most frequently cited as offering robust opportunity in 2017 include Generation X (86 percent) and millennials (85 percent, up from 79 percent last year).
Following closely are nontraditional buyers, those who are in the rental and vacation home markets (84 percent, up from 70 percent last year); boomerang buyers, those people who can now qualify for a mortgage after undergoing a short sale, foreclosure or bankruptcy (83 percent, up from 68 percent last year) and baby boomers (82 percent).
Continued economic improvement should give first-time homebuyers the boost they need to enter the market. In fact, about three in five lenders (59 percent) say it is very likely that there will be an increase in first-time homebuyers in 2017. The optimism around first-time homebuyers aligns with the recent report from the National Association of Realtors® that shows the share of sales to first-time homebuyers grew from 2015 to 2016 and was the highest it’s been since 2013. However, many lenders are predicting some challenges to mortgage industry growth with respondents seeing consumer debt as the highest risk factor this year (41 percent).
Survey Methodology - The Lenders One Mortgage Barometer was conducted online among a random sample of 200 mortgage lenders. Fieldwork was conducted by independent research firm Ebiquity between January 4, 2017 and January 14, 2017. The margin of error associated with the sample of n=200 is +/- 6.9 percent at a 95 percent confidence level.
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Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.