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Trends Affecting Mortgage Lending in 2022

The housing market is on a rollercoaster — and there’s no end in sight.

Amid a pandemic and economic crisis, Americans are buying homes at near record rates. Millennials, tired of renting, are entering their mid-30s and starting families. Meanwhile, COVID-driven supply chain issues have decreased housing inventory tremendously. Low inventory leads to more intense bidding wars and deeply frustrated buyers, and now more than half of homes are selling for over the asking price. So how do you stay on top of your game? Let’s dive into a few of the key trends affecting mortgage lending in 2022.

homeownership rates chart

We could spend time predicting precisely where we expect interest rates to go in 2022, but the truth is — in this market, forecasts are only as good as the paper they’re written on in these unprecedented times.

It’s hard to predict lending rates when so much is in flux. COVID has produced near constant instability since early 2020, and the most recent variant will create ripples across the global economy even as cases fall. Inflation is hitting highs we haven’t seen since the Carter Administration, and President Biden is attempting to inject more stimulus into the economy, which would bolster the stock market and interest rates while also continuing to increase inflation.

Meanwhile, government institutions and regulatory agencies are reacting to the uncertain situation in their own way. The Federal Housing Finance Agency (FHFA) increased fees on high-balance and second-home loans. To combat inflation, the Federal Reserve is discussing just how much and how quickly they’ll recommend interest rate increases. Some fear these policy changes will cause another Recession as the market corrects to the post-stimulus world.

Lenders hoping to ride the waves of uncertainty will need to understand the broader trends in the mortgage market.

1. Meaningful alliances will be more important than ever

Some real estate agents get into the market thinking they don’t need business relationships as much as they need their customers. That’s not true. Thoughtful business alliances are the foundation for good customer relationships and open communication for everyone involved in a homeownership transaction.

The 20-year fixed-rate for refinancing your mortgage, for example, recently jumped from

3.125% to 3.625%. The sudden shift caught many professionals and homeowners off guard.

With the market shifting as it is, professionals need to ensure they have every potential outcome covered – and this is where relationships become vital.

Ensuring you have strong relationships spanning a multitude of areas, including accounting, legal, home inspection and more, will prove fruitful. Additionally, business models that have an A-list team built into them will create synergy for clients at the end of the day.

2. A rapidly changing market will require nimble strategies

Real estate agents often see the lender as a vendor, but it’s in the partnership where you find true success. When the Marshall Fires hit Colorado, destroying more than 1,000 homes collectively worth more than $513 million, our team immediately launched a 203(h) program designed to help the displaced buy homes again.

Expect even more time-sensitive lending maneuvers in 2022. With the Federal Reserve considering bumping up interest rates multiple times throughout the year and a new nominee to head the Federal Housing Finance Agency waiting in the wings, policy change will be a big factor in 2022 — and the ability to adapt will be critical.

3. Housing supply will improve but demand will continue to outpace it

The current housing demand is unlikely to pop. Barry Habib, CEO of the mortgage loan software company MBS Highway, explains that the 2008 bubble resulted from, among other things, a gap between the number of homes being built and a decline in births dating back to Gen X. Today, we are experiencing the opposite problem: the number of homes being produced is lagging behind an increase in demand that’s driven by Millennials aging into the market.

While many of the supply chain issues that clouded 2021 will begin to pass, the sheer influx of new homebuyers — and current homeowners who delayed their purchase — will keep the market tight for some time to come.

4. Customer guidance will be more critical than ever

Finally, homebuyers, understandably discouraged by rising home prices, may feel like sitting out until the landscape is more favorable. The problem is — the perfect market isn’t waiting for them. While the homebuyer sits on the sidelines, prices keep rising.

While you should never apply pressure, you could help your customers understand the need to make a bid on a house they really like by using one of the following educational tools:

  • Break-even charts showing how many months it would take to pay down the amount above the current asking price.
  • Cost-of-waiting analyses showing the financial penalty of delaying or forgoing a home purchase.

With market specifics so unpredictable, you need to look at the big picture for guidance. Ultimately, with the changes expected in 2022, lenders and real-estate professionals are called to work more closely than ever before, supporting their customer’s success in a quickly changing real estate environment.

For more detailed information on the February 2022 Denver Real Estate Market Trends, be sure to check out my most recent update HERE!

Nicole Rueth has been passionately advising clients on their wealth building and home financing strategies for over 17 years. Her path has been non-conventional and it is a benefit to her clients.  www.TheRuethTeam.Com.

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