Predictions and Actions for 2017

The holiday season is over, football season is in the final stretch, and now, “prediction season” is in full swing. While scores of people with impressive pedigrees make punditry a year-round gig, the start of a new calendar year is particularly busy when it comes to matters of real estate, mortgage and all things money.

It’s understandable that the abundance of predictions about home prices, market pace and mortgage interest rates could create a mental rollercoaster for real estate and mortgage professionals, but a study conducted from 1998-2012 by Virginia-based consulting firm CXO Advisory Group examined over 6,500 predictions made by market pundits in print, television and online and found their accuracy rate to be 47 percent. 

In other words, they got it right less than half the time. So what good are the forecasts and prognostications? 

Think of them as a heads-up for what may affect your geographic and demographic targets, and think of how a particular forecast or expected market condition could affect your business plan and production goals. 

For example, mortgage loan officers should concentrate heavily on developing and growing relationships with Realtors®, and incubating homebuyer leads this year because the refinance market will likely decline as interest rates increase according to Fannie Mae Senior Vice President and Chief Economist Doug Duncan:

“If income growth picks up, then the rise in interest rates will affect refinancing, but not the home purchase activity. If incomes start to grow more strongly, it probably won’t affect buying as much as refinancing.”

A large portion of the public has become numb to the concept of “historically low interest rates,” so getting the word out to Realtor® partners and databases of prospects, past and present clients about what is still possible today, versus what may not be as easily attainable in a few months is critical.

Marketing outreach that explains the difference a buyer can qualify for at a 4.5 percent interest rate, and 1 or 2 percent more are particularly powerful.

Another theory by Chief Economist Jonathan Smoke is that consumers may have a lower threshold for feeling the urgency of needing to act in a climate of rising rates: 

“…in the past, what you tended to see was an absolute level that the market reacted to, and in years past that absolute level was closer to 6.5 and 7 percent. But there are plenty of people who believe that because we’ve had a decade of historically low rates that the new threshold for that might be in the mid 5’s or even as low as 5 percent.”

These predictions and thoughts by Duncan and Smoke are very general and in line with what we’ve all been expecting. However, the information becomes helpful when taken to heart and put into motion. 

Co-branded marketing by mortgage loan officers and Realtors® is not only a great way to reach more consumers, it’s a way to build better relationships by building business together. 

It’s one thing for the public to hear the industry news, but it’s our job to help them understand how it affects them.

Industry Commentator Kelly Guest contributed this article to the Total Expert blog.