Owning your own home has always been central to the American Dream—but, like all dreams, homeownership can be elusive. In 2011, iEmergent founder and market intelligence pioneer Dennis Hedlund wrote about the factors keeping people out of the metaphorical Homeowner Dream Club. The challenges facing today’s potential homeowners are different, but no less daunting.
Some would-be homebuyers are reluctant to apply for a mortgage after being declined in the past. Others struggle to accumulate the substantial up-front costs of a mortgage loan. Still others are hesitant to commit to homeownership at all after living through a global pandemic that cost friends and loved ones their livelihoods and their homes. Economic factors also play a part in exacerbating affordability for potential homebuyers, causing many qualified buyers to stop short of jumping into the housing pool. Fortunately, the pool has not been closed entirely.
Evaluate the pool of qualified homebuyers
To effectively grow the kiddie pool of current homebuyer opportunities to an Olympic swimming pool—particularly for unserved and underserved communities—mortgage industry stakeholders must take a deep dive to determine the true size and demographic makeup of the homebuyer pool. According to current market analyses, the overall size and depth of the pool of U.S. households qualified and ready to purchase a home is 129.4 million - but due to recent home purchases, credit issues, student loans, unemployment, and more, a further 50 million households must be excluded from the count, visualized below.
Lenders must identify where the demand is, in order to better assess why those consumers are not jumping into the pool and how best to serve them. For example, in our analysis of the Philadelphia market, we found that there is a high percentage of opportunity to lend to low- to moderate-income (LMI) borrowers, while in the Dallas-Fort Worth market, there’s growth in lending to Asian borrowers.
Expand the pool to diverse borrowers
By locating the opportunities available in individual markets, lenders and loan teams are empowered to reach the people who are qualified to buy a home and to identify the necessary steps to invite them to join the pool. Income distribution has always been a primary driver of mortgage demand as economic conditions change. LMI households hold far less borrowing power than today’s top earners, a disparity that is growing worse. Homeownership prospects for young households have been particularly stunted, even though they make up the fastest-growing homebuyer market. So what can be done?
Many industry groups, including the Mortgage Bankers’ Association (MBA), are advocating to policymakers that interest rates need to stabilize to make homeownership appealing once more. On Oct. 16, 2023, the White House announced a series of new initiatives designed to boost U.S. homeownership, particularly for LMI and historically underserved communities. But this isn’t enough.
Dive in to build the right opportunities
Lenders need to rethink what it truly means to be mortgage-ready. To effectively expand the housing pool, the mortgage industry must use tools and tactics designed to build trust and educate more people on how to become ready, willing, and able to buy a home.
There is plenty of homebuyer opportunity in today’s high-rate, low-demand mortgage market. Lenders just need the right market intelligence tools and forecasting tools to find it. Once the market turns back around, lenders that leverage community data to determine eligible housing pools in their service region will be the best equipped to engage and serve prospective homebuyers.
To learn more about how to leverage data to effectively evaluate and connect with active homebuyers in your pool, read the full length article It’s High Time We Invite Everyone Back Into the Pool!