In the ever-evolving world of real estate, today’s REALTORS® are navigating a perfect storm of challenges. The scarcity of available properties, transformative impact of workplace migration patterns triggered by the COVID-19 pandemic and uncertain mortgage markets have created a dynamic, demanding environment like never before.
Understanding the 2024 Market Environment
The landscape of real estate is evolving, and so is the length of homeownership in the United States. The National Association of REALTORS® reports that the median homeownership period is now over 13 years and steadily increasing. Many homeowners haven’t had to interact with the mortgage process, its pace and the technology associated with it. Some even remember having to fax document after document to get their approvals.
Since some of these homeowners first purchased their homes, a staggering shift in interest rates further creates more complexity. In January 2021, interest rates in the United States plummeted to a mere 2.65%, as reported by Freddie Mac. However, they have since surged to over 8% in October, marking the swiftest rate increase since record-keeping began. This rapid ascent has significantly inflated the monthly payments for homebuyers investing in a median-priced property, driving these costs up by over $1,200 per month from where they were in January 2021.
The fallout from these rapid changes is prompting many sellers to retain their low-interest rate mortgages, effectively prolonging their stay in their homes. For those prospective buyers with compelling reasons to enter the market, options have become increasingly limited. They may need to explore more affordable locations beyond their initial target areas or consider alternative loan products to achieve their housing aspirations.
Banks, in response to this unpredictable environment, have tightened their lending standards. According to the National Association of Home Builders, this trend is set to continue throughout 2024, putting further pressure on the real estate market.
Meanwhile, many real estate professionals across the country are confronted with another pressing concern—a fundamental need for a deeper understanding of the mortgage process and the full spectrum of financing options available to their clients.
How REALTORS® Can Learn More
As your clients’ trusted advisor throughout the homebuying and selling process, it’s important to be well-versed in all aspects of the transaction for when they, inevitably, come to you with questions, including the mortgage process. Being able to answer your clients’ questions with confidence will help you strengthen the trust you share as a steward of homeownership.
1: Lean Into Your Relationships
One of the most important benefits you offer is your professional relationships! How are you connecting your clients with a trusted lender? Through the Chicago Association of REALTORS® affiliate program, you have access to a database of Chicago-area professionals, including lenders, who can support your business. Make connections with these individuals so you have someone you can call to support your clients during the transaction.
2: Do Your Research
A colleague recently shared a story with me about a client selling their Detroit home and purchasing in Indianapolis – two markets they don’t typically operate in. While referring the transaction to local REALTORS®, the colleague remained actively engaged throughout the transaction. When it became apparent that the client’s initial lender was constrained by a large bank’s limited product offerings, they started doing their own research. By facilitating interviews with several other banks and credit unions, they managed to secure a 2% reduction in their interest rate – which allowed the client to close on a house they could afford closer to their new workplace.
Take the time to do your own research to help your clients when the time comes. There are a variety of grants and programs available to help assist homeowners with financing to save them money when purchasing a home. These programs are available through banks, the Illinois Department of Housing, the city of Chicago and more.
Also, Freddie Mac and Fannie Mae have resources on their website that can help you keep on top of mortgage rate trends and forecasts, find a variety of mortgage solutions to make homebuying affordable to everyone and more. Visit freddiemac.com to take advantage of these tools.
3: Take the Home Finance Resource Certification
Next, invest in your own education. The National Association of REALTORS® (NAR) responded to the market need by creating the Home Finance Resource (HFR) Certification. As fiduciaries responsible for safeguarding their client’s best interests, the HFR Certification empowers REALTORS® to add additional value by advising their clients about the most mortgage solutions available to them.
The HFR class doesn’t just offer a glimpse into the lending process; it breaks down every facet, from the initial contact to pre-approval, underwriting, appraisal, title search and closing. This comprehensive knowledge becomes a valuable framework that REALTORS® can use to guide their clients through the often-daunting path to mortgage approval and closing.
Whether you are a novice in the real estate business or a seasoned veteran with years of experience, the HFR Certification goes beyond mere numbers and ratios, delving deep into the financial prerequisites and long-term implications of diverse loan products.
Applying this Knowledge to Listings & Investing
The HFR Certification isn’t limited to buyer-side transactions; it equips REALTORS® with the skills to identify listing opportunities for homeowners with assumable low-interest rate debt, such as Veteran’s Administration loan.
Moreover, it empowers REALTORS® working with investors to be advisors instead of merely crunching numbers and relying on lenders to determine the impact that financing will have on the transaction. HFR-certified REALTORS® can take an active role in guiding clients to make sound choices that align with their investment goals.
Ready to Earn Your Home Finance Resource Certification?
In 2024, the REALTORS® Real Estate School is hosting this course live, taught by Michelle Behrendt. The course will cover how to:
- Guide your buyers through the mortgage preapproval process by, for example, creating a mortgage application checklist with all the documents they’ll need.
- Share resources for addressing low credit scores, alternative financing options like first-time homebuyer assistance or low down-payment programs.
- Avoid the most common mortgage sticking points in a transaction. For example, the mortgage preapproval — not just prequalification — has become key for buyers competing against multiple offers in today’s market.
Join us in class!
March 1, 2024 | 9:00 AM – 4:30 PM
Chicago Association of REALTORS® Office
430 N. Michigan Ave., Suite 800, Chicago, IL 60611
6 Hours Elective CE
By: Michelle Behrendt
EXIT Real Estate Partners