By John Egan
Mortgage marketers might need to rewrite their playbooks in 2018.
Why? Mortgage financier Freddie Mac predicts mortgage interest rates will see an uptick in 2018 while total loan originations will dip. Those two factors could lead to a tougher sell for mortgage marketers.
In its forecast for 2018, Freddie Mac envisions the benchmark 30-year mortgage rate climbing to 4.4 percent, up from 4 percent in 2017 and 3.7 percent in 2016. That rise in the 30-year rate is sure to deter some potential homebuyers.
At the same time, Freddie Mac expects total loan originations in 2018 to slide to nearly $1.7 billion, down from $1.8 billion in 2017 and more than $2.1 billion in 2016. Freddie Mac anticipates the origination total will decline because of a drop-off in refinancing activity; meanwhile, the volume of mortgages for home purchases is likely to go up, despite a projected increase in the 30-year mortgage rate.
At LeadsCon Las Vegas 2018, attendees can learn more about changes in mortgage marketing at a session titled “Buying & Selling: The 2018 Mortgage Marketing Playbook.”
In addition to Freddie Mac’s predictions regarding mortgage rates and loan originations, the recently enacted federal tax overhaul could prompt tweaks to the mortgage marketing playbook for 2018.
The National Association of Realtors had a lukewarm response to passage of the tax law. While some proposed elements that could have harmed homeownership didn’t appear in the final version of the tax overhaul, other components that did make it into the law are worrying, the group says.
“The new tax regime will fundamentally alter the benefits of homeownership by nullifying incentives for individuals and families while keeping those incentives in place for large institutional investors,” Elizabeth Mendenhall, president of the National Association of Realtors, says in a statement. “That should concern any middle-class family looking to claim their piece of the American dream.”
By contrast, the National Association of Home Builders expressed enthusiasm about the tax law.
“Providing tax relief for hardworking families and creating a more favorable tax climate for small business will make the economy more vibrant and competitive,” Granger MacDonald, chairman of the National Association of Home Builders, says in a statement. “In turn, this will boost the housing sector, which represents roughly one-sixth of the U.S. economy. Housing not only equals jobs, but jobs mean more demand for housing.”
As explained by DS News, here’s how homeowners, buyers and sellers will be affected by the new tax law:
Buyers will be able to deduct interest only on the first $750,000 of mortgage debt on a newly purchased home, down from the current $1 million threshold.
Homeowners must itemize their taxes if they want to claim the mortgage interest deduction. But since the law almost doubles the standard tax deduction, fewer Americans are expected to itemize.
Taxpayers no longer will be able to fully deduct state and local property taxes plus income or sales taxes. Rather, the law lets individuals deduct as much as $10,000 in state and local income and property taxes or state and local property and sales taxes. The upshot? Homeowners in high-tax states like California, New Jersey and New York could witness a hike in what they owe.
While the tax overhaul may or may not discourage homebuyers, the senior economist for real estate marketplace Zillow is optimistic about prospects for the U.S. housing market in 2018. In laying out his positive outlook, the Zillow economist, Aaron Terrazas, cites a robust labor market, rising confidence among prospective homebuyers and a lingering shortage of homes available for purchase.
“Demand will continue to grow and though supply should increase somewhat, we still won’t build enough new homes to meet this demand, contributing to higher prices. Higher mortgage rates will eat into buyers’ budgets, putting even more price pressure on the most affordable homes for sale,” Terrazas says in a December news release.
“Unless there is a fundamental shift in the number and type of homes for sale,” he adds, “this is the new normal of the American housing market.”
Click here to register for LeadsCon Las Vegas 2018.