On an individual basis, a home is frequently the largest purchase made over the course of a lifetime. Extrapolate that across the entire country, every year, you’re talking about a substantial chunk of the economy on an annualized basis. In fact, residential real estate investment makes up roughly 3-5% of the nation’s GDP (which was north of $18.5 trillion in 2017). This figure includes all inputs to residential real estate, including construction of new builds, remodeling and brokers’ fees. While the latter constitutes a small share of this total, it’s worth noting that with brokers fees traditionally hovering around 6% (more on this later), this constitutes a massive addressable market for mortgage brokers to capture.
Busy season = More Potential Business.
Despite the large market opportunity, business isn’t spread evenly throughout the calendar year. The traditional real estate season begins in the springtime and peaks during the summer. Nationally, the largest share of inventory is moved between April and October. Additionally, colder climates tend to have bigger peaks and lower troughs. If you’re a mortgage broker, this underscores the importance of having a fully ramped-up mortgage and loan operation in time for this peak season. This extends to all aspects of the business and is especially true for staffing. Having enough loan officers and mortgage brokers in response to local market conditions is key for any bank or mortgage brokerage looking to capture revenue. Any missed opportunities when the market is 33% busier will have a disproportionally negative impact on fiscal year revenue.
Competitive Market for Home Mortgages
The pressures based on capturing peak-season would be true with market conditions of solid growth and no other exogenous pressures. Ask any person involved in real estate, and they will be the first to tell you that this is a fantasy. There are several trends that make the home mortgage market more competitive than ever. First, in certain parts of the country, the market is extremely tight – with extremely limited inventory. Demand is outstripping supply in California to such a large degree that a dramatic overhaul is being debated to help alleviate the housing crisis. Additionally, new technology and upstart competitors such as Redfin are subjecting the brokerage industry to similar pressures that retail, livery and many others have had to respond to in recent years by undercutting on fees. Because of this, there has been downward pressure in commissions – from 6% to 5% (or even lower).
Outlook for Mortgage Professionals and Companies
What does this mean if you’re a mortgage broker or loan officer? The ability to uncover and close business is more critical than ever. Some if it involves networking like crazy, while being thorough, flexible and timely, and having deep knowledge of the local market - all while keeping the best interests of the customer at heart. The top brokers and loan officers should be able to navigate these headwinds by differentiating themselves from the competition and presenting the best value for the customers.
If you’re a mortgage company, you need as many of these people on your roster as possible – especially during the busy season. In order to do this, having a pipeline of the top candidates in your area is more important than ever. This is where Happie can help. By mapping the total talent universe and nurturing passive candidates for your open LO and mortgage broker positions, we’ve helped mortgage companies scale up with a roster of high performers.
Interested in learning more? Reach sign up for a free 15-minute consultation with one of our mortgage experts.