Mortgage application activity is a leading indicator for the real estate market 🔔

Most people start the new year with a sense of optimism. 

There's a clean slate and the world is full of opportunity to start fresh on January 1st. 

This mindset transfers over into the real estate world a bit, too.

Activity in the industry generally slows during the December holidays as buyers, sellers, and real estate agents focus on family gatherings and Christmas parties. 

But when January is here, there's often a flurry of activity as people take action on their goals to buy a home this year.

This shows up most prominently in the mortgage application data from the Mortgage Bankers Association (MBA).

The MBA publishes reports on the change in refinance and purchase mortgage applications. The purchase applications are a leading indicator of demand for real estate.

If applications to purchase are growing, more people are interested in buying and if applications decline, you can expect a slowdown.

How are mortgage applications at the start of 2025? 🧐

2024 ended a little differently than other years because of the presidential election. 

Every election year is a little different and this time, the data suggests that a larger number of buyers held off from making any moves until they got confirmation who was going to be the president.

Here's a look at the loan application data leading up to the election and after:

You can see that there was a lull in activity the month before the election with applications either flat or down 4 of the 5 weeks leading up to the event.

Since the election has completed, 6 of the last 9 weeks are in the green and Thanksgiving, Christmas, and New Years can account for the 3 down weeks. 

Overall, purchase applications are up a total of 26% since the election which is an incredibly encouraging sign for the real estate industry.

How significant is the most recent rise in applications? 🤯

It's common to see a larger increase in mortgage applications at the start of each year.

This is partly because we see a decline leading up to the new year so it's easier to increase after you've gone down some.

Also, there's just a general increase in activity as everyone gets back to business and set goals to purchase a home this year.

Where does our 27% pop in mortgage demand put us?

🚨 The last time applications were up this much was in 2015 and last week's reading ranks 25th largest since the MBA started tracking the data!

The data points to homebuyer demand swelling 🌊

This data gives us objective confirmation that there is a huge number of people waiting for an opportunity to buy. 

In fact, it's more than just waiting to buy given they've taken a concrete step towards achieving that goal and applied for a mortgage. 

The major question that remains is how many will make it to the finish line and close on a home?

Many would-be buyers apply and then hit the brakes once they see the numbers of what they're approved for and the properties that would get them.

And this is where creativity must enter the picture.

As much as we all want mortgage rates to come down, the hard truth is there's not much evidence that says they will.

The economy continues to outperform expectations and the Fed has gone from 4-6 rate cuts in 2025 to just 1 if we're lucky.

Further, inflation is bottoming and potentially heating up which could drive mortgage rates even higher.

Finding opportunity in 2025's real estate market 💡

There are a number of factors putting the brakes on the real estate market currently:

• Relatively high interest rates compared to 2021
• Elevated home prices that aren't getting any cheaper
• Shortages of high-quality homes at desired prices
• Rising insurance, property taxes, and HOA costs further squeezing buyers and owners

Believe me, I know there are plenty of challenges to overcome.

But there are a range of solutions that expert real estate professionals are taking advantage of to help their clients accomplish their goals.

🤔 Consider who you're working with. One of the simplest ways to find success in 2025 is to focus on helping retirees. The National Association of Realtors (NAR) confirmed the average age of a home buyer in 2024 was 56. The people buying most of the properties right now are established, often nearing or in retirement, and already own a property. Building a business around this segment will improve your odds of success.

🏗️ Specialize in new construction. Yes, I know quality of construction varies, but buying new construction can address the interest rate, insurance, and necessary cash challenges through their incentives and lower insurance costs. Markets that have a stronger presence of new construction will likely outperform those that are fully developed.

🗺️ Open your clients eyes to the undiscovered areas. So often, clients come to you and say they'd like to live In a specific neighborhood. And you set up the search and surprise, surprise, they don't end up purchasing because what they want doesn't exist in that area. Something has to give and most cities have parts of town that can check most the boxes, but your clients might not have explored that area or given them a chance. I encourage you to take your clients on tours of the city when you start working with them because you've got parts of town they might not have seen and it could be a great option if what they want doesn't come up.

Put all this together and you've got several specific things you can focus on instead of just "doing more" this year to succeed.

We're off to a great start to the year and I look forward to your success moving forward!

And if you're in Northeast Florida and want a little more help, check out my Market Insiders coaching! 🚀

Dr. Alex Stewart
Founder