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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 50 March 2024 F E A T U R E S T O R Y A s we navigate this unique year for mortgage lenders, we are be- ginning to see signs of stabiliza- tion and possible recovery, even though interest rates remain higher than in previous years. It is essential to remember that the mortgage market has seen higher rates before, with 30-year fixed rates hitting as high as 18% in October of 1981, and still, even in that environment, mortgages were made, and homes were sold. As of February, 2024, the average 30-year fixed rate stood at 7.8%, which is not far off the average historical rate for 30-year fixed mortgages recorded from 1971–2023, which was 7.74%. The broader perspective suggests that, while rates may feel high right now, they are not unprece- dented in the larger historical context. The abnormally long refinancing boom that characterized the market in the previous decade is likely over, at least for a while. As a result, mortgage lenders are focusing on finding creative and expanded ways to help their clients during current market conditions. One approach is to update or expand their product menu. The discussions around expanded product offerings have so far centered on various loan offerings such as Home Equi- ty Lines of Credit (HELOCs), Home Equity Conversion Mortgages (HECMs), builder or construction loans, and adjustable-rate mortgages (ARMs). Additionally, creative niche loan products like "Same Day" or "One Percent Down" mortgages have been introduced to serve potential borrowers. Lenders are expanding their range of offerings to cater to a broader audience of prospects. Factors Likely to Spur a Renovation Boom T he unique market conditions found throughout the mortgage industry are leading to the emergence of a potential surprise contender for significant origi- nation volume: renovation loans. Several factors are contributing to the potential renovation boom, including: » A shortage of housing units: The United States is facing a shortage of housing units, which has increased home prices and created fiercely competitive purchase conditions. With limited inventory available and the likelihood that their current mortgages are below market rate, current home- owners have less incentive to move, making renovations attractive for those who want to upgrade or downsize their existing homes. » High home values: Despite the rise in interest rates, homeowners still have substantial property equity. As home prices are projected to rise, many homeowners may choose to renovate their current homes instead of selling or refinancing. » High interest rates: Interest rates are expected to remain relatively high for the foreseeable future. This situation could create an affordability issue for potential homebuyers to purchase a new home, leading them to consider renovating less appealing homes a more viable option. » First-time homebuyer challenges: First-time homebuyers face chal- lenging conditions due to high home BUILDING THE PERFECT PRODUCT MIX: DON'T FORGET ABOUT RENOVATION Jim Clapp and Franco Terango of Certainty Home Lending explain how the convergence of several unique factors has set the stage for a home renovation loan spike. B y F R A N C O T E R A N G O & J I M C L A P P F R A N C O T E R A N G O is CEO of Certainty Home Lending. He has been a leader in the financial services industry for more than 30 years, and his career has transversed four lines of business, including consumer banking, investments, small business banking, and 25 years in mortgage lending. You can reach him at franco@certaintyhomelending.com. J I M C L A P P is President of Certainty Home Lending, a national mortgage lending and fintech business. He has held leadership roles with Certainty since 2009, including a nine-year tenure as President and CFO for W.R. Starkey Mortgage, Certainty's predecessor. He has served the mortgage industry for the better part of three decades. You can reach him at jclapp@certaintyhomelending.com.