Loan officers are grappling with housing market gridlock, mortgage rate uncertainty and tech changes, such as AI. But with those challenges come opportunities.
Inventory is a concern, but there are still clients with life changes that require a home purchase or refi. Rates remain elevated compared to the early 2020s, but more and more people are accepting the reality of today’s rate environment and are ready to act. And tech changes within the lending industry may pose a challenge to some, but the ability to fast-track a loan with tech help is opening doors to the next generation of homebuyers.
Andrew Chevalier, market leader at Movement Mortgage, compared the current market with the years immediately following the housing market crash of 2008. Motivated homebuyers will enter the market regardless of rates, he said.
“I think 2025 is going to be a year a lot like last year,” Chevalier said. “If you’re sharpening your skills, you’re doing the right things, you’re making the phone calls, you’re reaching out to your database and you’re staying in front of your referral partners, the opportunities are going to come.
“And they’re going to come because buyers are used to the rates now; they’ve heard the news. They know they’re not coming back down anytime soon.”
Inventory obstacles
Inventory remains an obstacle to homebuyers and the lenders who serve them, according to Dan Rogers, regional manager and senior VP of mortgage lending at Rate. The inventory issues plaguing the Chicago area and real estate markets across the country persist because of the lock-in effect, in which homeowners who locked in rates in the 3%-to-4% range a few years ago are staying put.
“They’re holding off, which is creating a huge logjam to that first-time buyer, the entry-level buyer that’s buying that first home,” Rogers said. “We keep track from year to year of how many borrowers we preapproved that did not buy a home for multiple reasons. Most of the time the reason ends up being that they were outbid, [or] they never found something they like, leading back to inventory issues. So we have this huge compounding effect of buyers that, over these past three, four years, that have been priced out of the market by other buyers overbidding them. Just in January alone, we had some 75 customers that we did preapprovals for in the last two years reaching back out, saying they’re ready to go look again because they never bought anything.”
Rogers sees the seller’s market created by the inventory shortage as a great opportunity to educate homeowners and consumers that the higher rates are the new normal.
“This is the new norm for rates. The expectations of them going down are not very good in the near future,” Rogers said. “How low will they ever go again or in the future — let’s say the next few years — they’ll likely never be back to those levels that most of these people are sitting on loans at. It really lends itself to a scenario that, accepting where rates are, if you’re a homeseller, you’re going to get the best dollar for your home right now.”
Kelly Price, senior mortgage consultant at Wintrust Mortgage, said lenders are seeing a lot of activity so far in 2025, though it isn’t necessarily translating in mortgage volume applications and closed deals. She’s starting to see homeowners who borrowed at 3% to 4% walk away from those low rates as they have gotten used to the idea of rates higher than 6%.
“Fortunately or unfortunately, life happens, and people get comfortable with where rates are and the economy usually is stabilized,” she said. “With inflation usually comes more jobs and higher wages to be able to afford these higher rates. There’s still a gap between home prices and wages. That certainly hasn’t necessarily been solved for, but I know Chicago is not as bad as other places are with that gap. What I’m hearing is you’re either super busy or you’re just not busy enough. And fortunately, I’m super busy.”
The state of rates
Rates in 2025 are as likely to go up as they are to come down, Chevalier said, pointing to stubborn inflation, the strong job market and the reluctance of the Federal Reserve to review rates.
“Right now, we’re probably rolling around 7.2-ish,” Chevalier said. “It really depends on how all this stuff kind of plays out right now. Inflation is the biggest concern. The jobs reports are strong, and that’s putting upward pressure on the rates. When the Fed steps out and says they’re going to reduce rates four times, then they change that to two, and then they kick it down the road to the summertime, that puts upward pressure on rates, as well. I’d say there’s probably more of a concern for the rates to go up than down. Best-case scenario, we’re probably looking at a few opportunities here and there where the rates dip down into the mid- to high-sixes. But overall, I think there’s probably a stronger chance that by the end of this year, we’re still somewhere in the mid-sevens or low-sevens.”
Rogers agreed that rates are likely to remain high for the foreseeable future, pointing to market uncertainty regarding how widespread tariffs announced by the Trump administration will affect inflation.
“I don’t feel they’re going to go down very much,” Rogers said. “Things are hovering right around that 7% mark. My anticipation is we may get down into the high-sixes, possibly the mid-six level. I think that’s the furthest on the downward trend that we’re going to see this year. And I don’t really see anything in the market that indicates it’s going to be sooner than later in the year.”
Price doesn’t anticipate rates going down until later in the year, and even that is uncertain. She expects that once the
y dip, more people will enter the market.
“We know statistics are telling us that when rates are above 7%, things slow down a little bit,” Price said. “When rates drop under 7%, people get really excited and start to get off the couch, because they think there’s a downward trend toward 6.5% or lower. That’s really what’s exciting right now. When rates tend to push up too far above seven, people start to slow down and they feel like things are becoming unaffordable. It’s kind of like, ‘Do you go on the road trip or not, depending on what the cost of gas is,’ right? I’d like to say maybe we’ll get some relief in the third or fourth quarter, relief being rates steadily toward 6.5%. I don’t know that we’re guaranteed that.”
Who’s buying and selling?
Price divides homebuyers into the categories of “have-to” and “want-to.” The “have-to’s” are people purchasing a home because they are relocating for a new job, while “want-to’s” are buying because they are combining households, their children have reached an age where they need more space, or they are retiring and want to downsize. She is also seeing an uptick in older women buying homes.
“Spring is often very heavy, and first-time homebuyers, including late millennials and Gen Z’s, are part of that,” Price said. “I think people naively assume first-time homebuyers are young, in their 20s or early 30-somethings. That’s not always the case. In Chicago, I see a lot of women, specifically in their 50s and 60s who have raised children and are thinking that they want to do something for themselves now, for the first time ever. That, I think, is a really big deal.”
Chevalier’s clients tend to be millennials near his age, and many are repeat homebuyers, but a fair share of first-time buyers also come to him.
“I also get a fair amount of Gen Zers that are investment buyers,” he said. “They seem to like the investment properties or buying multifamilies or multiple single-family rentals. They’re pretty savvy, sometimes too savvy. They have billion-dollar dreams and a $100,000 budget, but it’s good because they’re educated. They know what they’re at least thinking about getting into, and they have a mission. They have a business plan.”
Tech opportunities
Rogers said the first-time buyers are often stuck because fewer baby boomers are downsizing and are instead choosing to sit on their lower rates. To him, those first-time buyers are still the driving force behind the market. Lenders developing more tech to make the process more seamless for younger generations is a help, along with making mortgages more attainable for gig workers and people with nontraditional incomes.
“The ability for a self-employed borrower to be able to upload a year’s worth of bank statements to show the cash flow coming in is definitely something that has opened the door up to a lot more self-employed borrowers being able to purchase” he said. “They maybe wouldn’t have been able to purchase because their tax returns may not reflect the provable level of income due to the ability to write off expenses. The industry continues to evolve. We’ve had a lot of changes on the real estate side with how commissions are paid, everything is becoming more about educating the consumer, educating the potential homebuyer to what the realities are out there.”
Providing consumers with tech products designed to make the mortgage application process easier has helped bring younger homebuyers into the market, according to Rogers.
“The ability to do a whole application, upload their documents and do everything from a cellphone is huge,” Rogers said. “They live on their phone. Everything is on their phone. They can take pictures of a pay stub, upload them, if they didn’t do the online choice. They can take pictures of the bank statement, or they can go to their banking app and pull down the most recent statement, and right through our secure portal they are able to upload these documents as part of the preapproval process.”
Price described artificial intelligence as being at the heart of Wintrust Mortgage’s application platform and helping clients navigate the process more quickly. However, younger homebuyers can’t cut out the human element entirely.
“There’s a naivete around not understanding why some more mortgage consultation is necessary,” she said. “If you are doing an online application with a very busy lender, you have to be able to spend the time, whether that’s 20 minutes, 30 minutes, 45 minutes or an hour, depending on the astuteness of the applicant, because there’s so much information that in one shot can be shared about what expectations are, what the process is, what you need, what’s your circumstances. I can’t tell you how many younger millennials and older Gen Z’s who don’t understand or have any value for that type of consultation because they may have never been consulted on anything before in their lives.”
Clients who are taught to shop for just cost and rate may be less educated on the process and become more frustrated, Price continued.
“What happens when there’s no consultation involved, that cost and rate can change before you get to the closing table — and that’s horrible, right? Nobody wants that,” she said. “There’s that consultative piece that I think people need to really continue to show value.”
EXPERT SOURCES
Andrew Chevalier
Market Leader
Movement Mortgage
Kelly Price
Senior Mortgage Consultant
Wintrust Mortgage
Dan Rogers
Regional Manager and Senior VP of Mortgage Lending
Rate