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The Changing Landscape of Home-ownership: Affordability Challenges and Opportunities
Home-ownership has long been a cornerstone of the American Dream, but recent years have brought significant challenges to those aspiring to own their own homes. The stark reality is that home-buyers today need to earn a staggering 80% more than they did just two years ago in 2020 to afford the same house. This shift in affordability has left many potential buyers wondering if home-ownership is still within reach.
The Numbers Behind the Affordability Crisis
Home prices have skyrocketed by 42% since 2020, but that’s only part of the equation. Borrowing costs and interest rates have also risen dramatically, compounding the affordability issue. Median incomes, on the other hand, have only increased by 23% over the past four years, leaving a significant gap between what people earn and what they need to comfortably afford a home in today’s market.
Finding Equilibrium in the Housing Market
To address this affordability crisis, we need to find a new equilibrium in the housing market. This could mean seeking out cheaper homes, which is already happening in some markets, or finding borrowers who have higher incomes. While the latter might seem like a daunting task, there is an often-overlooked segment of the population that could hold the key to unlocking home-ownership for many: self-employed individuals.
The Untapped Potential of Self-Employed Borrowers
According to recent data, the median weekly earnings of full-time workers were $1,145 in the fourth quarter of 2023, with women earning 83.8% of the median for men. This translates to an annual income of around $59,540. However, the average income for a self-employed person, such as an independent consultant, is significantly higher at $97,500. This means that your average non-qualified mortgage (non-QM) borrower earns nearly twice as much as your typical agency borrower.
Targeting Small Businesses for Home-ownership
Opportunities For mortgage professionals looking to tap into this market of higher-earning potential borrowers, the key is to go directly to small businesses in your community. By focusing your efforts on self-employed individuals and small business owners, you can not only help them achieve their home-ownership goals but also establish valuable referral partnerships.
Here’s an idea: create flyers specifically tailored to non-QM borrowers and distribute them to small business owners in your area. When you hand off these flyers, emphasize your expertise in working with self-employed borrowers and position yourself as a resource for them and their self-employed friends who are looking to buy a home. By doing so, you open the door to discussing referral business opportunities with these small businesses.
The Power of Local Outreach
Let’s put this into perspective. If you have 70 businesses within walking distance of your office, and you take the time to distribute your flyers and engage with these business owners, what are the chances of picking up a transaction or establishing a future referral partner? The answer is simple: zero if you don’t do it, but potentially significant if you do.
The key is to take action. By investing a small amount of time and resources into local outreach, you could tap into a market of borrowers who have the financial means to make home-ownership a reality, even in today’s challenging affordability landscape.
Conclusion
While the affordability crisis in the housing market may seem daunting, there are opportunities for those willing to think outside the box and target untapped segments of potential borrowers. By focusing on self-employed individuals and small business owners, mortgage professionals can not only help more people achieve their home-ownership dreams but also establish valuable referral partnerships that can drive long-term success. The question is, what’s stopping you from seizing this opportunity?
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