You’ll have to live through all parts of the cycle when you’re in a cyclical business. In the case of the U.S. real estate business, we’ve been on the downside for about three full years now. Now our favorite place to be.

And yet, we all know that the cycle will change. Even now, the mortgage purchase market is poised for a comeback. 

It’s not a question of if—it’s a matter of when. And when the floodgates open, only the lenders who are ready to market effectively and compete aggressively will capture the new mortgage business that results.

Chris wrote extensively about this in the January 2025 issue of Scotsman Guide, highlighting key trends that indicate the market’s inevitable rebound. 

How Soon Will the Market Come Back?

One of the biggest questions in the industry right now is: how fast will the mortgage business return? 

The pace of recovery will largely depend on the Federal Reserve’s approach to interest rates. In November 2024, the Fed made a 25-basis point cut, the first in what is expected to be a series of reductions continuing into 2025. As expected, a third cut occurred in December.

But then things slowed down. 

Industry experts are watching closely and now the Fed is expected to cut rates by 50 basis points in 2025, which would bring the federal funds rate to 3.75% to 4% by the end of the year. It’s not yet clear what mortgage interest rates will be as a result.

What is clear is if the Fed continues its downward trajectory with rates as expected, homebuyers waiting on the sidelines will eventually flood back into the market. 

Historically, even moderate rate cuts have been enough to trigger renewed demand. The question is, are lenders ready to meet it?

How Far Do Rates Need to Drop?

While rates have started to come down, they haven’t yet reached the threshold that will bring borrowers rushing back en masse. Different organizations track the ideal mortgage interest rate that will spark a resurgence, but many experts believe that once rates dip below a certain psychological barrier—likely in the mid-5% range—the real estate industry will see a sharp uptick in activity.

For context, rates climbed above 7% in 2023, putting significant pressure on affordability and slowing home sales. A return to mid-5% rates could make homeownership far more attractive, especially to first-time buyers who have been holding off due to high borrowing costs. The impact on refinances would be more immediate and likely significant.

But the question lenders need to be concerned with now is, are they prepared?

When demand returns, it won’t be a slow trickle—it will be a tidal wave. Mortgage originators who aren’t prepared with effective marketing strategies, strong referral networks, and optimized technology solutions may find themselves left behind. 

Borrowers will seek lenders who can provide a seamless, digital-first experience, quick pre-approvals, and personalized engagement.

Companies that invest now in CRM tools, automation, and relationship-based marketing will be in the best position to win business when the market rebounds. 

Usherpa, for example, offers industry-leading marketing automation and CRM solutions designed to help lenders nurture leads and remain a top option for potential borrowers.

To dive deeper into these insights, download the full article in the January 2025 issue of Scotsman Guide or reach out to Usherpa today to ensure you’re ready when the market returns.