Buying a home is NOT just a transaction but a strategic goal for consumers. That strategic goal is to provide a home to raise a family, build on the promise of generational wealth, access better education for the member’s children, or provide recreational opportunities for the family. With the fundamental objective in mind, I’ll explore how the home buying demand-interest rate relationship is primarily media-driven and fails to consider the broader economic context in which higher rates present consumers.

The prevailing narrative in the media suggests that as interest rates rise, home buying demand decreases, and vice versa. Unfortunately, many credit union employees also buy into this media hysteria. In strategic planning sessions, I often hear executives say, we need to adjust our mortgage growth goals due to the economic climate, feeling like victims to a threat they cannot control. This kind of groupthink overlooks the cyclicality of interest rates and the opportunities this environment presents for homeowners. I’ll diagnose the realities of the hysteria and emphasize the opportunity a higher interest rate environment presents.

Media-Driven Hysteria

Media outlets sensationalize the impact of interest rates on the real estate market. When interest rates rise even slightly, headlines proclaim that the housing market is headed for a crash, sending potential homebuyers into a frenzy. Conversely, when rates drop, they suggest now is the best time to buy a home. The real story is more nuanced.

Home Values Often Dip

One aspect that the media overlooks is the cyclical nature of real estate markets. Home values can dip for various reasons, and interest rates are only one factor among many. Economic conditions, job growth, supply and demand for housing, and regional factors play significant roles in determining home values. To illustrate this point, look at the median price of a home in California compared to Texas.

When home values dip, it creates opportunities for buyers, regardless of the current interest rate environment. Savvy buyers know that reduced home prices can temper the impact of a higher interest rate. The typical mortgage term, or the average duration, is under ten years. This is because homeowners refinance into a new mortgage, relocate, upsize, or downsize.

There will be an Opportunity to Refinance

Another critical aspect that the media-driven narrative ignores is the potential for refinancing. When interest rates dip, homeowners can refinance their mortgages to secure a lower rate, reducing their monthly payments and saving money over the life of the loan. This can be a significant financial benefit, even when home values do not peak. During a high-interest rate environment, a savvy homebuyer might settle for a home that “needs some work” or has good bones but potential for remodeling. They can use a refinance to fund this work to make it the home of their dreams. Instead of constantly chasing the “perfect” interest rate for a new home purchase, individuals can focus on building equity and managing their finances effectively through refinancing.

The Broader Economic Context

Viewing the relationship between home buying demand and interest rates within the broader economic context is essential. Various factors influence interest rates, including inflation, central bank policies, and global economic trends. Homebuyers should not base their decisions solely on the latest headlines and should consider their strategic goal, to own a home, in context with their financial situation.

Marketers must Change the Narrative!

Through various channels and strategies, credit union marketers can communicate the nuanced relationship between home buying demand, interest rates, and the broader economic context to their members. Here’s how they can do it:

1. Educational Content:
   • Create informative blog posts, articles, and educational content on your credit union’s website and newsletters that explain the relationship between interest rates and home buying.
   • Offer guides on how members can assess their financial readiness for home buying, emphasizing that interest rates are just one of many factors to consider.
   • Partner with consumer programs on the local electronic and print media channels, focusing on how homeownership brings financial stability and economic value to the consumer.
2. Seminars, Workshops and Webinars:
   • Host in-person or virtual seminars and workshops on personal finance and home buying. Invite experts to provide insights on the impact of interest rates on the housing market and guide members in making informed decisions.
   • Organize webinars focusing on the relationship between interest rates and the housing market. These online events can offer an interactive platform for members to ask questions and gain a deeper understanding.
   • Ensure the content of these events balances the cyclical nature of interest rates and the power of home ownership in building generational wealth with the hysteria they hear in the media.
3. Infographics and Visuals:
   • Create visually engaging infographics and charts that simplify complex concepts and illustrate how interest rates can affect home values and mortgage payments.
   • These communication tools can be displayed in branches, social media, and the credit union’s website.
4. Financial Tools and Calculators:
   • Develop online tools and calculators that allow members to estimate mortgage payments based on different interest rates. This practical approach can help members make informed financial decisions.
   • Include scenario planning tools that allow the member to understand ownership equity growth and estimate the impact of a refinance at a lower interest rate.
5. One-on-One Consultations:
   • Offer personalized financial consultations to members who are considering home buying. Credit union staff can discuss their situations and help them understand how interest rates fit into their financial picture.
   • It is not uncommon that when the mortgage initiations slow down, the mortgage department may have more capacity than it needs. Some mortgage professionals (underwriters and processors) can be repurposed as one-on-one consultants.
6. Social Media:
   • Share bite-sized tips and information on social media platforms, addressing common misconceptions about interest rates and home buying.
   • Encourage members to engage, share personal stories, celebrate homebuying decisions, and ask questions.
   • Avoid jargon and technical terms that may confuse them.
7. Email Campaigns:
   • Send targeted email campaigns to your members, providing valuable resources, links to articles, and educational materials related to interest rates and home buying.
   • Talk about the importance of homeownership for family stability and general wealth building.
   • Again, avoid jargon and technical terms that may confuse them.
8. Member Testimonials and Case Studies:
   • Share testimonials from members who have successfully bought homes and refinanced their mortgages through the credit union. These stories can serve as inspiration and practical examples.
   • Share real-life case studies of credit union members who successfully navigated the housing market and made sound financial decisions, even during changing interest rate environments.
9. Q&A Sessions and Town Halls:
   • Host live Q&A sessions on social media and in-person and virtual meetings, where members can ask questions about home buying and interest rates, receiving real-time answers and expert guidance.
10. Collaborate with Experts:
    • Collaborate with local real estate agents, consumer advocacy groups, non-profit housing organizations, and financial advisors to give members an improved, well-rounded perspective on the real estate market and financing options.
    • Work with these experts to ensure the content of these events balances the cyclical nature of interest rates and the power of home ownership.
11. Clear Communication:
    • Use clear and straightforward language in all communication materials to ensure members understand the information you provide.

By employing these strategies, credit union marketers can help their members make informed decisions regarding home buying and provide them with the balanced knowledge and tools they need to navigate the housing market successfully, even in an environment driven by media narratives. Instead of being driven by media hysteria, prospective homebuyers Marketers should show them how to focus on their financial circumstances and long-term goals, not just the interest rates. By helping consumers look beyond the headlines, homebuyers can make better decisions that benefit them in the long run.