Using Market Intelligence to Create Expansion Strategies

Posted By Laird Nossuli on May 06, 2014

Even in today’s challenging lending environment, many lenders and brokers are still looking to expand their market footprints. The variable characteristics of markets across the nation make it clear that one size doesn’t fit all, and the “right” market for one lender might be completely “wrong” for another. With profitability becoming more and more difficult to sustain, lenders can’t afford to make bad decisions about where to grow. Instead, they need to be strategic in expansion—and that starts with choosing where to go.

Case in Point

ABC Mortgage is a moderately sized regional lender in the Midwest, looking to expand its footprint into the western states. The retail lending team has decided that it wants to focus on mid- to large-sized markets that are a good match for their most successful lending products and their reputation as a top FHA lender. They are looking for markets that have substantial opportunity; however, the density of mortgages and the speed of the market's growth are also important to their competitive strategy. Also important to them is that the competitive landscape of the market be fragmented, meaning that share is divided somewhat equally among a lot of lenders, as opposed to a concentrated market where the Top 5 lenders control 80-100% of the market.

Mortgage MarketSmart Market Comparison Tool

So, the question is: which western markets are strategically best for ABC Mortgage?

Using Mortgage MarketSmart's Comparison Tool to Expand Your Markets

The Market Comparison Tool in the Mortgage MarketSmart application is one of its newest tools, and also one of its most powerful. It’s exciting to see the different ways our users are leveraging the tool and the market intelligence upon which its built—to make decisions about expansion and growth; determine where to spend valuable resources (and where not to); and figure out how to prioritize all of their markets in a meaningful way.

What is the Market Comparison Tool (MCT)?

The MCT combines a dynamic map with a point and click wizard to help lenders score, compare, and rank their current and potential markets—according to what’s important to their business model and strategies. The high-level workflow is simple:

1. Choose what’s important to you.

2. Use weights to decide how important.

3. Choose the markets (locations) you want to compare.

4. Use the priority scores that are generated by the tool to rank your current, or potential, markets.

5. View the results in a detailed data table or on a rich, dynamic map.

6. Save the comparison and/or build another one!

One of the most common uses of the MCT is to determine which new markets are the best fits for your company. You might call it a “Market Attractiveness” tool.

The steps in the scenario below show you how easy it is to perform a market comparison for ABC Mortgage’s expansion plans using the Market Comparison Tool.

Pick and Weight What’s Important. ABC Mortgage began the analysis by picking the market characteristics that they wanted to consider. From Mortgage MarketSmart’s forecast data, they began by choosing the market behavior metrics that reflected their interest in the “all purchase loan” opportunity. They did not include 2014 metrics, since the expansion efforts would begin in late 2014. Second, they chose market behavior metrics for the FHA purchase market opportunity—again, focusing on 2015. In addition, they chose three additional indicators that quantify each market's competitive landscape. Finally, they used the MCT to weight the importance of each attribute.

Mortgage Market Comparison Tool

The table below reflects how ABC Mortgage weighted the relative importance of each attribute to the analysis, using a scale from 1 to 10, with 10 being most important:




2015 All Purchase Loans


2015 All Purchase Dollars


2015 FHA Purchase Loans


2015 FHA Purchase Dollars


All Purchase Mortgage Density ($)


FHA Purchase Mortgage Density ($)


All Purchase MOI (speed of dollar growth index)


All Purchase MVI (speed of loan unit growth index)


FHA Purchase MOI (speed of dollar growth index)


FHA Purchase MVI (speed of loan unit growth index)


Lender Concentration Score


Top 5 Share Threshold


Loan to Lender Ratio


Pick the Markets to Compare. Once the attributes and weights were designated, ABC Mortgage identified specifically which markets to compare. Although the MCT allows you to compare markets at three different levels of geography—MSA, county, or tract (depending on the level of granularity that you need to guide your decisions)—ABC Mortgage chose a county-level comparison. The tract level analysis might be too detailed at this point (could muddle the results) and the MSA level might be too general (could mistakenly exclude MSAs with targeted areas that are highly attractive).

Choose Mortgage Markets to Compare

View the Results of Your Comparison. ABC Mortgage chose what market data metrics were important to them and determined how important. Then, they picked the locations to compare. After saving those details, they clicked on the "Market Ranking" tab and saw the results of the comparison—in a detailed table and a color-coded map. 

Market Comparison Results Table

Market Comparison Results Map

From the variables chosen, it was not surprising that some of the largest counties in the West—like Los Angeles County, CA; King County, WA; and Maricopa County, AZ—were included as Tier 1 counties (those in red on the map). Enough value was placed on market size (purchase loan and dollar opportunity) that these very large markets ranked in the top.

However, ABC Mortgage’s analysis revealed that 7 of the Top 20 counties were located within the Colorado “Front Range” market, which basically includes the line of metro areas from Fort Collins to Denver to Colorado Springs. While not the largest markets, they ranked high in density and speed of growth, and had a competitive landscape much like the fragmented type ABC was wishing to target. Their relatively close geographic proximity also makes that group of MSA markets a good candidate for ABC Mortgage.
Mortgage Market Comparison Results

The analysis also showed that, despite the boom and bust issues they’ve had over the past 5 years, the Phoenix (Maricopa and Pinal Counties, AZ) and Las Vegas (Clark County, NV) markets are important to consider—especially if they are not expansion targets or top priorities for any of ABC Mortgage’s largest competitors.

Finally, the comparison illustrated the value that the Albuquerque, NM, metro area might have for their strategic position. Both Bernalillo and Sandoval Counties were ranked in the Top 20.

Implications for ABC Mortgage

The results of the comparison prompted ABC Mortgage to investigate expansion into the metro areas in Denver’s Front Range, as well as Las Vegas, Phoenix, and Albuquerque. All of these markets have strong FHA opportunity, are growing at least as fast in loan and dollar opportunity as the U.S. as a whole, and have fragmented competitive environments. They will fit well with the goals of the expansion, and should be good places for ABC Mortgage to build a sustainable competitive position over the next 2-3 years.

Comparing Markets for Expansion: The Big Picture

The Market Comparison Tool in Mortgage MarketSmart is just one example of a tool that leverages forward-looking market intelligence to shape sustainable strategies. What makes it especially useful is that it considers behavior metrics beyond a market’s sheer size, like speed of growth, density, emerging markets potential, and average loan sizes. It provides a complete market picture and allows you to match it to your own competitive strategies.

There are still many lenders who expand their reach without using objective, quantitative, and future-focused data. Here are some of the other ways many lenders decide where to expand:

  • They follow their sales and referral sources.
  • They target yesterday’s hot markets.
  • They target today’s hot markets.
  • They go where everybody else goes.
  • They don’t go where everybody else goes.
  • They look at rising home price indexes or household growth rates and follow them.

It may seem too complicated to bring so many pieces of market intelligence into your expansion strategies, and that’s how and why the “Market Comparison Tool” was born. For years, we’ve been acting as strategic advisors to our clients—helping them figure out how to create sustainable strategies using our forecasts and intelligence. Those experiences led us to build the MCT—a simple way to access and use complex information.

What tool you use is far from the most important message here. What is most important is that you think carefully about where you want to grow, and build strategies that position you for long-term success. You can’t be efficient if you don’t. We live in an age where data are brought into nearly everything we do, so it makes very little sense to make choices that aren’t built on the knowledge and insight they provide.

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