This year’s mortgage market has been defined by record-high interest rates and hesitant homebuyers. In light of these challenging market conditions, many mortgage professionals are eager for a change in 2024.
So, what does 2024 have in store for the mortgage and real estate markets?
In this article, we’ll summarize some predictions for this coming year’s interest rates, housing inventory, home prices, investment activity, unemployment rate, and real estate regulations. We’ll also offer some suggestions to strengthen your business prospects, no matter what the market throws your way.
Table of Contents
2024 Predictions For Interest Rates
Over the past two years, the Federal Reserve has hiked up the federal funds rate aggressively in an attempt to curb inflation. This rate rose from 2.25% to 2.5% in July 2022 to a record high of 5.25% to 5.50% in July 2023, pushing average mortgage rates up to nearly 8%.
For every 1% increase in interest rates, up to five million potential homebuyers exit the market. Thus, these sky-high rates have deterred many would-be homebuyers, slowing down business for mortgage lenders across the country.
According to the Mortgage Bankers Association, mortgage rates have likely reached their peak. Rates are projected to stay where they are until the second quarter of 2024. After that, they may start to drop, though they’re unlikely to go below 6% before 2025. That’s because the current inflation rate is still 3.2%, which is slightly higher than the Federal Reserve’s goal of 2%. Until this goal is reached, elevated interest rates serve an important purpose.
2024 Predictions for Housing Inventory
2023’s housing inventory has been notoriously limited. As of September 2023, the housing market had a meager 3.4-month supply. For reference, healthy housing markets tend to have supplies of at least five to six months.
In large part, this low housing inventory is due to homeowners’ hesitation to give up their low mortgage rates. Nearly 70% of existing mortgage loans have interest rates of 4% or below. Understandably, these borrowers are reluctant to swap them out for higher-rate loans. With fewer people listing their homes on the market, housing supply has been hard to come by.
Fortunately, supply will likely increase throughout 2024 for the following reasons:
- As interest rates start to drop, more sellers may list their homes on the market, knowing they’ll be able to secure a relatively affordable mortgage on their next purchase.
- New construction is currently underway—multi-family housing supply is projected to rise by up to 6.5% by the end of 2023, and this trend will likely continue into 2024.
2024 Predictions for Housing Prices
With low supply and high demand, housing prices have surpassed many aspiring homebuyers’ budgets. The median sale price in September 2023 was $394,300, just $20,000 shy of the highest monthly average home price recorded in June 2022.
While housing prices have been high nationwide, they vary quite notably by region. The most significant year-over-year price spikes took place in these cities:
- Los Angeles, California – 23.8%
- San Diego, California – 18.2%
- Richmond, Virginia – 15%
- Cincinnati, Ohio – 14.6%
- Providence, Rhode Island – 14.6%
When it comes to 2024 housing price predictions, experts’ opinions vary. Morgan Stanley estimates up to a 5% decrease, while the National Association of Relator’s chief economist, Lawrence Yun, predicts a 3% to 4% increase. Only time will tell which direction housing prices are headed.
2024 Predictions for Real Estate Investments
While many aspiring homebuyers have been priced out of the market, investors often have more capital to work with. As such, investors made up 26% of all single-family home purchases in June 2023.
In 2024, investor activity is expected to increase by 15%. If interest rates drop significantly, this increase may be even more pronounced.
2024 Predictions For Unemployment
The unemployment rate can impact mortgages in the following ways:
- Mortgage default rate – When people lose their jobs, they often struggle to keep up with their mortgage payments, putting them at greater risk of default and foreclosure. The average default rate for employed homeowners is just 2.4%, compared to 8.5% for their unemployed counterparts.
- Housing market demand – A high unemployment rate is often correlated with a downturn in economic activity. When the economy slows down, so does the demand for housing, which may cause housing prices to plateau or decline.
- Interest rates – The Federal Reserve takes the unemployment rate into account when setting interest rates. Low unemployment leads to more consumer spending, which can prop up inflation and necessitate higher interest rates. In contrast, high unemployment can stall consumer spending, tamping down inflation and enabling the Federal Reserve to bring down interest rates.
During 2023, the unemployment rate has hung around 3.6%, which is quite low. According to the Congressional Budget Office, the unemployment rate is expected to reach 4.1% by the end of 2023 and 4.7% by the end of 2024.
This increase in unemployment may result in a slight uptick in mortgage defaults and foreclosures, boosting available inventory and lowering housing prices. An elevated unemployment rate may also contribute to a reduction in interest rates and spur a surge in real estate activity that benefits mortgage lenders.
2024 Predictions For Real Estate Regulations
Economic fluctuations aren’t the only factors that may impact the housing and mortgage markets. New regulations have the potential to, as well. Just take Airbnb and Vrbo—these online marketplaces enable real estate investors to rent out their investment properties on a short-term basis. Not only have they reduced the available housing supply in popular areas, but studies also show that they have spiked surrounding home prices and local rent prices.
In an attempt to restore housing affordability, many cities have implemented or are suggesting legislation that would combat the impact of short-term rentals. Some proposed ideas include:
- Banning short-term rentals lasting fewer than 30 days if the host is not present.
- Limiting short-term rentals to a maximum of 90 days per year.
- Prohibiting the administration of new Airbnb or Vrbo licenses.
- Capping the number of short-term rental units within a certain area.
As more cities adopt stricter short-term rental regulations, Airbnb and Vrbo hosts may be motivated to list their investment properties, increasing the housing supply and potentially lowering housing prices.
How to Succeed as a Mortgage Lender in 2024
Now that you know what to expect from 2024, you may be wondering how to set your mortgage lending business up to thrive. While you can’t control external market conditions, you can take steps to strengthen your internal operations.
Here are a few ways to do just that:
- Automate key loan origination workflows – From lead generation to verification of income and employment (VOE), many lending workflows can be automated to save you time and money. At Certified Credit, our suite of Cascade solutions can automate these processes with ease.
- Take advantage of cost-saving opportunities – While business may not be booming in 2024, you don’t need to settle for a mediocre bottom line. You can protect your profits by saving money where you can. We offer several solutions that can make your credit reporting costs more affordable, such as Smart Select, Flex ID, and Cascade Undisclosed Debt Monitoring (UDM).
- Take control of your business – While market conditions may be out of lenders’ control, you have more influence over your success than you may think. By concentrating on the components under your control, you, and other mortgage lenders alike, can set yourself up to thrive no matter what market conditions bring or when borrowers decide is the best time to buy. Download our guide to learn how you can start.
- Fine-tune your borrower experience – With fewer loan origination opportunities to go around, you need to hone your competitive edge. One of the best ways to do so is to deliver an outstanding borrower experience. By letting Certified Credit’s tech-savvy tools take care of tedious tasks, you can funnel your time and attention into satisfying your borrowers and providing personalized customer service.
- Provide ongoing borrower education – Just as mortgage lenders are sitting on the edge of their seats waiting for the market to change, so are aspiring homebuyers. By producing timely educational materials on the state of the market, you can guide these prospective applicants into making informed decisions and earn their loyalty along the way.
Prepare Your Mortgage Lending Business for 2024 By Partnering With Certified Credit
To sum it up, 2024 will likely have many of the same challenges as 2023, though market conditions should improve as the year progresses. Fortunately, even a moderate drop in interest rates has the potential to stimulate the housing market, giving mortgage lenders a much-needed boost in business. As a mortgage lender, you can navigate the new year with confidence by tailoring your business strategies to these predictions.
If you need help, Certified Credit can support you along this process. As a leading mortgage solutions provider and workflow optimization consultant, we have ample experience helping mortgage lenders maneuver through evolving market conditions. By partnering with us, you’ll gain access to our growing suite of products and services, which includes:
- Affordable credit reports
- Automated VOE
- Automated lead generation
- Automated prequalification
- Automated undisclosed debt monitoring
- Credit score improvement tools
- Property and valuation support
- Fraud and risk mitigation
- Flood zone determinations
- Underwriting compliance
- Settlement services
Ready to set your mortgage lending business up for success in 2024? Schedule a credit consultation with the Certified Credit team today.