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6 Mortgage Market Trends to Watch in 2024

This last year was a whirlwind – from surging mortgage rates (hello, 23-year high of 8%) to elevated home prices (hey there, nine consecutive months of gains) to low home sales (how’s it going, 14.6% year-over-year drop?). And let’s not forget about the potential of a recession looming over our heads.

But 2023 is in the past. It’s officially 2024 and mortgage professionals are asking the age-old question: What can we expect in the year ahead?

Decrease in Mortgage Rates

Mortgage rates have fluctuated dramatically over the last few years. In 2021, the average 30-year fixed rate dropped to a record-breaking low of 2.65%, making the jump to over 8% this past year particularly jarring for homebuyers and mortgage professionals alike.

Fortunately, inflation is slowing and the Fed has paused its aggressive rate hikes, which contributed to the rising mortgage rates over the last year. Due to these recent shifts, experts are predicting lower mortgage rates in 2024. The Mortgage Bankers Association (MBA) expects the 30-year fixed rate to decrease to 6.1% by the end of the year. This is still higher than pre-pandemic rates, but the downward trend can be seen as a victory in and of itself.

Improved Inventory Levels

To add to the good news, experts believe housing inventory will improve – at least a little – in the new year.

According to a recent report, existing-home inventory is expected to reach 1.3 million homes by year’s end, which would mark a 7.6% increase year-over-year from 2023.

It’s likely this increase will be in part due to decreasing mortgage rates. With an improved market on the horizon, it’s possible that more current homeowners will be less reluctant to give up their already low rates and sell their homes.

At the same time, new home construction has already begun to climb, and experts believe it will continue to do so throughout 2024. According to the National Association of REALTORS, homebuilders are trying their best to “woo more buyers” by offering incentives like interest rate buydowns. The National Association of Home Builders chief economist even predicted a 4% increase in single-family starts.

Rise in Home Sales & Mortgage Originations

Home sales dropped drastically over the last couple of years. In fact, Statista found that home sales decreased by over 30% between February 2022 and February 2023.

Luckily, thanks to declining mortgage rates, Fannie Mae expects sale volume to begin slowly bouncing back this year. While sales will likely remain low in the beginning of 2024, existing home sales are expected to increase 12% by the end of the year.

At the same time, experts forecast a rise in originations. According to the MBA’s 2024 outlook, lower rates and improved existing home inventory will largely impact mortgage origination volume. The MBA expects it to increase by 19% this year to reach 5.2 million loans.

Home Price Increases

Home sales and origination volume are expected to rise in 2024, but home prices won’t be doing anyone any favors. According to Fannie Mae’s Q4 2023 Home Price Expectations Survey, average annual home price growth will increase 2.4% in 2024.

Bright MLS believes a slightly more modest increase is on the horizon. Its 2024 National Housing Market Outlook states that the U.S. median home price will rise by 1.5% to reach $394,200. There are 10 metro areas in which prices will likely increase by at least 5% – many of which are in the Midwest.

The report also states, however, that prices are expected to dip slightly in 10 other metro areas, including several markets in California and Florida. Increased supply will be a major contributing factor to these declines but won’t bring any double-digit price drops.

Enhanced Portfolio Diversification

The unlikelihood that home prices will drop in 2024 does significantly impact affordability and could keep home sales and originations at bay in certain markets. One of the ways many lenders will likely combat this, along with elevated – albeit declining – rates, is by diversifying their portfolios to meet more prospective homeowners’ needs.

Non-qualified mortgage (QM) lending has become more and more popular over the last couple of years as a way to provide financing solutions to underserved borrowers, such as self-employed individuals and contractors. As stated in a HousingWire article, non-QM demand remains stable throughout higher rate environments, making it a product worth considering in 2024.

Continued Adoption of Outsourced Services

We will also likely see more transitions from in-house to outsourcing this year.

So many organizations in the mortgage industry focused on rightsizing in 2022 and 2023 due to the slow market and economic uncertainty. As of the end of October 2023, five of the six largest banks in the U.S. laid off a total of 20,000 workers throughout the year. Now, at the start of a new year, organizations should be asking themselves future-looking questions.

What happens when the market picks back up again? Will we have enough staff to keep up?

For many, the answer is “no.”

But is the best course of action to increase headcount to make ends meet when volume begins to pick up in the second and third quarters?

The answer to that question is also “no” for many organizations, knowing the seasonal dip will begin at the end of the fourth quarter.

That’s where mortgage process outsourcing will come in. With an outsourcing partner who leverages a variable cost model, you can ensure that you can meet demand when volume picks back up again and avoid overspending when volume is low.

Your Mortgage Process Outsourcing & Automation Partner

As with any year, what the mortgage market will bring in 2024 isn’t written in stone. That’s why you need a mortgage process automation and outsourcing partner who continuously monitors market trends and can help you stay prepared for whatever the new year brings.

At MetaSource, we do just that and act as a one-stop-shop for our mortgage clients. Our solutions range from mortgage quality control (QC) and compliance services (yes, they include non-QM audits!) to loan boarding to mortgage automation.

If you’re ready to start 2024 off right and want to discuss your current challenges and goals with one of our mortgage industry experts, contact us today.

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