Now that summer is underway, 2024 is officially halfway over. This year’s mortgage market has fallen short of many mortgage lenders’ expectations – high interest rates, lackluster inventory, and record-breaking home prices suppressed the highly anticipated Spring purchase market.
As a result, many lenders are wondering what the second half of 2024 has in store. Are market conditions poised to improve?
In this article, we’ll examine some notable trends surrounding the upcoming market conditions, from dampening inflation to changing regulations. After that, we’ll offer some solutions to help you bolster your business as the year evolves.
Table of Contents
2024’s Interest Rate Trends
High mortgage rates have been the primary force holding back the market this year. While rates have fallen from their peak, they’re still above what most buyers and sellers are willing to pay. As of July 2024, the average interest rate on a 30-year mortgage was 7.09%.
So, what’s next for mortgage rates? So far this year, the Federal Reserve has delayed several rate cuts to combat ongoing inflation issues. However, it may still implement a few rate cuts in the fall. If these rate cuts are enacted, here are the following organizations’ mortgage rate projections:
- Fannie Mae
- Q3 2024: 6.8%
- Q4 2024: 6.7%
- Mortgage Bankers Association
- Q3 2024: 6.7%
- Q4 2024: 6.5%
- National Association of Realtors (NAR)
- Q3 2024: 6.7%
- Q4 2024: 6.5%
If these projections materialize, lenders, buyers, and sellers can look forward to a domino effect of positive market conditions, from increased inventory to enhanced housing affordability.
2024’s Inflation Rate Trends
Interest rates may be everyone’s top concern, but inflation will ultimately determine their direction. The Federal Reserve set an inflation rate target of 2%. To achieve that goal, the Fed hiked up the federal funds rate and slowly reduced it over time.
As of May 2024, the U.S. inflation rate was still above target at 3.3%. However, the Consumer Price Index increased to 3% year-over-year in June and prices dropped 0.1%, giving economists a brighter outlook on inflation’s deceleration. Many experts are optimistic that the inflation rate may fall closer to 2% by the end of the year.
During a monetary policy conference in Portugal in early July, Federal Reserve Chair Jerome Powell also declared that the United States was finally on a disinflationary path. “We just want to understand that the levels that we’re seeing are a true reading on what is actually happening with underlying inflation,” said Powell.
2024’s Housing Inventory Trends
The United States is currently facing a housing shortage of 4.5 million homes. As of May 2024, there was a 3.7-month supply of housing inventory, only marginally up from September 2023’s meager 3.4-month supply. This ongoing shortage has placed us firmly in a seller’s market.
Some experts suggest that the national housing supply may increase slightly this year. However, for inventory to increase more substantially, one of the following conditions must be met:
- More homeowners need to list their homes – Many would-be sellers are locked into low interest rates, and they don’t want to give them up. This has been the case for nearly two years. While most homeowners will continue to wait out the market, some will be forced to sell in the near future to accommodate life changes, such as growing families or job relocations. However, only a reduction in interest rates will inspire a larger share of sellers to list their homes.
- New construction needs to increase – Along with existing homes, new construction can add new inventory to the housing market. But so far, this solution has only offered modest improvements. Due to stubborn inflation and interest rates, builder confidence dropped down from 45 to 43 in May 2024, continuing a downward trend seen in the previous months. Readings below 50 indicate that builders don’t see favorable conditions for new construction in the near future.
Since neither of these conditions is likely to be met anytime soon, low inventory will likely persist through 2024.
2024’s Housing Price Trends
Housing prices have remained out of reach for many homebuyers, particularly first-time homebuyers who don’t have today’s fast-growing equity on their side. The median home price jumped to a record high of $419,300 in May 2024, a 6% increase from May 2023. In April 2024, home price growth increased another 6.3%, setting yet another record high.
In response to these price spikes, NAR’s Housing Affordability Index dipped below 100, suggesting that a median-priced home is no longer affordable for a median-income family. Additionally, average first-time homebuyers can only afford 29% of homes on the market, according to a First Time Home Buyer Outlook Report put together by First American Financial Corp.
If these trends are any indication, home prices are unlikely to decrease during the remainder of the year. In fact, NAR predicts a housing price increase of 1.8% over the next six months. Along with these high housing prices, insurance costs have surged across the country, exacerbating affordability issues.
While these metrics paint a bleak picture, there are a few silver linings. Firstly, buyers who can afford to get into the market can take solace in the soundness of their investment – the ongoing shortage of home supply should protect against an imminent market crash. Additionally, 25% of builders reduced prices in May to boost sales, and many more are adding other incentives for interested buyers.
2024’s Housing Sale Trends
Housing prices should hold steady this year, but housing sales are another story. In May of this year, existing home sales were down 0.7% month-over-month and down 2.8% year-over-year, largely due to the affordability issues plaguing the market. Newly constructed home sales are down 4.7% from the previous month and 16.5% from last year, too. Meanwhile, pending sales for all home types have plummeted to a four-year low.
According to Redfin economic expert Chen Zhao, housing sales may increase slightly over the coming months, but a sizable increase won’t take place until mortgage rates dip below 6%. While this news isn’t great for mortgage lenders, it highlights the need for them to rethink their offerings and focus on originating more HELOCs and second mortgages.
2024’s Foreclosure Trends
As of May 2024, foreclosures were down 4% from the previous year, and real estate-owned properties (homes that don’t sell at foreclosure auctions) were down 28%. Experts expect these foreclosure rates to trend in the same direction throughout the rest of 2024.
The reason? Today’s homeowners have an unprecedented amount of home equity. Total homeowner equity shot up to $17 trillion during the first quarter of 2024. Since then, many homeowners at risk of foreclosure have been able to use their equity to pay down late mortgage payments or sell their homes without incurring substantial losses.
2024’s Regulatory Changes
The most noteworthy regulatory change taking place this year is the way that real estate commissions will be calculated. After five years of litigation, a federal antitrust lawsuit has been settled for $418 million.
This settlement states that home sellers will no longer be required to pay their buyers’ agent commissions starting on August 17th. Instead, buyers will be expected to foot the bill, giving them the opportunity to negotiate their buyer agent fees.
As of now, no one knows exactly how this regulatory change will impact home prices or housing affordability. It will likely take a few years to see this change’s full effect.
How to Help Homebuyers During The Second Half of 2024
Now that you know what to expect from the rest of this year, you may be wondering how to tailor your lending tactics to attract more business and support prospective homebuyers. At Certified Credit, we suggest following these three steps:
- Offer prequalification – Affordability is a major issue for many aspiring homebuyers. When borrowers understand their budget constraints, they can carry out their home search with more clarity and confidence. An easy way to shed light on aspiring borrowers’ housing budgets is to offer online prequalification using a tool like Cascade Prequal. This automated prequalification solution can offer personalized loan estimates to applicants based on your custom credit thresholds. Better yet, it can automatically add these leads to your LOS sales pipeline.
- Highlight your HELOC offerings – As the data above suggests, purchase loans and refinance requests aren’t providing ample business at the moment. While you wait for mortgage rates to drop, you can promote your HELOC and home equity loan offerings instead. These second mortgage products are enticing to equity-rich homeowners who want to maintain their low-rate mortgages while accessing affordable financing. From our Automated Valuation Models to Cascade Alerts, we have many solutions that can help you originate more second mortgages cost-effectively.
Learn More: How AVMs Can Supercharge Your HELOC and Second Mortgage Growth Strategy
- Educate your audience – Just like mortgage lenders, many aspiring homebuyers want to keep their finger on the pulse of the real estate market so they’re ready to take action at the right time. You can capture these leads’ attention (and future business) by sharing educational updates online.
Learn more: Check out Certified Credit’s educational resources.
End The Year Strong With Certified Credit
As you can see, the remainder of this year may facilitate some positive changes, putting the market on a stronger footing for 2025. But only time will tell what trends and predictions come true.
If you want to take control of your success this year and beyond, you need a reliable vendor partner on your side. At Certified Credit, we’re committed to each of our mortgage lender’s success. That’s why we’re constantly adding to our suite of solutions, which currently includes:
- Affordable credit reports
- Automated workflow optimization solutions
- Credit score improvement tools
- Property and valuation support
- Fraud and risk mitigation
- Flood zone determinations
- Underwriting compliance
- Settlement services
Want to finish off 2024 on a high note? Discover how Certified Credit can support your success this year by scheduling a credit consultation with our team today.
