Lifting Your Housing Hopes (6 min read)
By: Luke Noble
Cards on the table, we think it’s safe to say that 2023 was not the best year for the Land Title Insurance and Settlement Industry. The sector as a whole was down around 40% and it’s likely we all felt that in some way. Inflation, housing shortages, and rising interest rates dampened any momentum needed to get the real estate economy rolling. But this isn’t 2023 anymore, it's 2024 and we wanted to take this opportunity to highlight some of the positive predictions and projections that are being tossed around. Sure, if you look for doom and gloom you can find it, but with it, you will find some major banks, publications, and high-level economists that see a parting of the clouds. Admittedly, no one is predicting boom times in the near future, but signs that the worst might be behind us are out there and a positive attitude is a good start to any day.
USA Today, in their “Housing market predictions” outlined that:
“No other phrase has defined the 2023 housing market as much as the “mortgage rate lock-in effect” – a phenomenon that brought the industry to a standstill, putting downward pressure on everything from inventory levels to home sales.
The pandemic-era sub-5% mortgage interest rates that 85% of mortgage holders are locked into kept homeowners from selling their home and buying another at elevated interest rates, which peaked at 7.79% the week ending Oct. 26, according to Freddie Mac.
“A marked turn can be expected as mortgage rates have plunged in recent weeks,” says National Association of Realtors Chief Economist Lawrence Yun.
One thing most experts don’t expect to see is an end to shortage of homes for sale.
“Despite this, households will have more options in 2024 from a small uptick in single-family home construction, and the completion of the large number of multifamily units that are under construction, the vast majority of which are destined to be rental homes,” says Danielle Hale, chief economist for Realtor.com.
Most experts predict the average 30-year mortgage rate to linger anywhere between 6.1% to 7% range in the first quarter, then decline throughout the year.
“Mortgage rates are likely to remain well above pandemic-era record lows because financial markets increasingly believe the country will avoid a recession in 2024,” says Redfin Chief Economist Daryl Fairweather. “Mortgage rates will fall to about 6.6% by the end of 2024. The gradual decline in rates combined with the small dip in prices will bring homebuyers some much-needed relief.
See there, right at the end. A small glimpse of hope for the average home buyer and thus the overall economy. Again, we didn’t say these were going to be fireworks and dance party predictions just NOT doom.
Forbes put out their “Housing Market Predictions For 2024” as well and started by saying:
"interest rates would need to cool off."
But Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Eye-popping mortgage rates in the last few years have led to plummeting mortgage applications. The good news is that rates have begun receding in recent weeks.
While application activity remains tepid, the Mortgage Bankers Association (MBA) sees this as the bottom, predicting total mortgage origination volume will increase from an anticipated $1.64 trillion in 2023 to $1.95 trillion next year amid rates drifting down to near 6% by the end of 2024.
Fannie Mae also expects mortgage activity will trend up, with single-family mortgage originations undergoing a slow but meaningful recovery in 2024, according to a recent report.
“Falling rates will bring both more buyers and more sellers into the housing market,” said Dr. Lisa Sturtevant, chief economist at BrightMLS, in an emailed statement. BrightMLS forecasts existing home sales to reach 4.6 million in 2024—up from an expected 4.1 million in 2023—and inventory to increase by approximately 8% by the end of the year.
Despite some areas seeing price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low. Experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having positive home equity.
Despite foreclosure activity trending up nationally, experts generally don’t expect to see a wave of foreclosures in 2024.
“Foreclosure activity is still only at about 60% of pre-pandemic levels as we prepare to exit 2023, and isn’t likely to be back to 2019 numbers until sometime in mid-to-late 2024,” says Sharga.
The biggest reasons for this, Sharga explains, are the strength of the economy—currently we’re seeing low employment and steady wage growth—along with excellent loan quality and expanded financial relief offerings from mortgage servicers.
People so often seem to want to compare this housing downturn to the last one in 2008/2009 but as outlined above…it just isn’t. The factors currently at work are different and are far less likely to lead to the broader economic nosedive experienced back in that era. Sure, the march back up may be slow, but there are signs that it’s already started and going steady in the right direction.
Lastly, in Business Insider’s “biggest predictions for the US housing market in 2024” experts from Goldman Sachs, Zillow, and the Chief Economist from realtor.com pointed out that:
“As the Fed turns dovish, the 30-year fixed mortgage rate will average 6.8% next year, Realtor.com predicted in early December. In the last week of the month, the rate slid to 6.61%.
This could have the effect of slowing demand as homebuyers feel less pressure to race against higher borrowing costs. The listing agency expects prices to dip by 1.7%, having risen 3% in 2023.
"It will be a bit of a break after what have been pretty relentless home price increases," Chief Economist Danielle Hale said, adding: "Some of the pressure and sense of urgency will start to let up."
Goldman Sachs estimates existing sales will only dip slightly in 2024, before rebounding to 4.24 million the year after. Meanwhile, new home sales will climb from this year's 680,000 to 723,000 in 2024.
That's as housing starts will inch higher, climbing from 1.39 million to 1.335 million in 2024. New home construction has substantially increased this year, as homebuilders jumped on the lack of housing.
The bank expects muted price growth next year.
"Taken together, the cost of buying a home looks to be on track to level off next year, with the possibility of costs falling if mortgage rates do," Zillow researchers said.
We’ve been hearing the dire warnings and incessant drum beat of the looming catastrophe since early 2020. The economy went through some never-before-seen hurdles that threw the housing and real estate markets for a loop. It was a wild ride up and down as the economy adjusted. Whether the recession came and went or ever came at all seems to be argued based on semantics and changing goal posts. As 2024 gets off to a slow start there are early signs that real estate market may be warming. Many hope it could be steady climb back to better times.
As always, our advice is to hope for the best and prepare for the worst. Please don’t let the fear mongers dampen your spirits and try to focus on the silver linings wherever you can find them. After all, isn’t a glass half full better than the alternative?
Anderson|Biro is a full-service, Executive Search firm dedicated nationally to the Financial Services sector. We source talent to service all aspects of the Built World, including the Land Title Insurance, Settlement and Appraisal industries. We have forged successful partnerships with leading Homebuilders, iBuyers, Fintech, Servicers, Law Firms, Real Estate Brokerages, Private Equity and Lenders with direct or indirect stakes around the real estate closing table. We offer quality solutions for clients in these primary fields and beyond. Our candidates are screened for specific industry experience, outstanding track records, and values that complement your mission and culture.