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Quarterly Mortgage Industry Update

Quarterly Mortgage Industry Update

Four times a year, we’ll update you with what’s happening in the mortgage and real estate sectors – as well as what we think is coming next. 

The Housing Market

If you’re looking to buy your first home or your next home, 2024 looks to be a more promising year. National Association of REALTORS® Chief Economist Lawrence Yun forecasts that: 4.71 million existing homes will be sold, the housing market is expected to grow and Austin, Texas, will be the top real estate market to watch in 2024 and beyond. He unveiled the association's forecast recently during NAR's fifth annual year-end Real Estate Forecast Summit: The Year Ahead. 

Yun predicts home sales will begin to rise in 2024 by 13.5% compared to 2023; and the median home price will reach $389,500 – an increase of 0.9%. Metro markets in southern states will likely outperform others due to faster job increases, while markets in the Midwest will experience gains from being in the most affordable region. Yun says he expects rent prices to calm down further in 2024, which will hold down the consumer price index. He predicts foreclosure rates will stay at historically low levels in 2024, comprising less than 1% of all mortgages. Yun forecasts that U.S. GDP will grow by 1.5%, avoiding a recession, with net new job additions slowing to 1.7 million in 2024, compared to 2.7 million in 2023 and 4.8 million in 2022. After eclipsing 8% in late 2023, he expects the 30-year fixed mortgage rate to average 6.3% and that the Fed will cut rates four times – calming inflationary conditions – in response to slower economic activity. He also foresees 1.48 million housing starts in 2024, including 1.04 million single-family and 440,000 multifamily. 

Top 10 Real Estate Markets with the Most Pent-Up Housing Demand in 2024 

NAR identified 10 real estate markets with the most pent-up housing demand, which it expects to outperform other metro areas in 2024. In order, the markets are as follows: 

  1. Austin - Round Rock - Georgetown, Texas 
  2. Dallas - Fort Worth - Arlington, Texas 
  3. Dayton - Kettering, Ohio 
  4. Durham - Chapel Hill, North Carolina 
  5. Harrisburg  -Carlisle, Pennsylvania 
  6. Houston - The Woodlands - Sugar Land, Texas 
  7. Nashville - Davidson - Murfreesboro - Franklin, Tennessee 
  8. Philadelphia - Camden - Wilmington, Pennsylvania - New Jersey - Delaware - Maryland 
  9. Portland - South Portland, Maine 
  10. Washington - Arlington - Alexandria, D.C. - Virginia - Maryland - West Virginia 

Yun says the demand for housing will recover from falling mortgage rates and rising income. In addition, housing inventory is expected to rise by around 30% as more sellers begin to list after delaying selling during the past two years. The selected top 10 U.S. markets will experience faster recovery in home sales. 

Second Mortgages 

According to Redfin, in October 2023 interest rates reached their highest level in over two decades. The increase in rates has made it financially challenging when a consumer is looking to tap into their home equity. With approximately 85% of U.S. homeowners having a mortgage interest rate under six percent, refinancing with a cash-out refinance can add hundreds of dollars to a monthly mortgage payment. The increase in interest rates has been felt as consumer demand for refinances continues to drop.  

As an alternative to a first mortgage cash out refinance, many consumers are opting for a closed-end, fixed-rate second mortgage. In a high-interest-rate environment, a second mortgage has become a viable alternative for consumers looking to tap into their home’s equity, which can be used to make home improvements, consolidate outstanding credit card debt, pay medical or student loan debt or use to invest in other property.