Financial experts are cautiously optimistic about the 2024 mortgage market.
Story by Tracy Dickinson
Featured in Spring 2024
After a significant slowdown in the real estate market during 2023, home buyers entered 2024 hesitant about purchasing or refinancing. Factors ranging from interest rates and the economy to an uncertain political climate and upcoming election have played into that outlook.
However, lenders are cautiously optimistic about the mortgage market and anticipate growth in 2024. Their focus as financial advisors is on helping homeowners make wise financial decisions no matter what the market does. And the consensus right now seems to be “Think positive. But proceed with caution.”
“We anticipated 2023 to be a slower year for mortgage activity and home sales, but I have higher hopes for 2024,” says Kim Downing-Manning of Bankers Trust.
All signs indicate that rates will drop further throughout the year, and inflation is expected to drop as well. This is good news for home sales, according to Jason Froehlich of HomeServices Lending. “To encourage the drop in inflation, the Fed has hinted that they may lower interest rates as many as three times during 2024. If that’s true, the rates will drop more slowly, but that would actually be better for the market. We’re less likely to get a rush of buyers that could drive prices up.”
A slow but steady increase in sales would make for a stronger market for both buyers and sellers. And if industry predictions hold true, Iowa Trust’s Vicki Davis says 2024 activity is likely to remain steady overall. “With all the uncertainty of the past year, that’s actually an encouraging sign,” she says. “Those incredibly low rates and high volumes we saw in 2020 and 2021 were not the norm, so remaining fairly steady is a good thing. Rates already began decreasing at the end of 2023, and everyone anticipates that will continue this year, but at a gradual pace.”
“There’s some pent-up demand out there that will become evident as rates drop,” says Froehlich. “And if that happens gradually, as expected, 2024 should be a better market overall.”
Davis says that improved market could lead to more interest in refinance options as well. “That portion of the market had dwindled to almost nothing when rates went up. But homeowners who did buy when interest rates were higher may benefit from refinancing if rates drop a bit more.”
That’s one example of the ways financial advisors can benefit their customers in this quickly changing economy.
Educating consumers has always been the objective of the best lenders, but that has become even more important during the past several years. Downing-Manning says, “When rates are low, finding the right mortgage package seems easy. But when rates rise, it gets more complicated. Making sure our clients are getting the best financial package for their budgets requires understanding their current situation, advising them on the long-term situation, and helping them make a decision that fits both.”
“Many other factors play into that monthly payment, so our role as lenders is less about making it possible for them to buy a specific home than it is about educating them on the long-term and the payment they can really afford.”
Vicki Davis, Iowa Trust
Ultimately, interest rates are only one factor in that discussion. “Lower rates are always good. They help everyone,” she says. “But the monthly payment and the long-range plan have much more effect on the budget. You have to look at what property taxes are likely to be, what insurance will cost, and so much more.”
The conversation between home buyer and lender should always focus on payment, not rate. Davis says that becomes even more crucial during periods of uncertainty. “It’s especially important to educate first-time buyers on all the factors that will affect whether a home is in their budget or not,” Davis says. “But buyers at all levels can get focused on interest rates and the purchase price they can expect to afford. Many other factors play into that monthly payment, so our role as lenders is less about making it possible for them to buy a specific home than it is about educating them on the long-term and the payment they can really afford.”
Froehlich says planning for the unknown is another significant challenge. “You can’t prepare for what you don’t know, and there are so many factors that just can’t be predicted accurately—the geopolitical climate, consumer confidence,” he says. “We have to help clients slow down and talk about their needs and their debt situation so we can offer the most-sound financial advice possible.”
Davis agrees. “The fear of the unknown affects everyone, and that’s truer than ever right now, with the upcoming elections and interest rates. But there are great financial products available and options for buyers, even in an uncertain national economy.”
“We’ve always made it a point to talk with builders, agents, and home buyers to find out where those pain points are in the market at any given time,” says Froehlich. “Those conversations enable us to adjust our products to alleviate some of that pain and to better educate our clients on the options available.”
Each of these professionals looks back on 2023 as one of the most challenging of their careers, but that has not discouraged them.
“I’m an eternal optimist,” Froehlich says, “and I still look back on 2023 and see a lot of positive things.”
Cautious optimism is always a good quality in a financial advisor. After the roller-coaster housing market of the past several years, home buyers can be even more grateful for that steady focus at their side. •
Resources
- Kim Downing-Manning Bankers Trust
- Jason Froehlich HomeServices Lending
- Vicki Davis Iowa Trust
