3 Mortgage Market Trends Lenders Need to Incorporate into Their 2024 Planning

As lenders plan for 2024 amid tepid forecasts predicting the continuation of elevated interest rates, many turn their focus to survival. After all, if market conditions won’t dramatically change, why invest resources into new growth strategies?

The truth is, a “survive until ‘25” mentality will leave significant opportunity on the table. By adopting a reactive, defeatist mindset, lenders will miss out on loan volume that remains in the market while failing to set the groundwork for lead generation in advance of the next upswing. Instead, lenders should see 2024 as a chance to capture market share as their competition remains complacent.

Specifically, these trends should guide lender planning:

1. Lending activity is shifting to more affordable locales.

Caught between high interest rates and expensive housing costs, Americans are overwhelmingly moving to more affordable areas. Exploring pockets of the Midwest, South, and Northeast, up-and-coming borrowers are turning away from major metropolitan hubs to seek homeownership. This rapidly growing trend is unlikely to slow down; with housing affordability a top concern and inventory a growing issue, relocations to specific cities and states are expected to drive home buying in coming years.

Due to this pattern, it’s crucial for lenders to reconsider the markets they serve. If not, they’ll risk missing out on remaining volume and pigeonhole themselves into markets that are slow to recover. 

Here, theLender EVP and Co-founding partner Chris Ledwidge said it best in our recent Mini-Guide to Surviving Today’s Big Housing Market Reset: “Maybe you’re only licensed in California currently. Well, now is the time to figure out how to serve the markets where people are buying. Pull data on the top 5 states growing in population and get NMLS licensed there. If you’re isolating yourself to one market, you’re going to have a hell of a time in production and growth.”

2. Tough market conditions are driving a rise in unexpected, scrappy borrowers.

The housing market is at an inflection point; not only are young, diverse millennials and Gen Zs driving interesting new buying trends, but women—many of them single and highly career-focused—are steadily grabbing up property. Many of these groups are historically underrepresented in the housing market, and at first glance, it might seem unlikely for these demographics to grow in share during today’s tough conditions. In actuality, though, the lock-in effect keeping older buyers in their homes means that housing market activity is concentrated among borrowers who don’t yet own property.

“Somewhat counterintuitively, high interest rates are giving rise to younger, first-time, female, and more racially diverse borrowers,” says Amy Jo. “That’s not to say that these borrowers aren’t confronting affordability obstacles, but because many of these buyers don’t have lower interest rates to lose, they’re accepting higher rates and becoming creative in their paths to homeownership. Thus, these underserved groups have become the demographics showing growth and resilience in today’s market—and lenders need to pay attention to them as they plan for 2024.”

3. Forecasts and early indications point towards the beginning of stabilization.

While the era of ultra-low interest rates may be over for the foreseeable future, several indicators point towards increased stabilization in housing and mortgage markets. Recently, Fed officials announced that they didn’t expect rates to go much higher, with benchmarked short-term interest rates expected to stay slightly above 5% in 2024 and at around 4% to round out 2025. While those rates are far above lows seen during the pandemic, they’re appealing to borrowers who have become accustomed to 7% rates—and hold the opportunity for refinance volume as current buyers seek lower rates.

Maxwell Q3 data, which reveals a narrowing year-over-year volume deficit compared to Q2, indicates the beginnings of a more balanced market ripe for recovery in 2024 and 2025. For forward-thinking lenders, the coming months will serve as an invaluable time to prepare their systems, technology, and teams for opportunity to come.

Find more unique market insight in our Q3 Mortgage Lending Report

Want to dig into borrower and loan-level trends to inform your 2024 planning? The Maxwell Mortgage Lending Report offers robust data, including:

  • Borrower demographics (race, ethnicity, gender, age, marital status)
  • Borrower creditworthiness (DTI, credit score, assets, liabilities, income)
  • Loan factors (amount, type, program)
  • Property indicators (type, address, estimated and appraised value)

By following these vital aspects of the mortgage market, lenders can understand—and allocate resources towards—the areas of opportunity that emerge in today’s fast-moving market.

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