Growing optimism could spell good news for the mortgage market
It may still be early in 2024, but there’s already some evidence that homebuyers are slowly becoming accustomed to the current rate outlook – and viewing the landscape for the year ahead with increasing optimism.
Fannie Mae’s Home Purchase Sentiment Index (HPSI) showed in January that 31% of consumers are expecting rates to fall this year, with 17% believing now is a good time to buy a home (an increase from 14% the prior month).
That improving outlook has been reflected in a busy start to the year on the purchase front, according to Kristi Hardy (pictured top), EVP, area manager and senior loan officer at the Virginia-based Atlantic Coast Mortgage.
She told Mortgage Professional America that her team had seen higher volume in the opening weeks of 2024 than the same time last year, with an uptick in purchase activity and the ongoing inventory shortage seeing a flurry of competing offers on listed properties.
That’s largely a product of customers gradually becoming accustomed to rates being where they are, she said, after a period of slower activity in the high-rate environment of recent times.
“I think people are getting used to the interest rates. I think they’ve already come to accept it is what it is,” she said. “And they’re starting to accept it. I think people were waiting and holding out for rates to come down, and then they’re kind of starting to realize it’s not going to be this quick, dramatic rate drop like they were hoping.”
New data from the Mortgage Bankers Association (MBA) has shown that the contract rate on a 30-year fixed mortgage increased to 6.87% in the week ending February 9, its highest level for two months – but still well below the October high of 8%.
The market is also anticipating rate cuts later in the year by the Federal Reserve, although a surprisingly strong labor market and persistent inflation appear to have dampened hopes of a drop in the spring.
After a rocky few years for the US housing market, consumer sentiment appears to finally be on the rise. Andrew Russell of RCG Mortgage shares insights on the shifting trends.https://t.co/A0xjQWZRkK#mortgageindustry #marketupdates #consumersentiment #housingmarket
— Mortgage Professional America Magazine (@MPAMagazineUS) February 13, 2024
How are first-time buyers faring amid a hotter market?
A noteworthy feature of those current bidding wars, according to Hardy, is that they haven’t been as extreme as those of previous years in terms of offers over listed value, with the highest bids currently coming in around $20,000 to $30,000 over asking.
First-time homebuyers may view that trend with some dismay, given their well-documented affordability struggles in many regions – but there are some strong opportunities for those buyers in West Virginia, Hardy said, particularly with appealing programs in place for new entrants to the market.
Borrowers with an eye on rates falling in the future are already asking about refinances, although Hardy still expects the 2024 to be dominated by purchase activity.
“I’m not counting on the refi business at all,” she said. “I’m focusing only on purchases. Maybe by the end of the year we might have a small refi boom, but now I’m not counting on it. Rates have gone up this week, and to me it’s just such an unknown. I don’t want to count on it at all.”
What’s top of mind for mortgage professionals as activity ramps up?
With a positive outlook on how activity will shape up in the mortgage market for the year ahead, Hardy said the client experience remains the core focus for her and her team at present.
That’s especially important with competition for mortgage clients hotter than ever in the opening months of the year.
“For me, it’s making sure that the clients feel extremely valued and that they’re getting a value by working with me,” she said. “It’s an extremely competitive market right now with online lenders and credit unions coming out of the woodwork with people’s current servicers, with all the trigger leads.
“There are all those external factors – so I’m very focused on making sure that our clients see the value in working with an expert like myself and with a team that really cares and wants to help them with their whole financial picture, not just this transaction.”
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