2024 Atlanta lending predictions

by Atlanta Agent

December 05, 2023

Featuring the perspectives of local lending executives:

Jeremy Collette
Executive Director of Capital Markets, Guaranteed Rate

What will happen with interest rates in 2024? When do you expect to see any changes?

Kim Nelson: The National Mortgage Bankers Association’s Economist, Mike Fratantoni, has forecasted the baseline for mortgage rates to end 2024 at 6.1 percent and reach 5.5 percent at the end of 2025. I am a believer that mortgage rates are likely to trend down in 2024. There are several economic factors that are indicators of how mortgage rates may trend, and economists point to variables like the employment market and inflation to forecast rate movement. Other key economic indicators include the spread between the 10-year Treasury and 30-year fixed-rate mortgages. Today’s market is constantly changing. Agents and homebuyers should look to their local trusted lending partner for insights into the rate market.

Jeremy Collette: Right now, I don’t see much relief in sight from this high-interest-rate environment. Inflation is still much higher than the Fed’s 2% target, so, unfortunately, the “higher-for-longer” theme being telegraphed by Fed officials is likely here to stay. The Fed recently moved its Fed funds rate forecast to 5.1% from 4.6% by the end of 2024, so with mortgage rates currently near 8%, maybe they get to the mid-sevens. It’s just amazing how strong the employment market and the consumer is — both major headwinds for Fed rate cuts.

What will be the biggest challenges and opportunities for lenders in 2024?

Colette: Generally, the biggest challenge will be continuing to operate in an extended high-rate environment. I do think there are some very interesting opportunities for nonbank lenders that can fill some of the niches left by banks exiting the lending industry due to balance sheet issues or because of the new bank capital rules.

Nelson: Opportunity: 2024 will be the great “reset” for the mortgage and real estate industry. The next five years will be totally different than the last five years! Being well capitalized, embracing change in an AI and automated environment while re-thinking your lead funnels, meeting consumer demands with technology, serving emerging markets, and making data driven decisions will separate the winners from the losers.

Inventory will continue to be a challenge. Home prices are expected to continue to grow over the next three years, as tight inventory supports price growth.

Aside from the traditional 30-year fixed-rate mortgage, which kinds of loans do you expect to be most popular for homebuyers in 2024?

Nelson: Most will continue to prefer a 30-year fixed rate mortgage. We will likely start to see lower down payments become more popular due to reported higher household debt and less liquidity. Today’s homebuyers are open to learning about various buydowns that may reduce their rate for a period of time. Homebuyer education is a key part of finding the right mortgage and a trusted advisor can help buyers navigate loan options to find a program that accommodates their needs now while planning for their future.

Colette: Short-term rates being higher than long-term interest rates, the so-called “inverted yield curve,” make it very challenging to originate ARMs or other short-term fixed-rate loans. I do believe there are some opportunities in the equity extraction space for products like HELOCs and reverse mortgages. Down-payment assistance, non-QM, business-purpose loans and affordable product sectors should continue to grow.