In 2024, home sales volume compared to 2023 will:

  • Decline (42%, 13 Votes)
  • Rise (32%, 10 Votes)
  • Remain flat (26%, 8 Votes)

Total Voters: 31

As 2023 comes to an end, real estate insiders are looking ahead to 2024. For mortgage lenders, they are choosing to by opportunistic (per usual). To distinguish, everyone in real estate sales or leasing is an optimist.

The Mortgage Bankers Association (MBA) has released its annual forecast for the year ahead, anticipating an:

  • 11% increase in purchase originations; and
  • 19% increase in total origination volume.

More sobering, the MBA does forecast that mortgage industry employment will continue to fall back in 2024. Since 2022, employment has decline roughly 20%, with the MBA expecting a total 30% decline from the 2022 peak to arrive sometime in 2024 (firsttuesday expects a steeper decline, nearer to 50%, not bottoming until late 2025).

Further, the MBA warns of a “mild recession” to arrive in the first half of 2024, resulting in higher mortgage delinquency rates.

And yet, they still anticipate higher origination volume in 2024. Their reasoning: with the coming recession, the Federal Reserve (the Fed) will not only put the brakes on their rate increases, but drop rates, thereby enticing homebuyers and refinancers back to the market.

Related article:

Tightened mortgage standards lock out mid- to high-tier homebuyers, sellers


Who buys in a recession, anyway?

Allow us a moment to be more realistic, as optimists figuring out what to do.

It’s true, mortgage interest rates are expected to slip in the short term, the indirect result of the Fed as conquistadors having pacified inflation. At that conjuncture, they of course will drop their benchmark rate as that battle has been won. But will the Fed’s moves really spark more interest (see what we did there) in mortgage originations?

During a recession — and while prices still demanded by sellers are way too high?

Don’t hold your breath; don’t bet your last fee.

With any recession comes job losses and gloomier consumer confidence. With the unemployed unable to qualify to buy or rent, and the employed starting to save rather than spend — discouraged by economic realities — originations are more likely to fall than rise in 2024. The swing of the pendulum has momentum in direction, until exhaustion.

Frankly, mortgage rates have little to do with buyer originations. That said, the mortgage industry won’t experience a rebound until sellers drop their prices sufficient to ignite speculator or homebuyer demand. Worse for originations, homebuyers will not return or remain sufficiently active until prices bottom with convincing duration.

When FRM rates drop — as in 2020-2021 — seller pricing moves up rapidly, taking around 12 months to fully absorb the additional mortgage funding, leaving no financial benefit to remain for buyers. On the other hand, when FRM rates increase — as in 2022-2023 — seller pricing moves down more gradually, taking 24-to-36 months to absorb the reduction in funds available to their prospective buyers. This seller delay is called the sticky price syndrome. It has been 16 years since sellers and their agents last experienced the adverse consequences of these declining market dynamics.

Thus, expect home prices to find their bottom for this cycle around late 2026, maybe 2027. Then, prices will begin to rise in a recovery fueled first by speculators and investors, and then by a full return of end user homebuyers.

Agents, brokers — and mortgage loan originators (MLOs) — who wish to make a living in the downturn will expand their practice to include buyers of the types who remain active during a recession.

Real estate professionals remain active by:

  • negotiating home purchases for cash-heavy buyers concerned only with getting the best price available today;
  • arranging home sales with carryback financing for mortgage-free or low debt sellers;
  • assisting with short sale mortgage discount negotiations as a facilitator for negative equity homeowners;
  • taking listings on REO inventory held by servicers/lenders;
  • arranging private money mortgage originations for funding business and investment purposes, not consumer mortgages; and
  • working for equity purchase (EP) investors purchasing homes from sellers-in-foreclosure. [See RPI e-book Buying Homes in Foreclosure Chapter 16: Assumptions: formal and subject-to]

Read more:

MLO Recession Side Hustle Guide [e-book]