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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 36 January 2024 F E A T U R E S T O R Y Greg McBride, SVP, Chief Financial Analyst, Bankrate.com Greg McBride, CFA, is the Chief Financial Analyst for Bank- rate.com, leading a team responsible for researching financial products and pro- viding analysis and advice on personal finance to a vast consumer audience. Q: What are the primary factors you expect to define the 2024 housing economy? McBride: I'd say affordability, inventory, and rates. There's better news on rates, which we can get to in a second, but from an affordability standpoint, I don't expect that we're going to see meaningful improvement on this front. It's going to continue to be a challenge. Even if rates come down, home prices are still high, and the faster the rates come down, the more likely home prices are to appreciate at a faster rate. On the inventory side, which I think feeds into that affordability issue, the limited inventory, I expect we'll see some improvement but not enough to allevi- ate those affordability issues. The new construction coming online will help some. I also think as mortgage rates move lower, we'll see some more existing-home invento- ry come onto the market, but I don't expect that we're going to see a surge in inventory. There's some good news in that mortgage rates that had peaked at 8% in October came down meaningfully in the fourth quarter, finishing the year below the 7% mark. I think that the downtrend will continue throughout 2024. It'll be a bumpy ride. It'll have some fits and starts, but generally, we'll see mortgage rates in the sixes for much of the year. I do expect they'll get below the 6% mark in the latter portion of the year, finishing around 5.75% for a 30-year fixed mortgage. Q: Do you anticipate any large-scale relief on the affordability front? McBride: It's going to take time. There's no magic wand here, and so if we get a period of years where home prices don't appreciate all that much—not necessarily stagnating, but if we saw ap- preciation that was in line with the rate of inflation, 2% to 3% a year, that gives incomes some time to catch up. Wage growth runs faster than that, so it helps close that gap. We saw outsized appre- ciation from 2020 until the midpoint of 2022, and that pulled forward apprecia- tion from future years and packed it into about 24 months. Home prices ran well ahead of incomes, and it'll take a pro- longed period of more tepid appreciation for incomes to close that gap. My advice to individual homeowners on that subject is to take another year or two to stabilize your financial foundation and invest in your career—those are the things that could make homeownership much more tenable 18 or 24 months from now. Then you're buying essentially the same house only there's a lot more breathing room in the budget as opposed to it being a real stretch at this point. Q: What are you seeing as far as the interplay between home prices, rent prices, and general housing affordability? McBride: Rents are high, but they're stabilizing. They're not continuing to go up. I think that is indicative of, or maybe a precursor to, what we will likely see going forward regarding homeownership costs in general: home prices and the cost of ownership. If mortgage rates ease, sud- denly that cost of ownership isn't going up as it has for the past few years. There does appear to be more building in the multifamily segment that could help the inventory picture in the near term— over the course of this year, certainly. "There's some good news in that mortgage rates that had peaked at 8% in October came down meaningfully in the fourth quarter, finishing the year below the 7% mark. I think that the downtrend will continue throughout 2024. It'll be a bumpy ride. —Greg McBride, SVP, Chief Financial Analyst, Bankrate.com