BLOG VIEW: Considering the cyclical nature of the mortgage industry and the resilience it exhibits during its ups and downs, it is safe to assume that the challenges of the recent past are behind us.
In 2024, housing inventory is forecast to rise; mortgage rates are anticipated to decline; and home prices are expected to stabilize, leading to improved affordability for home buyers and increased home sales.
Meanwhile, the mortgage industry is still playing catch up on the technology required to meet increased demand efficiently. While the industry has made great strides in adopting automation, it is still catching up with other sectors in harnessing technology for innovation, productivity and cost reduction.
Artificial intelligence (AI) has emerged as a pivotal player. The mortgage industry is at a juncture where it is evaluating how best to apply AI in a highly regulated market. Lenders are keen on understanding how to leverage AI to drive results, enhance efficiency and foster innovation.
The question arises: Are lenders looking to embrace AI, or are they hesitant?
The prevailing sentiment is that AI is here to stay, and every player in the industry must determine how to effectively leverage it. The competitive nature of the market demands the strategic use of AI for gaining an edge.
However, the lack of clear regulatory guidelines creates a quandary. Finding a delicate balance between regulations and innovation will likely be a focal point in the industry’s discussions and decisions in 2024.
In 2023, the industry witnessed a phase of exploration and experimentation with AI technologies. This year, lenders should expect to see AI becoming more mainstream.
At our firm, we evaluate – and run proof-of-concept studies on – the application of AI. Our Touchless lending platform, particularly in collateral analysis, is an area where we are leveraging AI to address challenges such as appraisal bias. This is expected to intensify in 2024 and beyond.
The high costs associated with originating mortgages remain a pressing concern. As the industry emerges from recent challenges, lenders are keen on evaluating how to position themselves advantageously in the market.
With mortgage rates projected to stabilize around 6%, there is a renewed focus on cost reduction. Technology, especially AI engines, will play a pivotal role in streamlining the origination and servicing of mortgages. The industry is poised to shift towards greater innovation, leveraging technology to drive both efficiency and growth.
While the course direction of the industry is positive, challenges persist for new homebuyers. The difficulty in accessing homes is compounded by local regulations that hinder the broad-scale construction of homes. Collaboration with national builders reveals that regulatory hurdles impede progress. Addressing these challenges and increasing inventory will be crucial for a more inclusive and robust housing market.
Entering 2024, the convergence of stabilizing mortgage rates, increasing inventory and maturing technology sets the stage for an intriguing year. The focus on leveraging technology for market positioning and customer service is evident among leading lenders. The industry’s ability to navigate the delicate balance between innovation and compliance will be a defining factor in its success.
This year holds promise for the mortgage and lending industries. The strategic integration of AI, a renewed emphasis on innovation and a commitment to addressing challenges in homeownership position the industry for growth and resilience in the years ahead.
The landscape for 2024 reveals a nuanced story of resilience and adaptation. Home prices are anticipated to experience a marginal decrease, around 1% or 2%. While this might be construed as a positive shift, it’s important to contextualize it against the backdrop of inflation. In reality, the decrease doesn’t signify a substantial drop in real terms. Nevertheless, framing it as a decline could offer a positive narrative amid economic fluctuations, presenting a favorable outlook for potential homebuyers.
In the aftermath of the Covid-induced slowdown, the much-needed surge in new home constructions is expected to materialize, marking a significant improvement in inventory levels. This development is crucial for meeting the pent-up demand in the housing market. Navigating this renewed landscape requires a strategic approach to capitalize on the improved inventory, fostering opportunities for lenders to engage with a growing pool of prospective homebuyers. The synchronized efforts of the industry stakeholders will play a pivotal role in steering this positive trajectory towards sustained growth.
One of the central focal points for 2024 will be the discourse around mortgage rates. While there’s excitement generated by the prospect of decreasing rates, the reality points towards a new course correction, with the baseline settling around 6%. Acknowledging and transparently communicating this adjustment is essential. Aligning business strategies with this new normal will be instrumental in fostering trust with clients and ensuring the stability of the lending ecosystem.
Anticipating and proactively addressing potential challenges tied to interest rate adjustments will be crucial in maintaining the industry’s robustness. Additionally, with the anticipation that 2024 will witness a surge in homeowners leveraging their home equity for various purposes, including home improvements and special endeavors, developing tailored products and services to meet these evolving needs will position lending institutions for success in a dynamic market.
Hassan Rashid is chief revenue officer, while Brad Sivert – who co-authored this article – is chief marketing officer for mortgage technology firm Tavant.