5 Mortgage Trends Affecting WA Home Buyers in 2024

January 18, 2024
Last updated:
January 18, 2024
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In 2024, home buyers in Washington could enjoy lower mortgage rates than last year (on average) and higher loan limits for FHA and conventional loans.

Those are just two of the mortgage trends in WA State you should know about in 2024 if you’re planning to buy or refinance a home. So, let’s take a closer look at these mortgage trends affecting WA home buyers in 2024.

1. Lower mortgage rates expected in 2024

Last fall, the average rate for a 30-year fixed mortgage loan in the state of Washington rose to a 20-year high of around 7.79%. That’s based on the weekly nationwide survey conducted by Freddie Mac, the government-sponsored mortgage buyer.

But since then, rates have declined by more than a full percentage point, drawing more home buyers into the market. When this report was published in mid-January of 2024, the average rate for a 30-year fixed home loan was back down to 6.6%.

This trend has already affected the real estate market here in Washington and elsewhere across the country. For instance, a recent Mortgage Bankers Association (MBA) report showed an uptick in the total number of loan applications nationwide.

To quote the January 2024 MBA report:

“The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catch-up in activity after the holiday season and year-end rate declines.”

If rates decline further in 2024, home buyers in Washington will have even more incentive to reenter the market. And that’s the very prediction being offered by the MBA.

In their latest forecast, the industry group predicted that the average rate for a 30-year fixed mortgage loan would drop toward 6.1% by the fourth quarter of 2024.

We should point out that this is an educated guess and not a guarantee of future mortgage trends in 2024. But it reflects the general consensus outlook among economists at the start of 2024, which bodes well for borrowers.

2. The Federal Reserve might be done with rate hikes

As you probably already know, the Federal Reserve made a series of rate hikes over the past couple of years in order to combat inflation. But they have since adjusted their policy and held the federal funds rate at its current level after their most recent committee meeting.

Fed officials also suggested that they could make a couple of rate cuts later in 2004. While the Federal Reserve doesn’t control mortgage rates directly, its policies often indirectly impact borrowing costs.

This is good news for WA State home buyers because it means mortgage rates might have to fall in 2024. Lower rates can make it easier for home buyers to purchase a home by reducing the overall cost of homeownership.

This is one of the top mortgage trends affecting WA home buyers we are tracking in early 2024. So you can expect to hear more about it over the coming weeks.

3. Fewer borrowers using adjustable mortgage loans

The 30-year fixed-rate mortgage is the most popular type of home loan in the state of Washington. However, a smaller percentage of borrowers choose an adjustable-rate mortgage (ARM) loan to secure a lower initial interest rate.

ARM loan products, like the 5-year adjustable mortgage, tend to become increasingly popular with rising interest rates. That’s because borrowers can use an ARM loan to get a lower rate during their first few years of homeownership.

But right now, we are seeing the opposite mortgage trend in Washington, with ARM loans losing favor among Washington home buyers.

According to the MBA’s most recent Weekly Mortgage Applications Survey, published on January 10, 2024: “The adjustable-rate mortgage (ARM) share of activity decreased to 5.4 percent of total applications.”

In November, when mortgage rates had risen to a 20-year high point, ARM loans accounted for roughly 10% of mortgage activity. So they’ve become less popular since then, which is not surprising.

This is another mortgage trend for Washington that will probably extend through much of 2024.

If rates continue to hover in their current range—and especially if they drop further—only a small percentage of home buyers in Washington will use ARM loans. The vast majority will opt for the long-term predictability of the 30-year fixed mortgage.

4. More homeowners refinancing in Washington

We could also see a higher level of mortgage refinancing activity in Washington, later in 2024, and for the same reasons mentioned above.

When mortgage rates experience a sustained decline over a long period, more and more homeowners in Washington refinance their existing mortgages.

We’ve already seen an uptick in the number of refinance loans generated in Washington and nationwide. The MBA finance forecast mentioned above predicts this will continue throughout 2024, with a gradual increase in refinance loan originations from one quarter to the next.

This is a relatively new trend over the past couple of years, as mortgage rates have been soaring since 2021. During this increasing rate environment, homeowners hesitated to refinance. There’s little incentive to refinance when rates are high, particularly for homeowners who are currently locked in at a lower rate than today’s posted rate.

But the tide seems to be changing in this department, as rates peaked in the fall of 2023 and are on their way down, albeit very gradually.

5. Washington home buyers get higher loan limits in 2024

Last but not least, we come to the subject of loan limits.

Technically, this isn’t a Washington “mortgage trend” for 2024. It has already taken effect, with no further changes forthcoming. But it’s still an important development affecting many home buyers in Washington for the rest of this year.

As we explained in a previous post, federal housing officials increased the maximum loan limits for conventional and FHA mortgage loans due to rising home prices.

Here are the 2024 conforming loan limits for conventional mortgage products:

  • $766,550 in all counties except those within the Seattle metro area
  • $977,500 in King, Pierce, and Snohomish counties

If you borrow more than the conforming loan limit for your county, you’ll have to use a jumbo loan and might have to put more money down. But that’s doable if you have the income to support it.

For the Federal Housing Administration (FHA) loan program, the 2024 limits for Washington range from $498,257 to $977,500, depending on the county. The Seattle metro area has the $977,500 cap, while all other counties fall somewhere below that threshold.

These mortgage trends affecting WA home buyers for 2024 could be beneficial. In fact, economists predict that the lower rate environment we see today will simulate the real estate market over the coming months.

In a housing market forecast published earlier this month, researchers from realtor.com wrote:

“Looking ahead, as mortgage rates have been on a downward trend since the beginning of November, Realtor.com anticipates a positive impact on home-selling sentiment and the possibility that more new listings will enter the market.”

In closing, mortgage trends affecting WA home buyers include lower mortgage rates, increasing refinancing activity, and more buyers opting for 30-year fixed-rate mortgages. All these characteristics will shape the 2024 housing market in Washington.

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