The current real estate market seems to put house shoppers in a difficult position. With potential home buyers caught between relatively high interest rates and shifting home prices, it’s natural to wonder if now is a good time to buy a house.

Of course, everyone wants a clear answer. But the reality is that it’s not so cut and dry.

Some believe that the high interest rates are a good enough reason to put off a home purchase for now. But others think that the ease of buyer competition could make it the perfect time to find the home of your dreams.

Housing market: A current look

At the macroeconomic level, most prospective home buyers are aware that mortgage rates have increased dramatically in recent years.

Although average mortgage rates have started to dip after hitting a recent high of 7.79% for a 30-year fixed-rate mortgage in late October 2023, rates are still significantly higher than they were in 2021. As of writing in December 2023, the average interest rate on a 30-year fixed-rate loan is 6.61%, which is higher than buyers are used to seeing for the last twenty years.

Higher interest rates can take a bite out of anyone’s home purchase budget. The possibility of lower rates is tangible, with the Fed indicating it might not raise interest rates again. But even if the Fed stops its string of rate increases, some experts predict mortgage rates will remain above 6% for the foreseeable future.

In addition to high interest rates, buyers are facing high home prices. A recent report from the National Association of Realtors found that the median price for existing home sales was $387,600 in November 2023, which is up 4% from the same time last year. Of course, that’s just the median. Buyers in some areas are facing significantly higher prices based on a relatively low supply for a higher demand.

2024 housing market predictions

As we move into the New Year, prospective buyers who want to make a home purchase this year cannot help but consider the question of is it a good time to buy a house?

In terms of mortgage rates, many expect these to fall a bit in 2024. However, the expected drop is relatively slight and buyers should expect to see elevated rates throughout 2024. Since a higher interest rate eats into your home purchase budget, it could force buyers to consider more affordable options. For example, buyers might need to consider smaller homes or less desirable locations to find a property that suits their budget.

How to know if it’s a good time for you to buy a house

When it comes to buying a house, the macroeconomic factors might not be as relevant as you think. Of course, interest rates and housing supply play into your ability to afford the home you desire. But the reality is that the decision to purchase a home requires as much introspection as it does monitoring interest rate trends.

Below are some things to consider before moving forward with a house search.

Personal financial situation

First and foremost, prospective buyers should consider their personal financial situation. Before you purchase a home, it’s important that your finances are in a stable position to accommodate the costs of homeownership.

Take a look at your income, savings, and current debts. Buying a house often involves taking on a relatively large loan, in the form of a mortgage. It’s best to avoid taking on this debt if you already have a lot of high-interest debt acting like a drain on your budget.

For prospective buyers with lots of debt, like credit card debt, consider paying off this debt before pursuing a home purchase. Not only will this improvement to your balance sheet come in handy on your mortgage application, but it can also free up necessary cash flow to support your homeownership endeavors.

It’s important to note that homeownership comes with lots of hidden costs. While you’ll definitely need to keep up with your mortgage payment each month, other expenses can sneak into your budget. For example, you might need to pay for lawn care and other maintenance. Additionally, repair bills can add up. It’s a good idea to expect extra costs beyond your mortgage payment. If you don’t have any extra wiggle room in your budget, your finances might not be ready for the responsibility of homeownership.

In addition to room to support ongoing homeownership costs, consider the fact that you’ll likely need to make a significant down payment. While you may not need to make the traditional 20% down payment, you should expect to make a down payment of at least 3% to 10%. If you don’t have a down payment available, start saving now to set the stage for homeownership.

Homeownership goals

Homeownership is a long-term financial commitment that can have a significant impact on your lifestyle. Before diving into a home shopping journey, consider what your goals are.

One top consideration is determining how long you plan to live in a space. For example, someone who wants to live in the same location for at least five to seven years might find a lot of value in homeownership. But someone who is planning to leave the area in one or two years might be better off renting.

Additionally, consider your family size and expectations. If you are planning to grow your family, finding a place with the space you need can pay off in the long run. Since homeownership is usually a long-term commitment, it’s a good idea to consider your lifestyle goals before moving forward.

If you think you’ll live in a place long-term, homeownership might be the right move for you.

Credit score

The right credit score can make all the difference to your home buying experience. A higher credit score not only offers you higher approval chances, it also unlocks the potential for a lower interest rate.

Take a minute to check your credit score. If you have a great score, you can move forward confidently. If you have a poor credit score, it’s worth taking the time to improve it. You can prioritize improving your credit score by committing to on-time payments, paying off credit card balances, and checking your credit report for any errors.

Understanding of the current market

The real estate market is constantly changing. A combination of high interest rates and relatively high prices has made this a difficult time for home buyers. But if your finances are ready for the commitment of homeownership, then it can still be a good time to buy.

Consider talking your options over with a local real estate agent to understand the current market conditions in your area. With more information about your location, you can start the home shopping process with your eyes wide open.

FAQ

Should I buy a house now or wait for a recession?

While it’s tempting to wait for home prices to drop dramatically before buying a house, there is no guarantee that will happen in the near future. If you are ready to buy a house based on your lifestyle goals and financial situation, it makes sense to move forward with your home purchase.

Will 2024 be a good time to buy a house?

Mortgage rates are expected to stay relatively high in 2024, which means it might not be the best time to make a home purchase. However, by purchasing a home, you’ll have the potential for home appreciation in the future.

Is the housing market going to crash in 2024?

Based on the current forecasts, it seems unlikely that housing prices will crash in 2024. In contrast, home prices are expected to remain stable or increase slightly.

The bottom line: Is now a good time to buy a house?

It’s impossible to predict the future of the housing market. However, you can evaluate your own financial situation to determine if you are ready for homeownership.

If you decide you are ready for homeownership, explore your mortgage options today.