As we approach the latter half of 2024, the housing market has undergone significant changes, prompting many individuals to ponder, “Is now the right time to buy a house? Or should I hold off?” Mortgage rates have recently plummeted to their lowest levels since April 2023, while home prices remain elevated, and future rate trends are contingent on Federal Reserve policies. Prior to making a decision to purchase a property, whether in Trenton, NJ, or Bridgeport, CT, it is essential to evaluate your financial stability, job security, credit score, and down payment savings. Continue reading to determine whether it is advisable to buy a house now or wait.
What is the current state of the housing market in 2024?
Before deciding on whether it is the right time to buy (or not), let’s delve into recent macroeconomic shifts and their implications for potential buyers.
Mortgage rates
In recent times, mortgage rates have seen a decline. On August 5th, the daily average for 30-year fixed mortgage rates dropped to 6.43%, the lowest level since April 2023. Despite a decrease in home prices, forthcoming mortgage rates will still be influenced by the policies of the Federal Reserve. Investors anticipate a gradual reduction in rates, although substantial decreases beyond current levels are improbable. Given that inflation plays a pivotal role in the high rates, potential economic alterations could result in further rate reductions. It is imperative to carefully weigh the decision of securing a rate now versus waiting.
Home inventory and affordability
Even with the recent decline in mortgage rates, many buyers remain cautious. Some are postponing their purchase, anticipating further drops in mortgage rates following anticipated rate cuts by the Federal Reserve, while others are awaiting clarity on the new rules from the National Association of Realtors (NAR) or the outcome of the forthcoming presidential election.
Despite these uncertainties, there are signs of improvement in home inventory, with new listings up 3.7% year-over-year and overall listings increasing by 16.6%. This expansion in inventory, driven by lower mortgage rates, provides buyers with more options, even though pending sales have decreased by 8.4% over the past year.
Key considerations before deciding to buy a house or wait
Prior to determining whether purchasing a home is the right choice for you, ensure to contemplate these five questions.
1. Do you currently have outstanding debts?
When applying for a home loan, lenders evaluate your debt-to-income ratio (DTI), which represents the percentage of your gross monthly income allocated towards debt repayment. This ratio aids lenders in determining the amount you can borrow by considering the total proportion of your income dedicated to monthly debt obligations.
2. Are you prepared to establish roots?
Reflect on whether you intend to reside in the city where you plan to buy a home for the foreseeable future. In certain regions, renting may prove to be a more financially viable option than buying. Evaluate your personal objectives and the financial ramifications of renting versus buying based on your long-term aspirations.
3. Do you possess job security?
Acquiring a mortgage entails a substantial financial commitment, and the prospect of job loss can add significant pressure. If there is a risk of potential layoff, it might be prudent to postpone the decision to purchase a home.
4. Is your credit score favorable?
Individuals with credit scores of 750 or above typically receive more advantageous mortgage rates from lenders, although it is feasible to qualify with a lower score. If your credit score is on the lower end, it may be wise to delay the home-buying process until it improves.
5. Have you saved enough for a down payment?
Prior to purchasing a home, having adequate savings for a down payment is crucial. In most instances, it is recommended to have approximately 20% of the purchase price set aside, although this can vary.
To Buy or Wait: The Verdict for 2024
In essence, the real estate landscape in 2024 presents a blend of opportunities and uncertainties. With mortgage rates at their lowest in months and a surge in home inventory, prospective buyers have a wider array of choices compared to previous years. Nevertheless, factors such as potential future rate cuts, regulatory alterations, and political events introduce complexity to the decision-making process.
To arrive at an informed decision, individuals contemplating a purchase should meticulously evaluate their financial preparedness, long-term objectives, and prevailing market conditions. Whether opting to take action now or postpone, staying well-informed and considering personal circumstances will be pivotal in navigating the dynamic real estate environment.