Should you buy a home now or hold off until 2024?
This is the question that prospective homeowners are trying to resolve in the current market for housing. Prices for homes have soared throughout the outbreak, as did the Federal Reserve’s efforts to curb inflation, which has also seen mortgage rates rise.
The result is that many potential buyers choose the “wait” part of the problem. According to the Fannie Mae Home Purchase Sentiment Index published at the beginning of September, over 80 percent of people think it’s not the best time to purchase a home.
Buyers will have more leverage in the West, while sellers’ markets dominate the East Coast
But, after being in constant decline in the last couple of years, the market has started to improve for buyers across many regions of the nation. The number of days on the market is rising, and buyers have the chance to take their time making the right choice. The most sought-after West Coast cities that had experienced soaring prices, such as Seattle as well as San Francisco, saw double-digit decreases in prices year-over-year. A study by the real estate firm Knock says over 30 U.S. metro areas will benefit buyers at the end of the year, including some desirable areas such as Atlanta, Charlotte, Dallas and Phoenix.
Is it now the time to purchase a home?
In all honesty, it’s probably more advantageous for potential buyers to sit and watch, hoping prices or rates will drop significantly soon. What is the best course of action in case of an economic recession? Here are some crucial factors to consider when deciding the best way forward.
Is it a good time to invest in a house?
Mortgage rates have been on the rise — more than they’ve seen in more than 22 years in early September. In addition, home prices are rising as well: according to the most recent case-shiller U.S. National Home Price NSA Index, the index has been increasing for the past five months. These factors may make you reconsider buying now, which is understandable.
Whichever direction the market for real estate is heading, buying now means you’ll be able to begin creating equity quickly. It also means you will be able to avoid the risk of having to pay for further rates later on. The rising rates could spell major problems for your budget and will also mean the cost of interest being higher over the course of your loan.
“If the buyer comes across an opportunity they want to live in, they shouldn’t wait,” says Stacey Froelich, an agent with Compass in New York City. “You can’t predict your market, and buying a home is an investment that should last for a long time.”
“When mortgage rates fall, and buyers return to the market, the cost of homes will increase,” Melissa Cohn, regional vice president of William Raveis Mortgage in Connecticut, recently informed her newsletter subscribers. “Remember that you’re supposed to marry the home and then date when you get the mortgage rates.’” To put the other way around, you could refinance later.
If you answered yes to these questions, it’s the right time to invest in a new home.
- Have you got good credit? Anytime you’re borrowing money, begin by looking up the score on your credit. The most attractive mortgage rates are available to those with scores of 740 or more, and, in actuality, the median score of credit of mortgage applicants for the quarter ending in 2023 is 769, as per the Federal Reserve Bank of New York. If you’ve proved that you’re a low-risk borrower who has made punctual and timely payments, you’ll qualify for the best mortgage rates a lender can offer.
- Have you saved enough money for down payments? In addition to paying your bills punctually, you should have some substantial cash to make the deposit. The more you are able to pay in advance, the less you’ll need to take out (and consequently, the lower interest you’ll be charged). Be sure to have enough leftover, too. Lenders are more comfortable lending you money when you have funds in cash reserves, which can act as security if an unexpected event occurs.
- Do you plan to remain in your house for a time? Beyond the purchase cost, a house has closing costs that can cost hundreds of dollars more. It’s a good idea to justify the one-time costs to ensure that you’ll not move within the next few years or that your finances will be stable enough to keep and lease the house. Selling a house quickly after purchasing could have significant tax consequences.
Should I purchase a home or hold off until 2024?
Ultimately, choosing the best time to purchase a house is entirely up to you. The world goes on regardless of whether the timing is ideal or not. If you’re looking forward to becoming a homeowner, if you’ve met the requirements above and are financially secure, you can start looking for homes.
If you’re hoping for lower mortgage rates, patience may be appropriate. The rates have fluctuated recently, reaching 7 percent in mid-July and then reversing to 6.88 percent before reaching 7.42 in September. This is a 0.54 percent increase in just two months.
While a half-percentage point might not seem like a lot, it could significantly affect how much a home is affordable in the long term. For instance, MyState’s mortgage calculator illustrates that purchasing an apartment worth $350,000 with 20 percent of your down payment and a monthly payment of both interest and principal on a 30-year loan at a 6.88 percentage interest would be $1,840. A similar loan with a rate of 7.42 percent will bring the monthly payments to $1,942 — greater than $100 more. That’s a total of more than $36,000 over the course of the loan’s 30 years.
It’s not possible to determine where the rates will end up by the time the year ends. Here are three situations where it may be better to sit for the market to settle:
- If the home prices in your area are declining: If you looked at the market around last year’s market and chose to wait to see what the market would be like, you likely made the right choice. In many regions, the summer and spring of 2022 were the price highs. Since then, a few hot cities have significantly declined median sale prices. The National Association of Realtors Quarterly report for Q2 2023 reveals that the prices in Austin are down 19.1 percent, for example, and those in San Francisco have dropped by 11.3 percent. The declines aren’t completed yet, which is why it’s best to be patient for a little longer.
- If the number of properties in your region is growing: When there are more homes on the market to pick from, buyers can bargain more. Since many buyers have been pushed off the market because of the current interest rate environment, certain regions have seen an increase in the number of available properties. However, based on NAR’s statistics, the country was home to 3.3 months of housing inventory in July, down 14.6 percent compared to July 2022 and far less than the demand.
- If your financial situation would benefit from a little love: The biggest reason to put off a decision is when your current financial situation isn’t ideal. If, for instance, you anticipate a substantial commission check, inheritance or another windfall that could make a significant difference to your down payment and you want to wait until it is received, it is sensible. If your credit score could be better, waiting is also wise. Spend some time to build your credit score and consolidate your debts so that you can be eligible for better loan terms.
Examine your local market thoroughly
Whether you should buy a home now or later depends on where you want to reside. Despite the national news, real estate is highly localized and can be very different between markets and even within a state.
If you take a look at this latest Redfin analysis from Texas. The data shows that the median home sale price in Fort Worth decreased by 7 percent over the past year and was at $335,000 at the end of July. However, in Dallas, only 30 miles to the south, the median price was $436,000 and was rising. It’s a gap of over 100,000 within the same metropolitan region. In today’s market for homebuyers, it’s more crucial than ever to locate an agent who truly knows your area or even your particular neighborhood — and will guide you through the nuances of each neighborhood.
What happens if you’re caught in the downturn?
The chances of the possibility of a recession are uncomfortably high, 59 %, according to the most recent survey by Bankrate. It’s not surprising that recessions are a dangerous time to purchase homes. For instance, when you quit your job, a lender is less likely to consider approving your loan.
Even if the economic downturn doesn’t impact you directly in your local area, if it is a victim, it could affect the real estate market in your area. A smaller number of local residents with money to buy could mean a lesser possibility of selling homes, preventing homeowners from selling and limiting the chances of acquiring a home.
However, there are some advantages to buying a house during the recession, when you can make the. In particular, there’s less competition, which can aid you in finding a fantastic property you wouldn’t otherwise be able to and could be a fantastic investment in the near future.
Remember, even though some experts believe a receding economy is inevitable, the truth is that it’s not necessarily a certainty.
