The current real estate landscape presents prospective homebuyers with a challenging question: Is now the right time to buy a home? High interest rates and soaring housing prices have many people feeling the same way. Insider magazine consulted five housing experts to provide clarity on whether it's wise to take the leap into homeownership, even in today's market.
Don't Wait for Interest Rates to Drop
Daryl Fairweather, Redfin's chief economist, anticipates a potential Federal Reserve interest rate reduction in the latter half of 2024, which might lead to slightly lower mortgage rates. However, waiting for this rate drop might not be the best strategy. According to Fairweather, such a move could trigger a resurgence of bidding wars, making it even more competitive for buyers.
Lawrence Yun, chief economist at the National Association of Realtors, suggests that financially prepared homebuyers should consider locking in a high interest rate now, with plans to refinance at a lower rate down the road. Historical averages suggest that higher mortgage rates have been prevalent in the past, and one can always refinance when rates improve.
Although mortgage rates are expected to fall over the next 12 to 18 months, they are unlikely to return to the nearly zero levels seen in 2022. Yun and Dr. Selma Hepp, chief economist at CoreLogic, predict mortgage rates to hover around 6% at the end of 2024.
Long-Term Ownership as a Sound Investment
David Meyer, vice president of data and analytics at BiggerPockets, believes that buying a home becomes a sound investment when you intend to stay in it for a significant period. Patience is the key, and as Meyer suggests, "Buying real estate is very forgiving if you plan to hold onto it for a long time."
Daryl Fairweather echoes this sentiment, emphasizing the importance of finding a home you'd want to stay in for five or more years. Long-term ownership often results in increased property value. However, she advises potential buyers to ensure that their monthly mortgage payment aligns with their budget, allowing room for savings to cover unexpected expenses.
No Perfect Time: Be Prepared and Flexible
The uncertainty in the real estate market presents a unique challenge for aspiring homeowners. Factors such as housing construction shortages and continued underbuilding maintain elevated home prices. Jenna Stauffer, an associate at Sotheby's International Realty, believes that despite the ongoing construction projects, the immediate impact on affordability will be limited.
Given these complexities, the experts recommend a proactive approach. Improving your credit score, expanding your property search to less expensive markets, and keeping a vigilant eye on new housing inventory could provide a competitive edge.
In the end, timing the market perfectly difficult, especially with the expectation of higher mortgage rates and continued home price appreciation. As Lawrence Yun points out, there is no ideal time to buy a home. However, when interest rates eventually drop, some homeowners with locked-in low rates might decide to sell, potentially increasing housing supply and relieving prices.
But it's important to note that lower rates might also result in increased competition and reduced negotiation power for buyers. In the dynamic world of real estate, there may never be a flawless moment to make this significant financial commitment.
The key to navigating the complex real estate market is being well-informed, financially prepared, and adaptable. Whether you choose to buy now or later, make sure it aligns with your personal circumstances and long-term goals.
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