Several people I know have spent the better part of 2023 looking at houses in an attempt to find a property they can make an offer on. And those same people have, unfortunately, all hit similar snags.
Right now, a lack of housing inventory is driving real estate prices up. It’s a simple matter of there not being enough supply to go around. And it’s hard to pay a premium for a home at a time when mortgage rates are still above 7%.
If you didn’t handle to buy a home in 2023, then you may be gearing up to explore in 2024. Or, you may be looking at buying a home for the first time in the new year.
Either way, know this: While current housing market conditions aren’t exactly wonderful for buyers, you’re not necessarily doomed if you ascertain to proceed forward with an offer in 2024.
Mortgage rates could come down
It’s not just mortgage lenders who are charging higher interest rates these days. Lenders across the board are imposing higher costs on borrowers on the heels of the Federal Reserve’s interest rate hikes.
The Fed has been raising interest rates since early 2022 to combat soaring inflation. And that’s driven the cost of borrowing up in a very big way.
But if inflation continues to cool, the Fed may cut rates in 2024. If that happens, we could see mortgages get a bit less expensive. And if rates fall to, say, the lower 6% range, that could help some buyers on the affordability front — even if home prices remain high.
Plus, recall that even if you get stuck with a higher mortgage rate in 2024, there’s always the option to refinance to a lower rate down the line. The key, however, is to make sure you can afford your home based on your loan’s initial interest rate.
If that rate allows you to keep your housing costs, including your mortgage payments, property taxes, and homeowners insurance, to 30% of your income or less, then you can feel reasonably confident that you’ve chosen an affordable property.
You may not pay as much as expected
It’s true that home prices are generally up right now. But you may be able to pay less thanks to savvy negotiation.
One thing you can do is work with your real estate agent to hire an aggressive home inspector — someone with a reputation for really being nit-picky. Any issues that inspector uncovers with a home you’re looking to buy can be used as a negotiating tool to get your seller to come down on price.
Also, don’t be afraid to be nit-picky yourself. If the backyard fence has seen better days, speak up. You never know when a homeowner may be more desperate to sell than they’re letting on.
If you’re willing to purchase a starter home, you may find that you’re able to spend a lot less money. That could mean giving up some square footage, or having to make a lot of repairs early on. But if you’re handy and have the bandwidth to do some work, you might end up with a lower purchase price on your home than expected.
All told, 2024 may not be the easiest year to buy a home. But it doesn’t mean you’re doomed to overpay and struggle if you ascertain to proceed forward with a home purchase, either. The key is to know how much house you can afford and be willing to potentially compromise a bit to get yourself into a home you can build equity in.
