Is Now a Good Time To Buy a House?

Buying a home is one of the biggest investments you can make. But today's housing market is so tricky to navigate that many prospective buyers are left wondering if now is a good time to buy a house.

We spoke with three specialists to learn key factors that have impacted the real estate market over the past few years, as well as what to expect from the housing market in 2024.

Factors affecting today's real estate market

It's no secret that the real estate housing market has been difficult in recent years, particularly for first-time homebuyers.

The pandemic turned the housing market upside down, with buyers fiercely competing for a limited supply of homes. As mortgage interest rates dropped to historic lows of 3% or less, demand skyrocketed even further.

In 2022, many US cities saw double-digit home price growth, with prices rising in all 50 states, according to the Federal Housing Finance Agency's House Price Index. During the first half of 2023, housing inventory reached its lowest level since Redfin started keeping records in 2012. Just under 1.4 million homes were on the market in May, down 7.1% from a year prior, Redfin data shows.

This small pool of inventory, mirrored by uncertainty surrounding meeting qualifications for mortgages, means buyers today are facing far more competition than they did before the pandemic. And with average interest rates for 30-year fixed-rate mortgages still well above 6% based on data from Freddie Mac, many homeowners who locked in rates below 3% during the pandemic are now unwilling to sell.

However, there's some good news for aspiring homebuyers—the boom times for sellers may be coming to an end.

Will 2024 be a good time to buy a home?

There are three factors to consider when deciding whether to buy a home this year: housing prices, mortgage rates and housing inventory.

Housing prices

When it comes to housing prices, there may be a slight reprieve for buyers. Realtor.com's original 2023 housing market forecast predicted US median list prices would rise 5.4% in 2024, while Fannie Mae predicted that housing prices will decrease by 2.2% this year.

Mortgage rates

Many analysts expect mortgage rates to decline over the coming year. Last year, Danielle Hale, chief economist for Realtor.com, expected them to decrease but still end up above 6% by the end of 2023. These predictions were in line with Fannie Mae's housing market outlook, which predicted mortgage rates to average 6.1% in 2024, dropping to an average of 5.9% in the fourth quarter.

The Mortgage Bankers Association's latest outlook is even more optimistic. Economists there believe rates will fall to 4.7% by the end of 2024.

"Inflation is the main factor at play," says Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors. "If inflation continues to decelerate, it will help bring mortgage rates down." Cooling inflation may also help alleviate affordability issues for some prospective buyers.

Housing inventory

Another potential bright spot for those hoping to buy a home in 2024 is housing inventory.

"Inventory is tight but it's improving, in part due to an increase in the construction of new homes," Hale says. In fact, new home sales are now close to pre-pandemic levels, according to the National Association of Home Builders.

Will we see a buyer's market anytime soon?

While mortgage rates are expected to decline in 2024, they'll remain well above the historic lows we saw in the early days of the pandemic. According to Freddie Mac, the monthly average interest rate for a 30-year fixed-rate mortgage hit 2.678% in December 2020—a 50-year low.

Should prospective homebuyers wait?

It may still make sense for those who are financially prepared to buy. "One reason is that you can buy at today's rate and then refinance when mortgage rates drop," says Maggi Bryant, a mortgage banker and vice president at First Citizens.

Bryant speaks from experience. Since purchasing her home 11 years ago, she's refinanced her mortgage three times, nabbing a lower interest rate each time.

Housing experts call this approach marry the house, date the rate. When you buy a home, you're committing to a long-term relationship with the house, but you can refinance your mortgage when a better rate comes along.

Bryant says it's important for buyers to keep today's interest rates in perspective. "Rates today aren't that bad," she says. Over the past 50 years, the number of months when average rates for 30-year fixed-rate mortgages exceeded 5% was 449—in other words, 75% of the time.

Is now a good time to buy a house?

While interest rates will be a contributing factor, the ultimate decision will come down to additional elements like your personal finances and the condition of your local housing market. The following strategies can help you determine your next steps.

Check the pulse of your housing market

Some markets are heating up, while others are cooling. For example, late last year demand for houses remained strong in Miami, according to the S&P CoreLogic Case-Shiller index. Meanwhile, prices in Seattle and San Francisco plummeted 12.4% and 11.2% respectively in 2023.

Reassess your finances

If you're ready to buy, take a close look at your income, debts and savings to make sure you can afford a monthly mortgage payment at today's rates. One popular guideline advises spending no more than 28% of your monthly gross income on your housing payment, including mortgage principal, interest, property taxes and insurance.

Review our guide to financial planning for buying a house so you're well-prepared when the time comes.

Review your credit

Another factor to consider is your credit score. According to Bryant, only borrowers with excellent credit—often those with scores of 740 or higher—are eligible for the best interest rates and repayment terms for conventional loans.

If your credit score isn't as solid as you'd like it to be, it may be worth waiting a few months while you work to raise it. You can do this by paying down credit card balances, requesting higher limits on existing credit lines and paying bills on time.

Save for a larger down payment

If you're concerned about the impact of today's mortgage rates, give yourself time to save for a larger down payment. The bigger your down payment, the less you'll need to finance—which means you'll pay less toward interest over the life of your loan.

Speak with a lender

Even in the best of times, the homebuying process can be complex. It's helpful to talk with a specialist who can work with you to review your finances, assess your options and help you determine whether now is a good time for you to buy a house. Once you're ready to buy, they can also guide you through the mortgage shopping and application process.

Key takeaways

• As we rebound from historically low interest rates, there's some hesitancy among both buyers and sellers.
• While the housing market likely won't change drastically in 2024, buyers may see some relief.
• It's important to keep today's mortgage rates in historical perspective. Also remember that refinancing is always an option.
• Assess the local housing market, review your finances and check your loan options to help you determine whether you should buy a home in today's market.

For additional guidance, schedule time to speak with a mortgage banker.