Interest rates are leveling out, but competition is still high in most cities. Here’s how to navigate the housing market this year.
You may be competing with lots of other homebuyers in 2024, but you can still find the house you’ve been dreaming of. It’s a good idea to develop a strategy if you’re looking to buy this year. If you have a clear understanding of what you need in a house, as well as your budget, you’ll increase the chance of success in today’s competitive market.
An overview of the 2024 home-buying market
When interest rates dipped to near record-low levels in 2020, it sparked a dramatic rise in the number of people looking to buy a house. In 2020, the interest rate on a 30-year mortgage averaged 3.02 percent; however, those rates suffered a severe rise in the years after the pandemic. They are beginning to level out now, with most experts agreeing that interest rates for 30-year home loans will hover between 5.8 and 6.1 percent this year.
While interest rates and higher home prices have slowed the real estate frenzy we experienced in 2020 through 2022, it still is largely a seller’s market out there, where there are more buyers than available houses. There’s greater competition, meaning sellers can usually choose the best offers.
If you’re a prospective buyer, take these steps and develop your strategy to help ensure a successful house search in 2024:
- Find your lender first — You may be tempted to jump right into house-hunting once you’ve decided to buy. But it’s best to identify a lender first, that will help you understand the price range you can afford. Check your credit reports and fix any mistakes before applying with a lender. As part of the loan application, you’ll provide information about your employment, credit history, and current debts. If you’re pre-approved for a loan, the lender will tell you the approximate amount.
- Save for a down payment — Your down payment is the lump sum you pay at the time you purchase your home. If you can save for a down payment that is 20 percent or more of the purchase price, you can often avoid private mortgage insurance (PMI), which is an extra fee you pay to protect the lender in case you don’t make your monthly payments. At the very least, aim for a down payment between 10 and 20 percent to avoid higher interest rates and other fees.
- Decide on a monthly payment that is comfortable — You want to make sure you can afford your monthly house payment without putting stress on your budget. A general rule is to choose a monthly payment that is less than 25 percent of your take-home pay. Your house payment usually includes principal, interest, property taxes, and homeowner’s insurance. Check with your lender to be sure you understand what is included in your monthly payment.
- Plan for rising home prices — This is another reason to find your lender first and know how much money you’ll be able to borrow. Decide how much you can comfortably spend on a house and stick to that number. It might be frustrating to see a house you really like get sold at a higher price, but staying within your budget will give you peace of mind.
- Be willing to adjust — Because there’s so much competition for houses right now, they don’t stay on the market long. That can make it harder to find the home you’re looking for, so adopt a flexible mindset. Make a list of things you must have in a house, as well as “wants” that you would like to have but can do without. If you can’t find a house in the neighborhoods you’ve targeted, expand your search area. A real estate agent who knows your community can help you identify neighborhoods you may not have thought about.
- Use technology to speed up the process — The COVID-19 pandemic brought new concepts to the real estate market, like virtual home tours and Zoom meetings. Closing on the sale of a home, which often required an in-person meeting to sign final documents, can now be done through electronic documents sometimes. Many of these tools will continue after the pandemic has subsided and can help you find and close on a home faster.
While it can seem intimidating to buy a home in a competitive market, a solid strategy can help you be successful. Sit down and make a plan for home-buying success today.