What You Need to Know about Buying a House in 2024

Market cooling

Despite home price increases, the market has been cooling. Fewer buyers are putting in offers on houses, so you’ll face less competition.

Frey has seen this cooling in his local market.

“Instead of 10-20 offers on a property, there might be three or four, which are better odds,” he explains. According to Frey, it was insanely hot and out of balance before the interest rate increase in March of 2022, but the rate hike has given people some hope.

Some buyers dropped out of the market due to the rate hike. Buyers who previously lost out on multiple homes may not face as many rounds of offers and rejections now.

Possible Mortgage Rate Increase

According to the Freddie Mac Economic, Housing, and Mortgage Market Outlook from November 2023, mortgage origination volumes are forecasted to stay low in 2024, with slight growth expected in 2025. Despite rising house prices, reduced sales are anticipated to decrease purchase mortgage volumes. Limited refinance activity is foreseen if mortgage rates remain above 6%. Overall, mortgage origination activity is predicted to remain subdued throughout most of 2024, gradually picking up toward the year’s end and showing modest increases in 2025.

When mortgage rates rise, it can cause a temporary dip in homebuying activity. However, it’s important to remember that rates are still historically low.

“Better to buy now and begin your experience of getting a fixed-rate housing cost,” Frey says, “It’s never too soon to start saving money.”

Even though rates may be higher than two years ago, buying sooner rather than guarantees a more predictable monthly payment.

At the peak of U.S. inflation, the rent-to-income ratio has hit 40%, marking the least affordable rental market in decades. In August 2023, the median asking rent for U.S. single-family detached or attached housing units stood at $2,600, reflecting a 4% increase compared to the previous year, according to CoreLogic.

Inventory

Tight inventory has contributed to the growth in housing prices over the last few years. With more buyers on the market than homes for sale, it led to bidding wars and price inflation. While new home listings have slowed in recent months, what will housing inventory look like going forward?

According to the National Association of Realtors, total existing home sales across single-family homes, townhomes, condominiums, and co-ops declined by 4.1% from September to a seasonally adjusted annual rate of 3.79 million in October.

Year-over-year, sales saw a significant drop of 14.6%, down from 4.44 million in October 2022. Furthermore, there is an anticipation of a 4.5% rise in sales of newly constructed homes for 2023 compared to the previous year, with a projected additional increase of 19.4% forecasted for 2024.

“We’ve been severely underbuilding for quite some time, and there’s a shortage in the market,” says Frey.

As a result, inventory continues to tighten, and new home building hasn’t kept up with demand, which could keep home prices from dropping.

There are, however, some signs of inventory increasing, according to HomeLight’s Top Agent Insights Report for End of Year 2023, 40% of agents reported that housing inventory in their market increased over the previous quarter.

Rising rental rates

Supply and demand are fundamental drivers in the economy, influencing rental prices. When supply exceeds demand, prices tend to drop. In the last two years, exceptional demand amid low supply propelled rental rates to surge by double digits annually. Nevertheless, there are indications of a shift in supply and demand dynamics.

Rent prices, as indicated in a November 2023 report from Rent.com, continued their downward trend in October, declining over -1.5% from September and almost one-third of a percent from last year.

This consecutive monthly decline follows six months of steady increases starting last February. The current national median price stands at $1,978.

If you live in a market where rents have grown by double-digit percentages, locking in a fixed housing payment could be the best solution.

How to assess your readiness to buy a home in 2024

You may want to buy, but are you ready? As important as it is, there’s more to entering the housing market than saving up a down payment. Here are a few other things to consider before talking to agents.

Check your credit score

Lenders pull your credit score as part of the mortgage application process. This score represents how well you’ve handled money in the past. A low credit score means you are less likely to qualify for as large a mortgage and will likely pay a higher interest rate. Too low, and you might not qualify at all.

Check your credit score a few months (or earlier) before applying for mortgages, then fix any problems.

Review your DTI

Your debt-to-income ratio is another important piece of the mortgage application process. If you’re already carrying a high debt burden — credit cards, student loans, and an auto loan — lenders will worry that you might be unable to make a mortgage payment.

Consider paying down debts or refinancing student loans before you start the homebuying process to lower your debt-to-income ratio and improve your chances of qualifying.

Apply for mortgage preapproval

A mortgage preapproval dictates your budget when home shopping. Most agents won’t work with buyers who aren’t preapproved — they don’t want to show you potential homes you can’t afford. After fixing any credit score problems and lowering your debt-to-income ratio, apply for a mortgage pre-approval.

Research home values in your area

Now that you know what you can afford, it’s time to look at local home values. Enter some criteria on an online real estate website like HomeLight to see what you can find — search by “recently sold” to gauge market activity.

Remember that homes may sell for more than their list price and that these websites don’t always update prices for the final sale. It’s a good idea to talk to an agent at this point, as they’ll have their finger on the pulse of your market and can give you MLS access for your home search. They’ll know how quickly homes are selling, how many typical offers, and the competition you’ll face.

Buying a House This Year?

If you are thinking of buying a house this year, you might be concerned about high mortgage rates, high prices, and inventory shortages. Working with an expert buyer’s agent will help you navigate this unusual market and win your dream home. HomeLight analyzes millions of transactions to find you the perfect agent for your needs. Connect with a top agent today to get started.

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Tips for buying a home in 2024

You’ve decided you’re ready to buy in 2024, now what? Follow these tips to navigate today’s real estate market successfully.

Be flexible (and patient)

Make your list of “wants” and “needs,” then narrow it down further.

As Frey puts it, today’s buyers “have to realize that affordability is down, as a first-time homebuyer, you’re probably not going to be able to buy your dream home. Focus on what matters to you and hone in on that.”

To buy a home in 2024, you’ll have to be flexible. This could mean everything from the closing date to which appliances stay in the home. Keep in mind that you can always upgrade the kitchen countertops later.

Look for down payment assistance and first-time homebuyer programs in your area

First-time homebuyers can take advantage of several state and federal homebuyer programs. Some offer down payment assistance, others extend mortgages at lower rates. If you’re a veteran, teacher, firefighter, or law enforcement officer, you also may qualify for help.

Do some research and ask your mortgage lender for guidance to see what programs you might qualify for.

Work with an expert buyer’s agent

When you’re house hunting, an expert buyer’s agent will become your new best friend. They’ll call and text when a new home comes on the market, keep their ear to the ground for homes that are coming, and work their network to find you a home.

They can also help write an offer and the crucial negotiations that come after an offer is accepted.

Discover How Much Home You Can Afford With Our Home Affordability Calculator

Understand the costs associated with buying a home and find out what safe budgeting looks like.

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Always get a home inspection

Lastly, always get a home inspection. Even if you waived the right to ask for repairs after an inspection, you want to know any potential issues that might arise. That way, you can have the plumber lined up on the closing date to fix the drains.

The reality is that there can always be hiccups in buying a home. The real estate market has ebbs and flows, but it’s difficult to time them perfectly. It’s better to buy when you have the need and are financially ready to start building equity for the future.

Header Image Source: (Roger Starnes Sr / Unsplash)