Should I buy a house now or wait?

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Monthly overview, May 2024

Buying a house is for many a lifetime decision.

You want to buy a new home. But so do millions of other Americans. The market has become crowded amid high hopes and expectations. As shoppers in today’s market, we are navigating a very much changed landscape of strong prices, higher mortgage rates, and uncertain prospects for inflation and economic growth. Even as the interest in home buying remains relatively high, some people are hesitating to take the big step. First-time homebuyers have been especially feeling a crunch. 

A question that arises often in our conversations with friends and clients is “Should I wait with home buying or grin and bear it now, while others are still waiting for rates to go down?” 

However, mortgage rates have shown no signs of significant change. The Federal Reserve just announced it was making no changes in base interest rates. Furthermore, the real estate market is already experiencing a typical springtime surge in activity that reaches its peak in June every year. Pending home sales in March climbed 3.4%, and forecasts show that existing home sales will rise by 9% in 2024, to 4.46 million, according to Freddie Mac and the National Association of Realtors.

Mortgage Rate Projections

In mid-March 2024, the average mortgage rate for a 30-year fixed loan stood at 7.0 percent, and it rose to 7.22 percent by May 2. There are some predictions of a potential decrease in rates as the year progresses, but nothing is for sure. The Federal Reserve on Wednesday emphasized that inflation has remained stubbornly high in recent months. That is why it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are slowing to its 2% target.

Some hope the U.S. presidential election will influence the Federal Reserve’s interest rate decisions, but the speculations were squelched by Fed Chair Jerome Powell who said policymakers were “at peace” with keeping political considerations out of their decision-making process. 

Impact on Home Prices and Sales

The housing market is experiencing a seasonal increase in home prices, albeit slower than in previous years. Sales volumes are expected to see a modest uptick, although the pace of sales may normalize, leading to longer selling periods for homes. This scenario indicates a market balancing between supply and demand, with home prices expected to rise slightly, particularly in areas where appreciation lagged during the pandemic.

Recent projections by the government-backed mortgage enterprise Freddie Mac suggest that higher home prices will boost the total value of mortgages this year even as home sales numbers may remain subdued.

Strategies for Homebuyers and Sellers

Given the market dynamics with real estate prices increasing and mortgage rates holding steady, we think both homebuyers and sellers should proceed with caution and strategy. For prospective homebuyers, this means getting pre-approved for mortgages to be able to act quickly and expanding their search to find better value. It is crucial not to overstretch budgets and to leave room for unexpected expenses. Sellers, on the other hand, should be prepared for negotiations, price their homes competitively, and consider offering incentives such as temporary rate buydowns to attract buyers.

Overall, the second quarter of 2024 presents a mixed outlook for the real estate and mortgage market. Challenges like low inventory and high competition necessitate informed decision-making for both buyers and sellers.

Author: Sasha Mrak Hendrickson, MBA, Director of Business Development

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