At the risk of jinxing it, things are looking up for home buyers. The average rate on a 30-year fixed rate mortgage has dropped for three consecutive months, competition has calmed down a bit, and inflation has also decreased. Additionally, the inventory of homes for sale in June reached its highest level in more than four years. For those hoping to buy in 2024, being well prepared with a budget and a mortgage preapproval might mean not needing to knock on wood. Let’s delve into the good news, challenges, and wild cards that remain for home buyers this year.
Good news: Mortgage rates drop to a one-year low
Finally, some relief for home buyers as the average rate on a 30-year mortgage dropped to an average of 6.28%, the lowest weekly average since February 2023. This drop in rates is welcome news for buyers who have been waiting for a more affordable cost of borrowing. Over the past two years, buyers have faced high mortgage rates, with the average 30-year fixed rate climbing from 3% to nearly 7% in 2022. However, with rates now decreasing, buyers‘ purchasing power is increasing. Economic signals suggest more positive news for buyers in the latter half of 2024, with potential cuts to the federal funds rate on the horizon.
Your strategy: If you’re ready to buy, jump in now
While a potential Fed rate cut is good news, it’s important not to wait for changes to trickle down before starting your search. Instead of trying to time the market perfectly, focus on shopping within your budget and taking advantage of the current lower rates. It’s also a good idea to shop around and get estimates from multiple mortgage lenders to ensure you’re getting the best deal.
Good news: More inventory, less intense competition
In June, the number of existing homes for sale reached a four-year high, providing buyers with more options to choose from. With more homes on the market, buyers are less likely to encounter intense bidding wars. Additionally, houses are staying on the market longer, giving buyers more time to make decisions. Pending home sales are also on the rise, indicating a positive trend for buyers.
Your strategy: Cast a wide net
While the increase in inventory is a positive development, it’s still technically a seller’s market. Focus on the options available now and be open to considering different types of properties or compromising on certain features. By expanding your search and being flexible, you can increase your chances of finding a suitable home in the current market.
Still challenging: Home prices climb to record highs
Despite improvements in other areas, home prices continue to rise, reaching record highs in June. The sales price of existing homes has increased for 12 consecutive months, making it challenging for buyers to afford a home. While the rate of price growth has slowed somewhat, home prices are still outpacing wages, making homeownership less affordable for many.
Your strategy: Make a budget and stick to it
To navigate the challenge of rising home prices, it’s essential to set a realistic budget and stick to it. Consult with a financial advisor to determine how much house you can afford and work with a buyer’s agent who understands your budget constraints. By setting clear financial boundaries and being disciplined in your search, you can avoid overspending and find a home that fits your financial situation.
Wild card: Changes to real estate commissions
One of the significant developments in the real estate market this year is a major legal settlement with the National Association of Realtors (NAR) that changes how buyer’s agents are paid. While the settlement introduces new payment structures for agents, such as flat fees or hourly rates, the impact of these changes remains to be seen. Buyers now have more negotiating power when it comes to agent commissions, providing an opportunity to advocate for more favorable terms.
Your strategy: Brush up on your negotiating skills
With changes to real estate commissions, buyers have the opportunity to negotiate with their buyer’s agent for more favorable terms. Be assertive in discussing commission rates and ensure that you understand all fees and terms before signing a contract. By being proactive in negotiating with your agent, you can ensure that you are getting the best deal possible in the current market.
The bottom line: Set realistic expectations
While there are positive developments for home buyers in 2024, it’s important to set realistic expectations and be prepared for the challenges that may arise. Instead of waiting for perfect buying conditions, focus on finding a home that meets your needs and budget in the current market. By being proactive, flexible, and disciplined in your search, you can increase your chances of finding a suitable home and achieving your homeownership goals.