As mortgage rates reach a 20-year , the question on many potential homebuyers’ minds is whether 2024 is an opportune time to invest in real estate.

The housing market marked by intense competition has undergone a shift. Now, with fewer homes for sale, increased interest rates, and persistently elevated house values, the decision to buy a house becomes more nuanced.

Survey data from Fannie Mae in July 2023 reveals that fewer than one in five consumers believed it was a good time to buy a home. 

However, gauging the ideal time to enter the housing market is complex, as the real estate landscape varies widely across cities and neighbourhoods. 

Mortgage rates, a crucial factor in the decision-making process, have seen a significant increase, reaching a level not witnessed in two decades. The Federal Reserve efforts to curb inflation by raising short-term interest rates have impacted both variable and long-term mortgage rates. 

Despite the uncertainty caused by the rise, historical context shows that mortgage rates are still near their 52-year average, providing a broader perspective for potential homebuyers.

A recent Zillow survey suggests that the trend in mortgage rates influences existing homeowners’ decisions to sell and move into another property. Existing homeowners, benefitting from lower mortgage rates, are inclined to sell only if rates fall between 4% and 5%. This “rate gridlock” contributes to the shortage of existing homes for sale.

Amidst the challenges, there is a silver lining – the increase in mortgage rates has led to a moderation in the rise of home prices. 

Zillow analysis indicates that home values are lower year-over-year in nearly half of the 50 largest metro areas. This may present opportunities for buyers to explore homes with price reductions and negotiate more favorable terms.

However, the supply of existing homes remains constrained, with new listings down more than 20% from pre-pandemic levels for over a year. 

To navigate this scarcity, potential buyers may need to consider expanding their search to more affordable areas near their desired neighborhoods.

Know what you want

Determining whether you would prefer to invest in the housing market or buy a house for personal use is crucial. If investment is your goal, exploring House ETFs could be a more straightforward option, allowing you to diversify your portfolio effectively.

On the other hand, if your intention is to buy and rent out property, be aware that this entails a significant investment of your time and requires a unique skill set. Weighing this option demands careful consideration of your available resources.

For those inclined to purchase a house for personal residence, prioritizing affordability over house prices is paramount. Timing the real estate market poses challenges, and even if you come across an attractive offer, its value diminishes if it falls beyond your financial means.

Evaluating affordability ensures that your housing investment aligns with your budget and financial goals, making the process more pragmatic and sustainable.

For those eager to buy, new home inventory is on the rise, showing promise for growth, according to the US Census Bureau. Considering new construction might provide flexibility in choosing finishes or obtaining a better deal on a spec home that has been on the market for an extended period.

The decision to buy a house goes beyond market dynamics and requires a thoughtful consideration of personal and financial factors.

Job stability, credit score, debt-to-income ratio, savings, and the down payment are critical aspects to evaluate. 

Additionally, the choice between fixed-rate and adjustable-rate mortgages, as well as the duration of the loan, can impact the overall affordability and long-term financial implications.

While external factors like mortgage rates and home values play a role, the decision to buy a house ultimately hinges on individual circumstances. 

Navigating the current market requires careful consideration of both short-term and long-term factors, ensuring that the investment aligns with personal and financial goals. 

Relentless comparison shopping for mortgage rates and lenders, coupled with a written preapproval, sets the foundation for a strategic and informed home-buying journey.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.