Important points:
If you have the money, now may be a good time to buy a home. The median U.S. home sales price reached $435,000 in October, the 16th month of year-over-year increases. Average daily mortgage interest rates are above 7%, moving from low to high since September, but still below 2023 levels. Easing inflation has prompted the Fed to cut interest rates twice in two months, but President Trump’s policy proposals create uncertainty. But the market is still heating up, and more buyers are entering the market after the election, undeterred by high interest rates, rising prices and industry changes.
As the year winds down and the effects of the election subside, many homebuyers are wondering if now is a good time to enter the market. After all, housing remains unaffordable in most parts of the country, and there are few signs of improvement. Given these challenges, it’s natural to wonder if now is the right time to take the plunge.
Whether it’s a good time to buy a home comes down to whether it’s a good time for you to buy a home. Let’s dig a little deeper into the market and uncover trends that can help answer the question, “Should I buy a home now or wait?”
>> Read: Are you ready to buy a home? 8 questions to help you decide
What’s happening in the housing market?
Here are some important market trends to watch to help you make informed home buying choices.
Housing prices: very high and still rising
The median selling price in the U.S. is currently $435,000, just shy of the all-time record. Home prices have recorded year-on-year increases for 16 consecutive months, and are up more than 45% compared to 2020.
Additionally, the median monthly mortgage payment is about $2,600, down slightly from last year.
Mortgage rates: rising and volatile
The daily average 30-year fixed mortgage rate has risen to 7.08%, below the April high but well above the recent September low. Despite the Fed cutting rates twice, interest rates are rising primarily because of stronger-than-expected job growth and election chaos.
The cuts are likely to total 200bps (2%) by the end of 2025, but it remains unlikely that mortgage rates will fall below 6% in 2025.
Supply: limited
Over the past year, months of supply have hovered between 3 and 4 months, moving the market closer to equilibrium. If the supply is less than four months, sellers tend to have an advantage. Anything beyond ~4 months is often in the buyer’s favor.
New construction has also declined in recent months. That’s because more inventory is on the market since the pandemic boom and builders are gradually pulling back. New housing starts decreased by 6.9% in October.
Demand: Gradually recovering
Pending U.S. home sales are slowly recovering, with Redfin’s homebuyer demand index reaching its highest level in about a year and a half.
However, other metrics are less convincing, with the number of new listings remaining flat and the percentage of sales that close within two weeks declining.
Inflation: falling, but future uncertain
Inflation has fallen to near its target benchmark of 2%, thanks in part to the Fed’s crackdown on pandemic-related inflation. This is a significant improvement from the steep post-pandemic inflation rate, which peaked at 9.1% in July 2022.
Lower inflation means less spending on goods and services, which can help buyers make ends meet.
But importantly, experts believe President Trump’s policies could reignite inflation, and it’s unclear what will happen next.
>> Read: Inflation and home prices: What home buyers, sellers and renters need to know
Home sellers need to prepare for competition
With the recent drop in mortgage rates, more buyers are ready to enter the market, which means more competition for property listings.
This comes as home seekers spooked by high mortgage rates have had inventory flagged for years, especially by sellers who want to preserve pandemic-era rates (lock-in effect). This is because they are also monitoring the situation. Now that interest rates are lower, more buyers are deciding to enter the market.
Will mortgage rates fall further in 2024?
Current mortgage rates reflect how investors think the Fed will respond. Investors believe the Fed has finished reining in inflation and expect mortgage rates to remain stable through the end of the year. However, uncertainty over President Trump’s policies has clouded economists’ forecasts considerably for the time being.
In other words, economists don’t expect mortgage rates to fall further than they have since the recently announced rate cuts are already priced into interest rates. However, factors such as inflation and employment statistics could change experts’ outlook.
Should you lock in your mortgage rate today?
If you have the means, now is a great time to get a low mortgage rate. This is the first time in nearly two years that interest rates have been this low.
Lower interest rates mean you can qualify for a larger loan amount or enjoy lower payments within your current budget. If you still feel that the interest rate is too high, you can also buy out the mortgage interest rate. All-cash buyers looking to avoid a mortgage entirely should also act now to avoid potential price increases as competition increases.
So is now a good time to buy a home?
If you have the means and are ready to own a home, now is a good time to buy a home. Waiting for interest rates to fall leaves you with the risk of increased competition among buyers and subsequent price increases by sellers. With interest rates lower than a year ago and sales, although still weak, on the rise, now may be the time to take action.
Buying a home now also means maximizing the potential of your investment. Lower interest rates save you money over the life of your loan, allowing you to use more of your mortgage payments to build equity.
However, it’s worth noting that the market has been volatile lately. For example, rising mortgage rates typically push down home prices, but over the past two years this has had the opposite effect. And while lower inventory usually leads to more competition, prices are too high for many buyers to afford, leaving some homes unsold and others sold within days. Masu.
It is important to be prepared for any possible surprises.
>> Read: How to Buy a Home: A 10-Step Home Buying Guide
final thoughts
If you’ve been considering buying a home and have been intimidated by high interest rates, now is the time to contact an agent and start your home search. Interest rates are expected to remain flat for the time being, but buyers are becoming restless and the market is gaining momentum. The longer you wait, the more competition there will be.
