If you’ve been watching your local real estate market, you may wonder if it is time to move. Home sales have been lower than normal for the last two years as potential buyers wrestled with the rapid increase in mortgage rates and high home prices, adding hundreds or even thousands of dollars to their potential payments.
Now, in many ways, it seems that the storm has passed. Mortgage rates have fallen and to some extent, home prices appear to be stabilizing in many markets. The most recent reading from the Fannie Mae Home Price Index (FNM-HPI) showed that home prices grew 5.9% in the third quarter. That doesn't sound like a slowdown, but it is down from 6.7% during the first quarter.
People have referred to the current situation as a stuck market, hemmed in by high mortgage rates and prices. However, national numbers rarely tell the individual story and there are compelling reasons why now may be the time to consider shopping for a home.
The last three months of the year are traditionally when homebuying slows. There is a flurry of activity in early October, but once Halloween hits and we are on to the holiday months, many people decide to wait until next spring to buy. But for those intrepid home shoppers, this market may have some rewards.
Reasons To Make A Move Before The End Of The Year
You may not get a cheaper rate for a while. Mortgage rates will probably stay where they are for the rest of the year or longer. Fannie Mae and the Mortgage Bankers Association have forecast that rates will end the year in the low 6% range. Zillow’s September market report found that lower mortgage rates have given buyers an average of $40,000 more purchasing power since May.
There will always be some fluctuations in rates and there is always the possibility that mortgage rates could dip, but all signs point to current mortgage rates sticking around for a while. If the numbers make sense to you right now, holding out for lower rates may not make sense. Remember, you can always refinance later if rates become attractive.
Sellers are motivated. During the last part of the year, many people with their houses listed for sale pull them off the market. There are plenty of reasons for that. Going through selling a house during the holiday season can be chaotic. They may not want to move, especially if they have young children in school. They may also be waiting for a more robust buying market in the spring. If someone still has their property listed, they are likely a motivated seller. Motivated sellers are buyers' dreams because they may be willing to drop the price or offer other concessions. Zillow’s September report showed that over 25% of listings had a price cut. If that trend continues, more power will be transferred to the buyer’s hands.
Competition is lower. For the same reason sellers don’t want to move, buyers may also decide to put off their home search until the warmer months. Hate tromping through an open house and seeing all of your competition in there measuring the closets? That’s less likely to happen in the colder months when fewer buyers exist. This also means you may be able to command more of your real estate agent’s attention and get easier access to tour homes.
Inventory is up. Low inventory has been a problem for several years, but conditions are improving. Altos Research reported that inventory is up 34% year over year. New listings are also increasing in most markets, up 8% yearly. Sellers are often keenly aware of other homes on the market and the prices they are getting. Whether or not you should make an offer below the asking price will depend on how long the house has been on the market and if the listing price is out of step with other homes.
Reasons To Wait Until 2025
Mortgage rates are at the high end of your affordability window. If you have prequalified and know how much you can afford, you probably have a sense of how much house you can get for your money and how much your estimated monthly payments might be. If the current rates mean that you would strain your budget to afford a home, it may make sense to wait and see if mortgage rates drop into the high 5% range next year. Even a few percentage points may make a big difference.
You want to spend during the holidays. When you are in the homebuying process, it’s not a good idea to spend a lot of money on big-ticket items. Buying a home comes with many additional expenses, including closing costs. If you had your heart set on splurging with friends and family or taking an expensive vacation, that could be a sign that it’s better to wait until all that spending is over and both you and your credit cards have recovered.
You don’t love what’s on the market. Traditionally, there is a smaller amount of new inventory during the holiday season. If you aren’t finding what you are looking for and don’t need to buy immediately, this may be a sign to wait.
Only you can know if you are ready to buy a home before the end of the year. Buying a house can be a stressful experience and some people find that the holidays deliver enough stress on their own. However, if you are already fully prepared to buy and are coming up on the end of a lease term or need to find a home in a new location, you may be able to capitalize on a slower market to find the home of your dreams.