What Homebuyers Need to Know as the Year Progresses

The housing market may have had a slow start in 2024 as buyers waited for interest rate cuts, but there are still reasons to be optimistic. Despite high rates and elevated housing costs, buyers and sellers are seeing positive trends that could create new opportunities as the year moves forward.

Current Demand in the Housing Market

While the demand in the housing market has cooled compared to the highs of the past two years, it remains steady. Year-over-year demand has remained flat, but it has started to tick upward during the summer months, a time when the housing market typically picks up. One key factor is that buyers are now adjusting to mortgage interest rates ranging from 6-8%, and some have decided to jump into the market after waiting on the sidelines.

A recent survey found that over half of millennials and 40% of Gen Z respondents feel that now is a good time to buy, even with the higher interest rates. However, affordability continues to be a significant challenge. Over three-quarters of Americans cannot afford the median home price of $500,000, and half cannot afford a $250,000 home. If the supply of homes increases, prices may begin to decrease slightly. Encouragingly, the number of new single-family homes for sale was up nearly 12% year-over-year in April and continues to trend upward.

Where is the Housing Market Headed?

Interest rates are expected to come down gradually, but the pace will likely be slow. When reductions do occur, they may generate excitement and renewed activity in the housing market. Many experts predict that consumer demand will strengthen in the second half of 2024 and continue to improve as the year progresses. The fourth quarter, typically a quieter period for homebuying, could experience an upswing if rates are cut later this year.

Navigating Interest Rates

For homebuyers focused on securing the lowest possible interest rate, it may be wise to start looking now and purchase when you're financially ready. Historically, the 30-year fixed mortgage rate has averaged 7.68% since 1976. Fannie Mae forecasts that rates will slowly decline but remain above 6% through 2025.

If you can afford a home and qualify for a loan, waiting for further rate drops could delay your homebuying journey. Additionally, buying now and refinancing later—when rates potentially fall—could be a smart move. It allows you to lock in your home's price, begin building equity, and then take advantage of lower rates in the future. If you've recently purchased a home and are considering refinancing, it's essential to be aware of common mistakes to avoid.

Interest rate changes can cause spikes in demand, so it's wise to be prepared. Knowing your desired neighborhood, having a solid financial plan, and getting pre-approved by multiple mortgage lenders can help you act quickly when the right home becomes available.

New Rules from the National Association of Realtors Settlement

A recent ruling affecting real estate transactions has also caught the attention of both buyers and sellers. Previously, sellers were required to pay their buyer's agent's commission—typically around 6% of the sale price. With the new ruling, this may no longer be the case, potentially offering more negotiation opportunities for commission fees.

It's possible that buyers may now have more options, such as hiring agents offering reduced-price services or opting for self-guided viewings of homes through lockboxes. While first-time homebuyers may be concerned about the cost of paying for their agents, there's potential for these fees to be negotiated into the sale price rather than paid out of pocket.

Moving at Your Own Pace

Buying a home is a significant financial milestone, but it's important not to feel rushed. Moving forward at your own pace, based on your financial readiness, can help ensure a satisfying and successful purchase. While the market may fluctuate, being prepared with a clear plan and understanding of your financial goals will help you navigate the housing market confidently.

For those just getting started, tools like ComeHome can help buyers search for homes, while current homeowners can track their home's estimated value and monitor neighborhood listings.

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