Prices will increase but not as much as in 2021
With more demand than supply on the housing market, homes sold for record-setting prices in 2021. Prices are expected to continue to increase in 2022, but at a lower rate than last year. High prices mean you may need to scale back your expectations of what you will get with a home.
What to keep in mind when buying a home
Before you look at homes, make a list of needs and wants, and rank them accordingly. While you can continue to look for homes that meet everything on your wishlist (i.e. chef’s kitchen or open floor plan), know what you are willing to sacrifice to buy a home.
Keep in mind that most lenders will only approve a mortgage for the price of a home’s value. If a home comes in assessed below the price accepted, you will be responsible for paying the difference in prices.
You should also do your research before you put in an offer on a home. While you won’t know the final assessed value until inspection, you can get an idea of that amount by checking the prices on one of several websites that will give you an estimate of a home’s value.
Mortgage rates will go up
In 2020, the Federal Reserve lowered interest rates to stimulate an economy stunted by the pandemic, which made getting a mortgage more appealing to many Americans. But with the economy inflated, the Fed will increase interest rates accordingly. That, in turn, means you can anticipate a higher mortgage rate than you would have had one year ago.
Before looking at homes, you should take into account what a higher interest rate would mean for your monthly mortgage payments. Take a thorough look at your finances and see what you can realistically afford to pay every month while still having money left for other living expenses and savings. You also want to leave room in your budget to pay for other housing costs, such as property taxes, maintenance, and insurance.
Tips to decrease your monthly mortgage payments
You can decrease your monthly mortgage payments by making a larger down payment on your home. Most lenders require buyers to put down at least 20% of the sale price as part of the mortgage. If you can increase the down payment to 25% or 30%, you can bring down your monthly mortgage installments in the future.
With the help of a high down payment and other strategies, some buyers have been able to pay off their mortgage in as little as five years — avoiding a fortune in interest rates in the process.
Be sure to do your research on what kind of home loan is best for you. Becoming more familiar with home loans can help you not only save money up front, but allow you to borrow extra money using the value of your home down the line when you need it.
Once you know your budget, only look at homes that fall comfortably within it. There are few things more heartbreaking than falling in love with a home and finding out you can’t afford it.
Competition will remain fierce
In more stable markets, homes might sit on the market for about two weeks before the seller accepts an offer, giving buyers more time to make their decisions. In a hot market, sellers may accept an offer the day it goes on the market. In 2024, you can expect homes to sell more quickly than usual.
Buying a home can be nerve-wracking, especially for first-time buyers and those moving to a new area. When you add in a quick sale, you may find yourself feeling stressed or, worse, worrying you’ve made a mistake.
To avoid rushing into a deal that may leave you with buyer’s remorse, it’s important to work with an experienced real estate agent or company who will have your best interests at heart during negotiations.
Many companies have evolved to simplify the home-purchasing process, allowing buyers to focus on the other hassles associated with moving. Doing a little bit of research on which organizations to consider can save you money and stress in the long run.
Pro tip: think outside the box
Fierce competition coupled with high prices and mortgage rates can make buying a home challenging for many Americans, particularly millennials and first-time buyers. But buyers willing to consider alternative options may be in luck.
When looking for homes, you might want to consider buying a multi-family property. While you and the rest of your household live in one of the units, you can rent out the others and put that money toward making mortgage payments. While you may not want to live in a multi-family home forever, it could make for a smart long-term investment that helps you find your forever home when the market is better for buyers.
Likewise, you might consider buying a home with a partner by pooling together your resources. This could be a trusted friend or family member. If you go this route, be sure to create a legal contract that lays out the details to protect everyone’s interests.
Conclusion
With the booming real estate market, there are a lot of things to expect when buying a home in 2024. From taking into consideration the mortgage interest rates and down payment, it can be stressful.
Yet, when you know what to expect, you’ll be taken less by surprise.
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