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When my friend insisted in January that 2024 was going to be the year in which she’d become a homeowner, my first thought was “good luck.” And yes, I meant that both genuinely and sarcastically.
It’s not a secret that so far, 2024 is shaping up to be a pretty lousy time to be looking for a home. As of January, there was only a three-month supply of available properties on the market, according to the National Association of Realtors. That’s well below the six-month supply that’s commonly needed to fully meet buyer demand.
It’s also not a secret that mortgages remain expensive to sign. Between that and elevated home prices, anyone who buys a home in 2024 could end up with very expensive housing payments.
But since I of course want the best for my friend, when she asked for advice as a 2024 home buyer, I told her to make sure not to do these three things.
1. Wait for mortgage rates to come down
You’ll often hear that trying to time the stock market doesn’t work. The mortgage market isn’t too different.
It’s true that economists are anticipating interest rate cuts from the Federal Reserve later this year. Once that happens, mortgage lenders might lower their rates.
But we don’t know to what extent mortgage rates might fall. And a modest downtick may not do much for buyers financially.
It’s also hard to know exactly when we’ll see lower mortgage rates. So, I told my friend not to track mortgage rates obsessively. Rather, I told her to go out and try to find a home she can afford — and by that, I mean a home that will have her spending 30% of her take-home pay or less on housing expenses. The way I see it, if she can afford a home based on the mortgage rate she’s able to lock in this year, in time, she can always try to refinance and pay less.
2. Assume she can’t negotiate
Because there aren’t many available homes on the market today, you might assume that when a seller puts a home up for sale, you have to pay the asking price at a minimum. Not so.
You never know when a seller might negotiate in exchange for flexibility. My friend, for example, isn’t trying to buy and sell a home at the same time. Rather, she lives with folks right now as a means of saving money, and they’re not kicking her out anytime soon.
Because of this, she can close on a home immediately if a seller wants, or delay her closing by five months. That flexibility is something she can use to her advantage by talking a seller down on price. And if you’re not on a tight timeline, you can do the same.
3. Buy at the top of her price range
As mentioned above, the general convention is that you’re not taking on too much house as long as your monthly costs — including things like your mortgage, property taxes, and homeowners insurance — are limited to 30% of your take-home paycheck. But I advised my friend to try to go lower and keep her costs to more like 25% of her pay.
The reason? Homes have a sneaky way of needing expensive maintenance and repairs. Because my friend is buying hers solo, she’ll only have her income to rely on when things go wrong. So I think she’d be wise to be more conservative in the amount she spends. And I’d tell anyone else buying a home solo to do the same.
Today’s housing market is tricky — there’s no question about it. But the above advice doesn’t just apply to my friend. It applies to almost anyone looking to buy. So take these words to heart as you try to navigate the market and close out 2024 with a mortgage and home in your name.
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