Housing Market: The Pros and Cons of Buying in 2024
Written by
Sean Bryant
Edited by
Elizabeth Constantineau
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Due to the Federal Reserve’s fight against inflation, mortgage rates doubled in 2022, and things didn’t change much in 2023.
High interest rates have kept many potential first-time homebuyers from making that first purchase, and many current homeowners have avoided moving unless it was absolutely necessary.
Now that we’re moving into a new year, it’s time to look at what might be on the horizon for the housing market. Keep reading to discover the pros and cons of buying a home in 2024.
Pros of Buying a Home in 2024
Less Competition
Mortgage rates have declined slightly over the past couple of months, but they are still at elevated levels compared to where they were just a couple of years ago. As of December 28, 30-year fixed-rate mortgage rates were 6.61% (according to Freddie Mac).
While higher rates have caused mortgage payments to increase for homebuyers, they have also caused many people to avoid purchasing altogether. However, many experts expect interest rates to continue falling slightly throughout 2024, which means buying could pick up as the year progresses.
“As interest rates continue to fall in 2024, the earlier you start your home search, the easier it will be to get your home under contract,” said Alex MacLagan, a mortgage broker at MacLagan Home Loans.
“There have been a lot of home buyers waiting on the sidelines for interest rates to fall, so the sooner you start your search, the less of a chance you have of running into multiple offer situations.”
More Homes on the Market
When interest rates were at record lows, people were either buying new homes or refinancing their current mortgage to take advantage of cheap money. That all stopped when interest rates spiked.
Now that rates are declining slightly, more people might start thinking about their next move, which could increase the number of homes on the market as we move into the spring selling season.
“The higher interest rates have stopped a lot of people from listing their homes for sale,” explained MacLagan. “Homeowners either bought when rates were at an all-time low, or they refinanced into these historically lower rates.
“With rates dropping in 2024, this will cause more homeowners to sell, giving you more inventory to choose from.”
Baby Boomers Are Starting To Sell Their Homes
With equity in their homes at record highs, baby boomers are beginning to sell. They want to downgrade to smaller, more manageable homes or move into retirement communities. This is going to increase the supply of homes on the market.
Cons of Selling Your Home in 2024
Record High Prices
From 2019 to 2022, mortgage rates were at all-time lows. Combined with an extremely limited housing inventory, housing prices increased significantly.
Even as mortgage rates have risen, limited inventory has kept prices high. These high housing prices are expected to continue throughout 2024.
Unfortunately, high prices have been an obstacle for many first-time homebuyers looking to purchase their first home.
Coming up with a 20% down payment is more difficult, and even though purchasing with less is possible, it requires private mortgage insurance (PMI), which can add hundreds more to mortgage payments.
Multiple Offers Are Possible
If interest rates continue declining in 2024, more buyers could start returning to the market. However, if inventory doesn’t keep up with the increased demand, there could be an issue with multiple offers pushing up prices even further.
As MacLagan explained, “More than ever, homebuyers have been waiting on the sidelines since interest rates started to shoot up in 2022.”
When interest rates fall in 2024, more people will want to bid on the available homes. These multiple offer situations often cause would-be homebuyers to pay $20k, $30k or even more over the asking price in order to have the best “bid” for their new home.
There Are Still Recession Concerns
Rumors of a possible recession have been floating around for several years. With so much uncertainty around the economy’s stability and how the Federal Reserve will continue handling inflation, many thought the bottom would end up falling out.
While inflation has pulled back to normal levels and the Federal Reserve has hinted that rate increases might be over, there is still worry floating around.
Some people are still concerned that they could purchase a home just as an economic decline finally happens. While this would almost certainly lower mortgage rates even further, it could depreciate home values, putting recent homebuyers in a difficult position.
The Bottom Line
Even though there are pros and cons to buying a home in 2024, this is no different than every other year. If you are considering purchasing a new home, assess your budget and finances to understand what you can afford.
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