3 signs it's safe to buy a home again
For many homebuyers and owners looking to refinance, 2023 can't end soon enough. Inflation and the higher interest rates meant to combat it made borrowing significantly more expensive than it was just a few years ago. Mortgage rates hit a 23-year high over the summer right around the time the Federal Reserve's benchmark interest rate reached a 22-year high. Combined with reduced housing inventory, it was not exactly a buyer's market — or a great time to refinance, either.
But as the year has evolved, circumstances have changed, and now some buyers are taking a cautiously optimistic approach to 2024. That said, is it really "safe" to buy a home again, or should buyers continue to sit on the sidelines for a better opportunity? That's what we'll break down below.
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3 signs it's safe to buy a home again
Here are three encouraging signs for homebuyers looking to get more involved in the real estate market.
Inflation is cooling
Inflation hit 9.1% in June 2022, the highest it's been in more than 40 years. And while it's not exactly at the Federal Reserve's target 2% goal, it's getting there. It was 3.1% in November. While that's still hotter than most economists would like it's significantly improved from where we were just a year and a half ago.
This means more money in consumers' pockets and less being spent on the same items that were cheaper in 2021. But it also could lead to an improved rate environment.
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Interest rates are paused
Sure, an interest rate pause is not nearly as desirable as an interest rate cut. But considering the numerous hikes that have taken place in the last 18 months or so, a pause is welcome. Rates have been held steady since July 2023 (the latest pause took place this week). And there's already talk about rate cuts to come in 2024, possibly before the summer.
While a rate cut will undoubtedly spark renewed interest and activity, a rate pause is a good precursor for interested buyers. It could also be a sign to move now before competition increases when rates do fall.
Home prices are falling
While this is unlikely to happen in a nationwide capacity, if home prices are falling even slightly in the area you want to live in, it could be a sign that it's safe to buy a home there.
That said, a home price drop is relative. If prices have fallen dramatically, particularly if they've done so in an abbreviated time frame, you may want to consider why before acting. But if home prices have cooled in a more moderate fashion — combined with a reduction in interest rates — it may be a sign to act promptly.
The bottom line
Homebuying is highly personal. What's considered affordable for one family may not be for someone else — and could be cheap for a third buyer. That said, the last year or so has been considered to be a poor market for the majority of buyers. But things are changing and it could soon be safe to buy a home again. Inflation is on a positive, downward trend, interest rates have remained paused since July and most think they'll be lowered before next July. And if home prices are dropping slightly in the desirable area you want to be in then, yes, it may be safe to buy a home again.
