Is It a Good Time to Buy a House?

If you're wondering if now is a good time to buy a house, ask this instead: Is it a good time in my life to buy a house?

Housing market trends give important context, so we’ll look at those numbers here. But ultimately, whether this is a good time to buy a house depends on your financial situation, life goals and readiness to become a homeowner.

» MORE: Should I buy a house? How to tell if you're ready

Let’s explore both aspects of the homebuying journey: the housing market and your own readiness to buy a home.

How’s the housing market right now?

These are some factors affecting buyers in today's market.

Mortgage rates: Stubbornly high

The interest rate on a 30-year fixed-rate mortgage averaged 6.51% annual percentage rate (APR) for the week ending Dec. 12, down eight basis points from last week and down 34 basis points from a year ago, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of 1%.

Average weekly mortgage rates

Averages are for the week ending Dec. 12, 2024, according to rates provided to NerdWallet by Zillow.

Whether today’s rates feel high or low depends on how long you’ve been house hunting. In the short term view, recent rates might sting: The 30-year mortgage rate dropped to a monthly average of 6.07% in September and has remained higher in the weeks since. But if you’ve been house hunting for a year or so, that very same rate could feel like a relief: Buyers are still better off today than when the 30-year mortgage rate peaked at 8% in October 2023, or even when rates surpassed 7% in May 2024.

You can't influence average rates, so focus on the things you can control:

• Shop around for the best deal. Especially given today's higher rates, buyers can save $600 to $1,200 per year by applying for loans from multiple mortgage lenders, according to a February 2023 study by Freddie Mac, the government-sponsored entity that buys conforming loans from mortgage lenders.

• Make sure you can afford the monthly mortgage payment. A home affordability calculator can help you crunch the numbers.

• Lock in your rate. After getting approved for a home loan, consider locking in the mortgage rate until the loan closes to protect against further rate increases.

» MORE: NerdWallet's mortgage interest rates forecast

Inflation and the economy: The Fed lowers the federal funds rate again

The Federal Reserve, the nation’s central bank, guides the economy with two goals: encouraging job growth and keeping inflation under control. The Fed doesn’t directly set mortgage rates. However, it does set the federal funds rate, which influences interest rates for loans including mortgages.

With inflation slowly easing, the Fed announced a 25-basis-point cut to the federal funds rate on Nov. 7. This follows an aggressive 50-basis-point cut on Sept. 18. We’ll find out the Fed’s next move after its next meeting, Dec. 17-18, 2024.

» MORE: How the Federal Reserve affects mortgage rates

Supply of homes for sale: More options than last year

We’re not in a buyer’s market quite yet. But after a few years of slim pickings, inventory has been gradually improving, according to the National Association of Realtors (NAR).

October had a 4.2-month supply of unsold homes for sale, meaning it would take a little more than four months at the current pace for all listed properties to sell. While month to month inventory growth has been slow and unsteady, buyers still have more options compared to last year: In October 2023, the market had a 3.6-month supply of homes for sale.

"The worst of the downturn in home sales could be over, with increasing inventory leading to more transactions,” NAR Chief Economist Lawrence Yun said in a news release. "Additional job gains and continued economic growth appear assured, resulting in growing housing demand. However, for most first-time home buyers, mortgage financing is critically important. While mortgage rates remain elevated, they are expected to stabilize.”

» MORE: Homebuying season: What recent data suggests for 2024

Home sales and prices: On the rise

To get a snapshot of the current market, let’s look at two important data points: How many homes are changing hands, and what they’re selling for.

Sales of existing homes — properties that were owned and occupied before going on the market — dropped 1.0% from August to September to a seasonally adjusted annual rate of 3.84 million. Sales slumped 3.5% compared to September 2023.

Sales grew 2.9% compared to October 2023, the first year-over-year increase in more than three years (since July 2021). When existing home sales go up, that’s the sign of a healthy market: Buyers can buy, and sellers can sell.

October is typically a slow month for home sales, so this month’s gains are surprising. However, these numbers reflect buyers who locked in a relatively low mortgage rate in September and closed the deal in October. With mortgage rates back on the rise, it’s unlikely this points to a larger trend in the months ahead.

One trend that continues its steady climb: home prices. The national median price for existing homes sold in October was $407,200, up 4% from October 2023, according to the NAR, following 16 straight months of year-over-year price increases. All four U.S. regions — Midwest, Northeast, South and West — saw year-over-year price increases in September. Here's a regional look at median prices and year-over-year price changes:

• Midwest: $305,300, up 7.2%.

• Northeast: $472,900, up 7.6%.

• South: $361,200, up 0.9%.

• West: $627,700, up 4.4%.

» MORE: What to expect when buying a house this year

Competition: Steady, but less intense than last year

Some good news: Compared to last year, competition has cooled off. The October 2024 Realtors Confidence Index, a survey of the NAR’s members, highlights these key market indicators year over year:

• Bidding wars aren’t the norm. A home listed for sale received an average 2.5 offers in October, up slightly from 2.4 last month and the same as last year. For context: In the era of hot bidding wars in 2021 and 2022, the average was around five offers per home.

• Fewer homes are selling above list price. In October, 19% of homes sold above listing price, down from 28% a year ago. 

• Homes are staying on the market longer. Houses stayed on the market for a median 29 days in October — six days longer than October 2023, when the median was 23 days. Last month, 59% of respondents reported that homes sold in less than a month. A year ago, that figure was 66%.

Overall, though, demand still outpaces supply. This is hardly a mellow market: Good homes sell quickly, and buyers should still expect competition out there. If you’re ready to buy, get a mortgage preapproval so you’re prepared to make a strong offer. Once mortgage rates drop, competition will only go up. There’s no time like the present to start shopping.

Homebuying readiness: Should I buy a house now or wait?

Ask yourself these questions to explore whether you're ready to buy a home.

Are you prepared to put down roots?

Think about your life goals, relationships and interests. How long can you see yourself living in this location?

Ideally, you'd want to remain in the home long enough for rising property values and your equity to exceed the costs of buying and selling, including real estate commissions and mortgage closing costs. That will typically take several years.

You could also be subject to capital gains taxes if the home appreciates in value and you sell it after less than two years.

» MORE: Avoid capital gains on real estate

How's your job security?

A mortgage is a big commitment and can become a stressful burden after a job loss, so it's not a good time to buy a home if you think you'll get laid off.

Wait until your employment is stable before thinking about buying a house.

» MORE: What happens if you lose your job before closing on a mortgage?

Are you financially prepared?

Here are the three main ingredients to evaluate.

Savings

You'll need money for a down payment and mortgage closing costs as well as for moving and other expenses after you buy the home. The down payment requirements vary by the type of mortgage and the lender. The more you put down, the lower your monthly mortgage payment.

The typical down payment for first-time buyers is 9% and for repeat buyers is 18%, according to an NAR survey of home buyers who purchased a primary residence from July 2023 through June 2024.

» MORE: How to save money for a house

Credit

Lenders generally offer the best mortgage rates and terms to borrowers with credit scores of 740 and above, although you can qualify for a mortgage with a score in the 600s. The options are much slimmer, and loan costs can be higher for borrowers with a score in the 500s.

If your credit is marginal, it might make sense to postpone buying a house and use the time to work on building your credit.

The average FICO credit score for closed mortgage loans to purchase homes in the past 30 days was 737, according to mortgage data provider ICE Mortgage Technology.

» MORE: The credit score needed to buy a house

Debt

Lenders look at your debt-to-income ratio (DTI) to help determine whether you qualify for a mortgage. Your DTI is the percentage of your monthly gross income that goes toward monthly debt payments, including housing costs, as well as car, student loan, credit card and other debt obligations. Lenders like to see a DTI under 36%, although it's possible to qualify with a higher ratio. The lower your DTI, the better your chances of qualifying for a mortgage and getting offered the lowest available rate.

The average DTI for purchase mortgages in the past 30 days was 40%, according to ICE Mortgage Technology.