Is It a Good Time to Buy a House?

Get ready for competition if you’re buying this spring. But compared to 2023 and 2022, conditions look slightly better for buyers.
Abby Badach Doyle
Barbara Marquand
By Barbara Marquand and  Abby Badach Doyle 
Updated
Edited by Johanna Arnone Reviewed by Michael Soon Lee

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If you're wondering whether it's 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. But whether this is a good time to buy a house also depends on your financial situation, life goals and readiness to become a homeowner.

Here's what to consider.

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The market outlook for home buyers

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

Mortgage rates continue an unsteady decline

The average interest rate on a 30-year fixed-rate mortgage was 6.66% annual percentage rate (APR) for the week ending March 14, down 18 basis points from the previous week and down eight 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

Mortgage type

APR

30-year fixed mortgage

6.66%

15-year fixed mortgage

5.97%

5-year adjustable

7.85%

Averages are for the week ending March 14, 2024, according to rates provided to NerdWallet by Zillow.

Mortgage rates have improved since autumn, when the 30-year rate topped 8% in October. If the economy cools, as many experts predict, mortgage rates are likely to continue a modest decline into 2024.

Another bellwether to watch is the Federal Reserve: If the Fed announces a rate cut at any point this year, which seems possible as inflation gets under control, lower mortgage rates are likely to occur. After a series of 11 increases to the federal funds rate starting in March 2022, the Fed has kept things steady since September 2023. Even a fraction of a percentage point would offer buyers more relief.

Higher rates shrink buying power because they make home loans more expensive. For example, the monthly payment for a $350,000 house with a 20% down payment would be $1,679 with a 6% mortgage rate on a 30-year mortgage, not including home insurance and property taxes. With a 7.5% rate, the monthly payment would be $1,958 — $279 higher.

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.

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

Home supply is still limited

A shortage of homes for sale continues to make this a tough market for buyers.

In January, there was a three-month supply of homes on the market nationwide, according to the National Association of Realtors (NAR), meaning it would take about three months at the current pace for all the properties to sell. Supply is still well below favorable conditions for buyers. In a balanced market with plenty of buyers and properties for sale, the supply would last five to six months.

Existing-home sales grew 3.1% from December. Compared to January 2023, sales dipped a slight 1.7%. Winter is traditionally a slow season for home sales, although savvy home buyers can snag a deal in these months when there’s less competition. If mortgage rates decline (as forecasters predict), we’re likely to see existing-home sales strengthen — and more competition in the market.

"While home sales remain sizably lower than a couple of years ago, January's monthly gain is the start of more supply and demand," NAR Chief Economist Lawrence Yun said in a news release. "Listings were modestly higher, and home buyers are taking advantage of lower mortgage rates compared to late last year."

Home prices keep climbing

The national median price for existing homes sold in January was $379,100, up 5.1% from January 2023, according to the NAR.

All four U.S. regions — Midwest, Northeast, South and West — saw year-over-year price increases in January. Here's a regional look at median prices and year-over-year price changes:

  • Midwest: $271,700 up 7.6%.

  • Northeast: $434,300, up 10.1%.

  • South: $345,100, up 4.1%.

  • West: $572,100, up 6.3%.

As a buyer, lean on your real estate agent to understand home values in your area so you can make a competitive offer without overpaying.

Competition remains steady

Despite rising home prices, demand still outpaces supply. That means buyers should expect competition when making an offer on a home. As mortgage rates fall, competition is likely to go up. If you’re ready to buy, there’s no time like the present to start shopping.

According to the Realtors Confidence Index (a survey of the NAR’s members), homes listed for sale in January received an average of 2.7 offers, up just a bit from December (2.4 offers) and from January 2023 (2.5 offers). More than half (53%) of respondents said properties sold after less than a month on the market, about the same as last year (54%) and down a bit from 56% in December. The number of cash offers is up slightly. Nearly 1 in 3 sales (32%) in January were all-cash transactions, compared to 29% last month and last year.

A total of 16% of homes sold above list price in January, remaining flat from last month and last year. While bidding wars may have cooled off for now, NAR members predict a busy spring homebuying season: 36% of respondents predict a year-over-year uptick in buyer traffic over next three months, compared to 33% one month ago and 20% in January 2023.

Your readiness to buy a home

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

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.

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.

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 8% and for repeat buyers is 19%, according to an NAR survey of home buyers who purchased a primary residence from July 2022 through June 2023.

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 733, according to mortgage data provider ICE Mortgage Technology.

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 39%, according to ICE Mortgage Technology.

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