For most of 2023, the housing market was stuck in neutral. Rising mortgage rates weighed on both supply and demand, causing home sales to plummet.
And for a while, it seemed like mortgage rates could climb indefinitely. But mortgage rates started to reverse course in November, and suddenly, the outlook for the 2024 housing market was striking a more positive tone.
While lower mortgage rates won’t entirely crack the ceiling of what’s still a historically unaffordable housing market, 2024 is expected to be more balanced, with the potential for higher inventory and slightly lower home prices, according to Fran Lisner, real estate agent with Daniel Gale Sotheby’s. “The best news is for buyers who will see more options to choose from, increased negotiating power and reduced time pressure,” Lisner said.
As we kick off the year, prospective homebuyers are wondering what’s in store for them. We talked to several experts about their housing market predictions and top tips for today’s homebuyers. Here’s what they had to say.
Read more: Mortgage Predictions: Could 2024 Be a Better Year for Homebuyers?
10 expert tips for buying a home in 2024
While experts are cautiously optimistic about the direction of the housing market in 2024, buying a home (especially if it’s your first time) is rarely a pain-free process. From tracking market conditions to the actual process of getting a mortgage, there are a lot of moving parts.
1. Follow what housing market experts are saying
Housing market trends are dynamic and, oftentimes, hard to understand, especially when it comes to all the factors that affect mortgage rates (the list is longer than you think).
That’s why housing market experts and economists are constantly tracking economic data to better understand where things are headed. Keeping an eye on what those experts are saying, whether by reading newsletters or listening to podcasts, can help you become a more informed buyer without getting too deep into the macroeconomic weeds.
Here are some of the podcasts I listen to that help me stay in the loop.
2. Monitor mortgage rates regularly
In 2023, mortgage rates kept climbing until they passed 8% in early fall. But soon after, rates started to trend down for the first time in months. As inflation slows and the Federal Reserve initiates interest rate cuts, experts predict mortgage rates will eventually reach 6% by the end of 2024.
“Rates are down over 1% since peaking in October, and with the Fed done with their rate hikes, we expect rates to keep falling for the next few months at least,” said Greg Heym, chief economist at Brown Harris Stevens.
But mortgage interest rates are volatile, making them difficult to predict. And while tracking mortgage rate movement isn’t the most exciting thing to do, there’s a reason experts recommend it: It can save you a lot of money and free up some room in your homebuying budget.
Your interest rate doesn’t only affect your monthly mortgage payments. It also affects the total interest you’ll pay over the course of your loan. Securing a lower rate from the beginning, even if by a few tenths of a percentage point, can save you tens of thousands of dollars over time.
Read more: Compare Current Mortgage Rates
3. Create a homebuying budget
If you haven’t already, start budgeting for your down payment and other costs associated with a home purchase, like closing costs.
The minimum down payment required by most lenders is 3% for conventional loans. But experts often recommend making a down payment closer to 20% of the property’s asking price. That way, you can take out a smaller loan and avoid having to pay private mortgage insurance.
Many lenders will approve you for a loan larger than what you need or can comfortably afford. But that means taking on more debt. “Shift from asking, ‘How much could I borrow?’ to ‘How much should I borrow?’” said Matt Vernon, head of consumer lending at Bank of America.
When creating a budget, you want to make sure you can cover your future monthly mortgage payments as well as any other debt you have, like student loans or credit card debt. At CNET, we recommend the 28/36 rule: Allocate no more than 28% of your pre-tax monthly income toward housing-related expenses and keep your total monthly household debt below 36% of your gross income.
CNET’s mortgage calculator can give you a good idea of what your future mortgage payments might look like based on a few specifics, like your credit score, projected down payment and interest rate.
Read more: How Much House Can I Afford?
4. Be flexible about location
Between 2020 and 2022, home prices saw double-digit growth. In 2023, the pace of growth slowed but prices were still up around 3% on an annual basis. Forecasts from Redfin and Realtor.com show home prices easing in the second half of 2024, but not dramatically -- between 1% and 1.7%.
“I don’t predict many bargains out there because you don’t go from zero inventory to an overflow of available homes on the market, which is when you would see a substantial price drop,” said Dottie Herman, vice-chair at Douglas Elliman Real Estate. That means we won’t see any major home price declines in 2024, according to Herman.
But what real estate is doing on a national level might not reflect what’s happening in your neck of the woods. Home prices and housing supply vary by city and state, so it’s always worth looking at less expensive markets. In markets where inventory is especially tight, like New York, prices are expected to increase by 3% in 2024. Meanwhile, prices in the Austin, Texas, metro area are projected to fall by around 12%.
5. Get ahead of the competition
Many prospective buyers are sitting on the sidelines as they wait for mortgage rates to fall and affordability to improve. As mortgage rates inch lower over the course of 2024, experts expect that pent-up homebuying demand will lead to increased competition.
“If 2024 becomes a turnaround year for housing, my suggestion would be to get all of your financing straightened out and in shape, and then start looking right away before the weather changes and you are joined by competition,” said Herman. “That’s when bidding wars start, so you want to be ahead of them.”
Buying sooner rather than later, if you have the option, could grant you more negotiating power while the pace of home sales is still slow, according to Afifa Saburi, capital markets analyst at Veterans United Home Loans.
6. Consider new-home construction
Limited housing inventory is directly related to the lack of home sales: Because the majority of current homeowners have mortgage rates below 5%, they haven’t been eager to list their homes and give up their bargain interest rates for today’s higher rates.
While experts are split on how much the inventory of existing homes will increase in 2024, there is a silver lining: New construction. “Single-family construction has offered relief from scarce existing inventory conditions over the last year,” said Hannah Jones, senior economic research analyst at Realtor.com.
If supply is limited in your area, consider what new-home construction is (or will be) available this year. Buying a newly constructed home comes with a few benefits. For starters, a new home will be move-in ready and likely more energy-efficient than an older home.
Brand-new homes can often be more affordable. As a way to incentivize buyers, many home builders have been offering discounts and rate-buydowns -- when you (or a seller) pay money upfront to a lender in exchange for a lower interest rate. Experts say those incentives will continue into 2024.
7. Interview multiple real estate agents
The right real estate agent can make a big difference in your homebuying journey. You want someone with good communication skills, connections and experience, but the most important thing is an agent with in-depth knowledge of your market who can help you develop the right approach, said Joseph Castillo of Compass Real Estate.
An agent familiar with your area can tell you how realistic your budget is or even point you to more affordable neighboring areas. Start by contacting several local real estate agents to discuss your needs and concerns before settling on one.
8. Explore your loan options
If cost continues to be a barrier, see if you qualify for government-backed loans or down payment assistance programs.
“While increased demand is pushing up home prices, there are loan options and grant programs for those who may be able to afford monthly mortgage payments but struggle with the upfront costs,” said Vernon.
FHA loans, VA loans and USDA loans tend to offer lower credit score and down payment requirements than conventional loans. States also provide different types of housing assistance, either through grants or interest-free loans. Check with your state or local housing authority, real estate agent or lender to find out what you may qualify for.
Read more: These 8 First-Time Homebuyer Programs Can Save You Money on Your Mortgage
9. Shop around for mortgage lenders
No matter what’s happening in the market, one step you should never skip is shopping around for mortgage lenders. Researching and comparing offers from multiple lenders will help you find someone aligned with your financial picture and save you a lot of money on your mortgage.
Mortgage interest rates and fees vary widely across lenders. That’s why experts recommend getting at least three loan estimate forms from different lenders to compare the cost of borrowing and potentially negotiate a lower mortgage rate or better loan terms.
10. Prepare to wait
If 2024 isn’t your year to buy a home, that’s OK. You can do plenty of things while you wait to put yourself in a better position when you’re ready to buy.
Improve your credit score. Your credit score is one of the main factors lenders consider when determining whether you qualify for a mortgage and at what interest rate. The minimum credit score for conventional loans is 620, but to qualify for the lowest rates, you’ll want to aim for closer to 740. Paying your credit cards on time (ideally, in full) and staying below your credit limit are great places to start.
Pay down debt. Lenders also take into account your debt-to-income ratio, or DTI. Paying down debt will lower your DTI, which means you’ll be able to borrow more -- and at a better rate. As an added (and significant) bonus, it will also relieve a major financial burden and give you more room to save for long-term goals, like your down payment.
Save for a down payment. It can take a long time to save up enough cash for a down payment, but you can start small with weekly or monthly savings goals. Consider stowing your cash in a high-yield savings account or certificate of deposit (if you don’t plan to buy in the immediate future) to take advantage of compounding interest.
Is it worth buying a home in 2024?
Experts are optimistic that a combination of falling mortgage rates and slightly lower home prices will give homebuyers more options than last year. But a variety of other issues -- like low inventory -- are weighing on affordability. Ideally, the affordability crisis will ease and the housing market will stabilize, but that is unlikely to happen in just one year. Though 2024 might not seem like the best year to buy a house, the perfect time should be determined by your financial circumstances and long-term goals.
“Buyers often ask me if it’s the right time to make a purchase. It is, but only if you’re prepared,” said Castillo.
