By Elizabeth Lucchesi

Are you skeptical of real estate professionals’ advice suggesting the current housing market is a great time to buy? 

If you’re wondering whether it’s an excellent time to buy a house, ask this instead: Is it a good time to buy a home in my life? 

Housing market trends give essential context. But whether this is an excellent time to buy a house depends on your financial situation, life goals, and readiness to become a homeowner. 

The real estate market is ever-changing and influenced by many factors, including interest rates, economic conditions, supply and demand dynamics and policy changes. Assessing the market’s current state is the first step in understanding if it’s an opportune time to buy a home. 

Interest rates 

Recently, interest rates have been historically low, making borrowing more affordable and attractive for potential homebuyers. 

Higher year-over-year mortgage rates 

2021 brought the lowest mortgage rates in history, with 2.65% in January 2021. The average rate for that year was just under 3%. In 2022, the average rate climbed to 5.34%. After historic lows and a surge of market activity, mortgage rates began rising last year. For 2023, the average 30-year fixed-rate mortgage has more than doubled and teetered between 6% and 7%. 

Mortgage rates are influenced by the short-term interest rate controlled by the Federal Reserve. The government agency has raised a short-term interest rate 11 times since March 2022 to control inflation. 

Higher rates mean more expensive home loans and less buying power. For example, the monthly payment for a $450,000 house with a 20% down payment would be $2,294 with a 5% mortgage rate on a 30-year mortgage, not including home insurance and property taxes. With a 6.5% rate, the monthly payment would be $2,637 – $343 higher per month. 

Limited inventory 

Many regions are experiencing a scarcity of available homes for sale, leading to increased competition and potentially higher home prices. 

The supply would last about five to six months in a balanced market with plenty of buyers and properties for sale. According to the National Association of Realtors, as of July 2023, there was a 3.3-month supply of homes nationwide. This means that it would take a little over three months at the current pace for all the properties to sell. 

Home prices are edging up 

Home prices have steadily risen in various markets, driven by high demand and limited supply. This can impact the affordability of homes for some buyers. 

NAR reports the median price for existing homes sold nationwide in July was $406,700, an increase of about 2% since July 2022. 

Experts weigh in on market trends 

We’ve gathered insights from seasoned real estate professionals well-versed in market trends and consumer behaviors to determine if now is a good time to buy a home. 

Dave Ramsey, an iconic American radio personality who offers financial advice, does not believe high-interest rates should keep new homeowners skeptical from buying. 

“If later the interest rates come back down, you’re not stuck,” he said. “Just refinance and dump the old mortgage that you had at 6% or 7% or wherever it lands right now.” 

Ramsey added an aspirational component of why buying a house can be a big step toward long-term wealth. 

“We’ve studied millionaires for decades. For the typical millionaire, the first $1 million to $5 million of net worth they get is their paid-off home,” he said. “And you’ve got the opportunity to set yourself up to do that fairly quickly.” 

Are you ready to buy a home? 

Consider your life goals, relationships and interests, job security and financial stability. How long can you see yourself living in this location? Are you financially prepared? 

You’ll likely want to stay put in your new home for several years – long enough for rising property values and equity to exceed the costs of buying and selling. 

If the home appreciates and you sell it in less than two years, you could be subject to capital gains taxes. 

Financially, your savings, credit, and debt are the main ingredients to evaluate. 

Savings. You’ll need cash for a down payment and mortgage closing costs, as well as for moving and other expenses. 

Credit. If your credit is marginal, it might make sense to postpone buying a house and use the time to work on building your credit. Borrowers with credit scores above 740 typically get offered the best mortgage rates and terms. Although those with scores in the 600s can qualify, terms are often less favorable. 

Debt. Your debt-to-income ratio is an essential factor in determining whether you qualify for a mortgage. Your DTI is the percentage of your monthly gross income that goes toward monthly debt payments. The lower your DTI, the better your chances of qualifying for a mortgage and a great rate. 

Take control of the search 

It’s impossible to control interest rates, so focus on what you can control, like how much to buy and who you work with. 

Do your homework and assess your buying budget to be confident you can afford the monthly mortgage payment. As a rule of thumb, homebuyers should budget no more than a fourth of their take-home pay toward their mortgage. A home affordability calculator can help you crunch the numbers. 

Lean into your trusted real estate professional to get a pulse on the local market, how to make a competitive offer, creative financing resources when needed and how to negotiate the best price on your terms. 

The bottom line 

The consensus is the current real estate market is still favorable for homebuyers. Considering your unique circumstances, financial stability and long-term homeownership goals, it’s crucial to approach the decision thoughtfully. 

If you’re financially prepared and clearly understand your budget, now could be an opportune time to embark on the journey of homeownership. It’s advisable to engage with a real estate agent and a mortgage professional to navigate the complexities of the market and secure a deal that aligns with your needs and aspirations. Ultimately, the decision to buy a home should be well-informed and reflective of your circumstances and aspirations.

The writer is the founder of the LizLuke Team of Long & Foster Real Estate. She is also a buyer and seller agent.