Navigating the housing market in 2024 comes with unique challenges. Interest rates are fluctuating wildly, lending criteria have tightened, and property prices are soaring amidst fierce competition from investors. These factors create a challenging landscape for potential homebuyers – but understanding these hurdles can equip you with the knowledge and insights you need to make informed, strategic decisions.
Let’s examine the challenges you are likely to face during your home-buying journey and explore a few expert tips for overcoming them.
Fluctuating Interest Rates
In 2024, fluctuating interest rates add a layer of complexity to any home-buying project. Rates can shift unpredictably, increasing borrowing costs and monthly payments. The events of the past years have done nothing to ease this trend: interest rates on mortgages have been steadily on the rise since early 2021! Understanding this scenario before choosing to buy a house is important to accurately predict costs and returns.
- Understanding Rate Lock Options
Securing a rate lock can provide peace of mind as the market continues to fluctuate. This fixed rate, offered by lenders for a specified period varying from 30 days to 120 days, shields you from rising rates and allows you to make your home-buying decisions without having to rush through a deal when rates seem convenient.
- Leveraging Adjustable-Rate Mortgages
Adjustable-rate mortgages (ARMs) offer a lower initial rate compared to fixed-rate loans. ARMs could be a suitable option if you plan to move or refinance before the adjustment period ends.
Stringent Lending Criteria
Tighter lending criteria in 2024 make mortgage approval more challenging. Lenders are cautious, scrutinizing applicants’ credit scores, debt-to-income ratios, and employment stability. The best way to navigate this scenario is to understand where you stand and take the time to improve your credit history and score before buying a house.
- Improving Your Credit Score
To navigate stringent lending criteria, focus on improving your credit score. Pay down existing debts and ensure timely payments. You should also regularly check your credit report for errors, as even minor inaccuracies can impact mortgage approval, and speak to your bank to understand how to boost your score (e.g.: by getting a secured credit card). You should strive to have a credit score of at least 620 before applying for a mortgage to increase your chances of success.
- Partnering With a Mortgage Expert
Getting a mortgage in today’s market can be challenging. That is why it is essential to work with a mortgage expert. A specialist will help you find the right mortgage for your needs, avoid mistakes during your application, and receive approval promptly.
High Property Prices
Over the past years, house prices have increased steadily, driven by demand and limited supply. This makes purchasing a home daunting, particularly for first-time buyers.
- Identifying Undervalued Markets
Look for undervalued markets to counter high property prices. These areas might be in the early stages of development or recovering from economic downturns, thus offering lower prices. You may also be able to find a better deal by purchasing a house directly or choosing an off-market property, though these options will require you to have more experience in real estate transactions to avoid risks.
- Negotiating Effectively
Effective negotiation skills can help reduce the purchase price. Research comparable properties to understand the market rate, and present a competitive, well-justified offer, that allows you to negotiate terms beyond the price, such as closing costs or home repairs. This aspect is also important if you are looking to sell or upgrade your property: knowing how to negotiate can help you sell your house fast and for your desired price, making it easier to unlock the funds needed to purchase your new home.
Limited Housing Inventory
Limited housing inventory remains a significant challenge in 2024. The need for more available homes means you are likely to face higher competition and fewer choices for buyers.
- Expanding Your Search Area
Expanding your search area is a surefire way to overcome limited inventory, but it may cause you to compromise on other aspects, such as location or accessibility. Consider nearby neighborhoods or suburbs where homes might be more available and affordable. Partnering with a real estate agent who understands the ins and outs of the local market can make this process easier.
- Considering New Builds and Developments
New builds and developments are worth considering as they can offer more availability and modern amenities. Often, buying directly from developers allows for customization and better terms. Plus, newer homes mean fewer repairs and upgrades initially, and you can even purchase a property off-plan—if you have enough time to do so—to enjoy the benefits of new builds.
Finding Help Along The Journey
Real estate transactions, no matter when they are carried out, come with inherent challenges. Fortunately, you don’t have to be alone in this project. By partnering with a real estate agent expert in the area, a mortgage advisor, and even a conveyancer, you can navigate the journey ahead with peace of mind.
