Is Now a Good Time to Buy a House?

Key takeaways:

• If you have the means, now may be a good time to buy a house.
• The median U.S. home sale price recently hit a near-record $435,000, continuing 16 months of year-over-year gains.
• Daily average mortgage rates dipped to 6.7% and have swung from low to high since September, but are still below 2023 levels.
• Easing inflation has encouraged the Fed to cut interest rates twice in two months, but Trump’s policy proposals bring uncertainty.
• Even with headwinds, the market is still heating up: More buyers have entered the market since the election, unfazed by high rates, rising prices, and industry changes.

As the year winds down, many homebuyers are left wondering if now is a good time to enter the market. Housing is still largely unaffordable for most of the country, after all, and shows little signs of improving – even with mortgage rates dipping. Given these challenges, it’s natural to wonder if now is the right time to take the plunge.

Whether or not it’s a good time to buy a house boils down to if it’s a good time for you to buy a house. Let’s dive a bit deeper into the market and uncover trends to help you answer, “Should I buy a house now or wait?”

>> Read: Am I Ready to Buy a House? 8 Questions to Help You Decide

 

What’s going on in the housing market?

Here are some key market trends to keep an eye on and help you make an informed homebuying choice.

House prices: Sky-high and still climbing

The median U.S. sale price currently sits at $435,000, just shy of the all-time record. House prices have posted year-over-year gains for 16 months and are over 45% higher than they were in 2020. 

Also, the median monthly mortgage payment sits at around $2,600, a small decrease from last year.

Mortgage rates: Elevated and volatile

As of December 9th, daily average 30-year fixed mortgage rates sit at 6.7% – below April highs but well above recent September lows. Rates have remained relatively high primarily because of faster-than-expected job growth and post-election jitters, even with two interest rate cuts from the Fed. However, rates have begun creeping down a bit.

Interest rate cuts will likely total 200 bps (2%) by the end of 2025, but mortgage rates are still unlikely to dip below 6% in 2025.

Mortgage rates directly translate to monthly costs. The higher the rate, the more you pay every month. For example, let’s assume you make a 20% downpayment on a $380,000 house. Using this week’s 6.7% rate, your monthly payment would be $2,530 (excluding home insurance and taxes). If we drop that rate to 6.0%, the monthly payment drops to $2,390. This is why, when rates fell to 6.35% back in August, homebuyers gained nearly $30,000 over the lifetime of their mortgage.

Supply: Limited

Months of supply has hovered between 3 and 4 months for the past year, which is close to a balanced market. Supply below 4 months tends to favor sellers; above 4 months often favors buyers. 

New construction has dropped in recent months, too. This is because more inventory is hitting the market and builders have slowly backed off since the pandemic-driven boom. New housing starts were down 6.9% in October. Investor home purchases have also slowed down.

Demand: Slowly coming back

Pending U.S. home sales are creeping back up, and Redfin’s Homebuyer Demand Index hit its highest level in nearly a year and a half two weeks ago, though it has since fallen. 

Other metrics are less convincing, though, like new listings remaining flat and a falling share of sales going under contract within two weeks. 

In general, demand is outpacing supply, which is driving up prices throughout the country. This means it may be a good time to buy – if you’re prepared for competition.

Inflation: Dropping, but with an uncertain future

Thanks in part to the Fed cracking down hard on pandemic-related inflation, inflation has dropped close to their 2% target benchmark. This is a major improvement from the meteoric post-pandemic inflation surge, which peaked at 9.1% in July 2022. Lower inflation means less spending on goods and services, which can help buyers’ budgets. 

Importantly, though, experts believe Trump’s policies could reignite inflation, so it’s unclear what lies ahead. 

>> Read: Inflation and House Prices: What Homebuyers, Sellers, and Renters Need to Know

Home sellers should get ready for competition 

Recent drops in mortgage rates sets the stage for more buyers entering the market, meaning more competition for listings. 

House hunters scared off by high mortgage rates have been waiting on the sidelines for years, especially as inventory flagged due to sellers wanting to hold on to their pandemic-era rates (the lock-in effect). Now that rates are dropping, more buyers are deciding to enter the market.

Will mortgage rates fall further in 2024?

Today’s mortgage rates reflect what investors think the Fed will do. Investors believe the Fed is done limiting inflation and expect mortgage rates to hold steady through the end of the year. Economists’ expectations are clouded for the foreseeable future, though, due to Trump’s policy uncertainties. 

In other words, economists don’t expect mortgage rates to drop more than they already have, because rates have already priced in the recently announced interest rate cuts. Factors like inflation and employment data could change experts’ outlooks, though.

Should you lock in your mortgage rate today? 

If you have the means, now is a great time to lock in a mortgage rate. Rates are lower than they were a year ago but may stay elevated for longer following the election.

If you lock in your rate but it ends up feeling too high, you have the option to buy down your mortgage rate, too. 

All-cash buyers hoping to avoid mortgages altogether should also act now to avoid probable price hikes as competition heats up.

So, is now a good time to buy a house? 

If you have the means and are ready to own a home, now is a good time to buy a house. Waiting for rates to fall leaves you at risk of increased competition among buyers and subsequent price hikes from sellers. Rates are lower than they were a year ago and sales are still sluggish but improving, so now may be the time to act. 

Buying a house now also means you’re maximizing your investment potential. Lower rates save you money over your loan term and mean more of your mortgage payments can go towards building equity. 

It’s worth noting, though, that the market has been topsy-turvy recently due to historically low housing supply. For example, higher mortgage rates typically push house prices down, but they have had the opposite effect over the past two years. Also, declining inventory typically leads to more competition, but prices have been too high for many buyers to afford, causing some homes to sit unsold and others to sell in a few days. 

It’s important to be prepared for any surprises that may come. 

>> Read: How to Buy a House: 10-Step Home-Buying Guide

Final thoughts

If you’re in the market for a house and have been scared off by high rates, now is the time to connect with an agent and start your home search. Rates will likely remain steady for the foreseeable future, but buyers are getting restless, helping the market gain momentum. The longer you wait, the more competition you’ll see.

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