Houses are getting more expensive even though there aren't many for sale. The normal house costs $434,271 now. People who want to buy homes must compete with each other because so few houses are for sale. This makes sellers happy because they can ask for more money. Banks ask people to pay about 7% interest on home loans. Many people still want to buy houses, and homes sell fast in big cities. If you want to buy your first home, you need about $404,500. Banks are also making it harder to get loans. If you want to buy a house now, you need to know these things to help you make smart choices.
Current Housing Market Snapshot
The housing market is hot right now. More people are buying homes, but fewer homes are for sale. Last month, home sales went up a lot. But the number of homes for sale went down.
Think of it like a game of musical chairs. When the music stops, there aren't enough chairs for everyone. That's how the housing market feels right now. There are more buyers than homes to buy.
Home prices have stayed about the same. They went down just a tiny bit from last month. Many buyers are waiting for banks to make loans cheaper.
But there still aren't many homes to pick from. If you want to buy a home, you need to be ready to act fast when you find one you like.
Low Inventory's Impact on Prices
Houses are hard to find right now. This makes them cost more money. When you want to buy a house, you have to compete with many other people who want the same house.
Right now, it would take less than 4 months to sell all the houses for sale. A normal market needs 5-6 months of houses. This means sellers can ask for more money for their homes.
People who own homes now don't want to sell. They've good deals on their loans. Building new homes is also hard because parts are hard to get. Big companies that buy lots of homes make it harder too.
In big cities, houses sell very fast. More people try to buy the same house there.
While we've more houses now than at the start of 2022, we still need many more to make prices fair.
Mortgage Rate Market Dynamics
Mortgage rates have been going up and down a lot this year. In January, rates were at 6.64%. They went up to 7.06% in May. This made it hard for people to buy homes. Right now, the rate is 6.81%.
Rates moved like this:
- 2024 so far: 6.64% to 7.06% due to how the economy grew
- 2023: 6.48% to 7.79% due to rising prices
- 2020-2022: 3.15% to 5.53% due to what the Fed did
Good news is coming. Big banks think rates will drop to 6.6% by the end of the year.
The Fed cut rates, and prices aren't going up as fast. This means it might get easier to get a loan soon.
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First-Time Buyers Face Challenges
Buying your first home feels tough right now. Houses cost a lot – most sell for $404,500. You need to save up more money than ever before to make a down payment.
Not many homes are for sale, which makes it hard to find one you can pay for. Banks also want to make sure you can pay back your loan, so they look at your money very closely.
When you borrow money to buy a home, you have to pay back more than you borrowed. Right now, that extra amount is high at 6.88% for most home loans.
Rising Down Payment Requirements
Buying your first home is harder than ever. Many people now need to save more money than before to make a down payment. A down payment is the money you pay upfront when you buy a home.
You might hear that you need to put down 35% of the home's price – that's about $127,750 for most homes in the US. But don't worry! You have choices that need less money up front.
You can get different types of home loans:
- Regular loans need 3-5% down
- FHA loans need 3.5% down
- VA and USDA loans need no money down
Most first-time home buyers put down about 8% of the home's price. You don't have to put down 20%, but more money down means you'll pay less each month.
In big cities like Los Angeles and San Jose, you might need to save up to 80% of the home's price to make your monthly payments easy to handle.
Limited Affordable Housing Options
Finding an affordable home is hard for many people today. In cities like Buffalo, home prices went up a lot – 23% more than last year.
Even with help from the government, it's tough to buy a home. Programs like Housing Choice and Good Neighbor can help, but not everyone can get them. You need to meet special rules about how much money you make.
When you buy your first home, you often need to pay extra fees if you can't put down a lot of money at first. Some help is out there:
- Housing vouchers for people who get public housing help
- Special loans for homes that save energy
- Help from your state, if you don't make too much money
No matter where you look or what kind of help you try to get, there just aren't enough low-cost homes for everyone who needs one.
Mortgage Qualification Hurdles
Buying your first home is tough these days. You must show the bank you can pay more than what they offer. This means you need to prove you can pay at a higher rate.
Your credit score shows banks if you're good with money. Most banks want to see a score of 680 or higher. Banks also look at how much you owe compared to what you make. If you have a low credit score, some other lenders can help, but they cost more.
You need to show a history of using credit well. If you can pay more money up front, this mightn't matter as much.
Before you shop for a home, get the bank to tell you how much you can spend. This makes it easier when you want to buy a house.
New Construction Growth Trends
The housing market is looking up! More people are building new homes. In fact, builders started work on 1.03 million houses this September – that's 3% more than before.
Still, finding a home to buy isn't easy. There are only enough homes to last about 4 months if no new ones get built.
Builders want to help buyers:
- Most are offering deals to make homes cost less
- They've added more homes for sale
- There are 23% more homes for sale than last year
- Many builders are cutting prices by 6%
But buying a home is still hard. High loan costs make it tough for many people. Not enough homes are for sale.
More apartment buildings are done now, so it's a bit easier to find a place to rent. This shows how the housing market is changing.
Market Competition Remains Strong
Homes are selling fast as many buyers want to buy the same houses.
This has pushed the price of a typical home up to $404,500 this fall.
If you want to buy a home now, you need to act quickly and make a strong offer.
Multiple Offers Drive Prices
Buying a home is tough right now. Many people want the same houses you do. Most homes get lots of offers from buyers who want them.
Home prices are going up. The average home costs $434,271. That's more than last year.
To get the home you want, you need to know what works:
- Most people use regular bank loans to buy homes
- You can tell the seller you'll pay more if someone offers more
- You can skip checking the house for problems
- You can write a nice note to the seller about why you love the house
Houses will cost even more next year. This is because there aren't enough homes for everyone who wants to buy one.
Buy-Side Challenges Intensify
Getting a home is harder than ever right now. There aren't many homes for sale – only about a 4-month supply. Home loans cost more too, with rates at almost 7%.
People are buying fewer homes than last year because it's tough to find one. Even though there are more homes for sale than last year, it's still not enough for everyone who wants to buy.
Many people who already own homes don't want to sell. They've cheap loans on their homes and don't want to pay more for a new loan.
Even with some good news about lower rates and less rising prices, buying a home will stay hard in 2024. Home costs will likely go up 4% to 6% by the end of the year.
Economic Factors Driving Housing
The housing market today is changing because of money matters. Home loans now cost more – about 7 out of every 100 dollars you borrow. There aren't many homes for sale, which makes people compete to buy them.
Money in our country is getting more stable. This means banks might make loans cheaper next year.
What else is happening?
- Few new jobs were made last month
- House prices went up in most big cities
- Houses cost more in Rhode Island and New Jersey than other places
- People keep spending money even when times are tough
Until more houses are built or loans get cheaper, homes will stay costly. This makes it hard for many families to buy a house right now.
Future Market Outlook
The housing market will keep growing in 2024, even though homes cost a lot. There aren't many homes for sale – much less than before COVID. This means buyers still have to compete for houses.
Home prices are at their highest ever, at $404,500. These prices will keep going up, but more slowly. Prices won't drop much because sellers still have the upper hand.
While builders are making new homes, they can't build enough to change things much.
If you want to buy a house, get ready for tough competition. Even though there are more homes for sale than last year, finding the right house is still hard. The market remains tight, with few choices for buyers.
Conclusion
The housing market today is doing something strange. There aren't many homes for sale – less than half of what we had before COVID. But home prices keep going up. They cost 7% more than last year.
Let me tell you about what happened in Denver. A family put their house up for sale. It had three bedrooms. In just two days, 18 different people wanted to buy it! Someone paid $75,000 more than what the owners asked for.
More people want to buy homes than there are homes to sell. This means prices will likely keep going up in 2024, unless big changes happen with money or jobs.
