At Inman Connect Las Vegas, July 30-Aug. 1, 2024, the noise and misinformation will be banished, all your big questions will be answered, and new business opportunities will be revealed. Join us.
Homeownership has long been a cornerstone of the American Dream and — despite recent economic challenges — it remains a sought-after goal for most Americans. Concerns over current market conditions, such as high interest rates, rising home prices and limited inventory, have served as barriers, keeping sellers on the fence and leaving buyers hesitant to enter the market.
TAKE THE INMAN INTEL INDEX SURVEY FOR JUNE
However, according to LendingTree data, 84 percent of young Americans who don’t own a home express a desire to buy one in the future, underscoring the enduring appeal of homeownership coupled with strong demand. So, what should prospective homebuyers do?
Recent reports from RE/MAX show steady growth in home sales and new listings, and there might even be some stabilization in home prices. According to the latest National Housing Report, the number of newly listed homes in May 2024 increased by 15.1 percent compared to last year. Home sales are also climbing, with an almost 11 percent increase from April.
While we typically see more sales before summer, the consistent upward trend over the past four months suggests the market is in good shape. Plus, we’ve had one of the biggest year-over-year jumps in inventory, with a 39.6 percent increase from May 2023. This means there are more homes available, which is great news for buyers.
Amid the evolving housing landscape, many are left asking, “Should I buy now or wait?” Unfortunately, there’s no one-size-fits-all answer. As real estate professionals, it’s our job to steer clients through the homebuying process, educate them on the intricacies of the local market and help them determine the right time to buy a home.
The myth of perfect timing
The idea of waiting for the perfect moment to buy a home is appealing but nothing new. I’ve been in the industry for nearly 30 years and have seen many clients hold off on making a purchase, hoping that interest rates will fall or that housing prices will go down. Conversely, I’ve watched others rush into the market at the first sign of increasing prices, fearing they will be priced out if they wait.
Owning a home is an investment in one’s future. While a rate may not be appealing in the current moment, one can choose to refinance at a later date should rates fall.
Thus, it’s good to explain why waiting for the ideal moment can often be counterproductive. The housing market is influenced by numerous fluctuating factors, such as economic trends, government policies and global events, making perfect timing nearly impossible. Clients who wait for the ideal moment risk missing out on opportunities or making rushed decisions based on fluctuating market conditions.
Instead, emphasize the importance of making informed decisions based on their personal readiness and long-term goals. Encourage clients to focus on their financial stability, current needs and future plans. By doing so, you can help them make a confident and sound investment that suits their unique circumstances, regardless of market uncertainties.
Ready, set, buy: Personal readiness matters
Homebuyers should shift their focus from fixating on market conditions and daily fluctuations to whether buying a home makes the most sense for them. An easy method to facilitate this shift in focus is to provide clients with a checklist that assesses their financial readiness, including:
- Are they financially stable?
- Do they have a steady income and a strong credit score?
- Have they saved enough for a down payment and closing costs?
- Do they have sufficient savings for any rainy day or unexpected expenses?
These factors play a crucial role in determining whether now is the right time to buy a home.
Homeownership is more than just financial readiness. Prospective buyers need to think beyond savings and truly understand the all-in costs each month. It’s essential they understand their budget and the price range that will allow them to build equity while preparing for other big financial milestones like retirement, children or education.
Encourage clients to go through pre-approval to determine their qualifications and understand if they need private mortgage insurance (PMI). This can give them a clear picture of their buying power and what financial adjustments may be needed. If clients find they are not ready to enter the market yet, it’s a perfect time for them to educate themselves on the process and get their finances in order while they wait.
Market savviness: Know when to hold ’em
While focusing on your clients’ readiness for homeownership, it’s essential to consider current market conditions. Knowing what’s happening in the market can give you the necessary tools to guide clients in making informed decisions. For example, if interest rates are very low, it might be a good time for them to lock in their rate. If housing prices are rising quickly in their area, they might need to consider whether those prices fit their budget and long-term plans.
There’s been a lot of discussion about the Federal Reserve cutting rates this year, but we haven’t seen any major changes yet. Buyers who are waiting on significant rate cuts to enter the market may need to adjust their strategy if they want to buy a home soon.
Advise your clients not to rush into a purchase because of market pressure. The industry can change quickly, and being open to different scenarios can result in finding the best deal. This might mean adjusting their expectations or considering different neighborhoods.
What’s best for your client?
Navigating the complexities of the housing market can be daunting for clients, which is where your expertise becomes invaluable. Provide insights into market trends, lay out the current conditions, and guide them through the buying process with access to crucial resources and data.
Buying a home is one of the biggest financial decisions that most people will ever make, so real estate professionals must be able to guide them with clarity and timely advice. Help them look past the market noise, assist them in making smart decisions, and work hard as their trusted advisor to secure a house that’s right for them.
The American Dream of homeownership is alive and well — just as it’s always been. So, the question remains: is now a good time to buy? For many, with the expertise and guidance of Realtors, the answer this year will be: Yes.
Amy Lessinger is president of RE/MAX, LLC. Follow her on LinkedIn.