In the last several weeks, the housing market, both nationally and in the Cape Fear region, has been improving for buyers. Inventory is increasing, mortgage rates are slipping, and prices are finally softening.
While these signs give hope for the future, the real question is whether you should wait for the future. In other words, should you get into the market now that it has moved down from its peak, or should you hold off and wait for things to get even better?
Timing any type of financial market is extremely tricky. Those who manage to buy at the extreme low and sell at the peak are probably more lucky than anything else. Here’s why: as rates drop and prices fall, more buyers—including investment buyers with deep pockets—may jump in. When they do in mass, they potentially will send home prices back up, creating a bidding war.
You don’t need a very long memory to look back at what happened the last time interest rates fell. In 2020, when the Fed began easing to keep the economy chugging along during the pandemic, mortgage rates plummeted below 3%, but home prices rocketed higher.
According to Lawrence Yun, the chief economist at the National Association of Realtors, the situation will be fundamentally different in 2024. “I don’t anticipate that type of situation this time,” he told Business Insider. “First, we’re not going to get to 3% mortgage rates. And the second is that I think we’re going to certainly see more inventory come out to the market.”
Yun and other housing experts are telling buyers that if you’re waiting for mortgage rates to dip that far again, you may be left out in the cold. They think mortgage rates hovering between 6% and 7% (after hitting 8% in October) are the most realistic times for buyers to get into the market.
In their eyes, the trick is timing the market, but also timing the actions of the investment buyers. So, instead of buying when the rates and prices are at their lows, buy when the competition is at its low point—when the investors are sitting on the sidelines. The experts are predicting that if rates dip below 6%, then it’s more likely investment buyers will get back in the game.
JFB recommends having a discussion with a mortgage broker who understands the local market. We can recommend several loan officers from a variety of companies. The big question you want to ask is how soon after getting a mortgage can you refinance? For many companies, if it’s a simple refinance from one loan to another without taking any cash out, buyers have to only hold their mortgage for six months to a year, as long as they have a history of on-time payments. This means if you bought a home today at a rate in the low 7% or high 6% range and the rates dipped to 5% in the late summer or even next year, you may be able to rework that loan at a lower rate.
The message for buyers in 2024 is to remember that the housing market can be a very competitive sport. It would be great if you could time things out perfectly, but perhaps more important is to watch what the competition is doing and move before they move. Because if you get the timing of the markets wrong, then in most cases, it’s probably going to be better to get in a little bit too early than a little bit too late.