And Tips on How to Buy in 2024
So, it’s certainly no secret that housing affordability has decreased dramatically in recent years. Potential buyers are still actively lamenting over the loss of unusually low interest rates during the Corona pandemic era and recent bouts of inflation has done nothing but to pressure the hinges leaving many would-be buyers wondering if they will ever be able to afford their personal version of the American Dream.
So, you too may be left wondering if now is a good time to buy a home, or if you should wait until economic conditions improve. The answer? It probably depends on your financial situation and where you would like to purchase a home.
If you are looking to purchase somewhere in the greater Charlotte area, it should be noted that housing in the area is still in high demand in spite of housing costs slightly cooling. Not only are we seeing a large influx of people relocating to the area (predominately from "expensive" locations with higher standards of living), but we can also see from the data that homes are staying on the market (from list to close) on average for about 40 days. As long as things don’t change drastically economics-wise (which seems likely during an election year), it’s probable that we’ll see this number gradually nearing 30 days as we progress into spring and summer, which are, of course, the most popular times for families to consider moving into a new home.
Now that spring is fast approaching, as verified by the daffodils sprouting in my front lawn, more home buyers are beginning to actively search for homes! Statistically speaking, we expect that most prospective home buyers will start getting much more serious when the average interest rate nears 5%. Fortunately, this rate has been gradually decreasing from the high 7s that we were seeing last fall, but we are still finding ourselves around a 6.6% interest rate, which means that most qualifying home buyers can currently secure loans with interest rates somewhere in the high 5s – low 7s % range depending on their personal credit scores and other financial credentials.
From watching how the market has acted in previous years, it is expected that an influx of home buyers is likely to continue to drive home prices up (due to high demand and moderate inventory – right now we are seeing about a 1.6 months’ supply, which has improved, but a neutrally-supplied market is generally perceived to rest somewhere near 3 months of supply, so there is still a limited selection of homes for buyers and desirable homes are moving quickly).
Historically speaking, the pandemic era proved to be a time when there was a very high demand for homes and one of the issues that home buyers were running into is that they needed to bring more cash to the table, since they would likely need to outbid other buyers and many needed to make up for the difference between the home's appraisal value and the sale price out of pocket. The high demand for homes also left many buyers “sore out of luck” since there were more potential buyers than desirable homes being sold.
According to various recent articles, although Charlotte remains one of the top producers for new construction homes, the housing market remains noticeably tight, with most for sale homes going under contract on average in about 10 days’ time. Which means that if you are serious about buying a home this year, you should get pre-approved for a loan (if you need one) and be ready to put an offer on the home you love as soon as possible in order to prevent other buyers from snatching it first!
In comparison to this, you can see that there may be some clear benefits to buying in a slower season - even with higher interest rates. For instance, sometimes the quality of life that you would receive from moving sooner is worth paying for regardless of if the market “is ideal” for your financial situation. And as you can see above, you may end up paying a lower home price, paying less out of pocket, and / or having more negotiation power when it comes to the selling price or compensation for making necessary repairs.
Not only this, but it has been largely proven that it is almost impossible for the majority of people to properly time the market, and so investing earlier is generally perceived as being a smart decision. In addition, you may be able to qualify for refinancing your loan, which would allow you the benefits of starting to build equity sooner, while still enabling you to take advantage of lower interest rates as soon as they become available. *
So now that you see why now might be just as fine of a time to buy as any, you might still be wondering if you can afford to make the leap. I understand that not everyone has perfect credit, enough for a down-payment, or that they may run into other issues when it comes to home affordability. No matter the case, I’d be happy to talk through your situation and help you figure out the next steps toward purchasing a home! Usually where there is a will, there is a way, and even if now turns out not to be the right time to buy, it is the right time to start looking into what you can do to prepare yourself for buying in the (hopefully near) future.
For those who are not quite sure if they can afford at all, I want you to start seriously considering your options when you can afford a monthly mortgage payment of about $1,700 - $2,000 / month *. You might need less or more – depending on what kind of home you are looking for and the location of the home, but this is a good ballpark to see if you are close to being able to afford. Many people forget that the monthly payment is typically what matters most to them, not the current interest rate.
If you’re concerned about being on the verge of being able to buy, I want to propose some ideas that might make buying easier for you:
Consider getting a co-signer or someone to help you with the down-payment. Perhaps a simple concept, but if you think your credit isn’t going to cut it, see if your partner or a family member might be willing to co-sign your loan. If you don’t have enough for a down-payment, maybe see if a parent or family member might be able to give you personal loan or otherwise gift you the amount necessary for a down-payment and closing costs. (You can also attempt to negotiate for the seller to help you cover the closing costs, which is something they might entertain in lieu of going down in price.)
Consider programs that allow you to waive or minimize the customary down-payment amount. Are you a veteran or do you want to live out in the country in a rural area? There might be special loans and federal programs made just for you! * It is a misconception that you always need to put 20% down; if your home will be owner-occupied (not an investment property) then you can likely get by with putting much less down!
Consider going in with a family member. – Sometimes it makes sense to go in with a mother who is aging and could use some help around the house or a sister who is like a fun, built-in roommate. Multi-generational housing and living with family can really help cut costs and it’s usually beneficial when caring for younger or older family members too!
Consider “house-hacking” or living in a duplex. – Want to have your renters pay some or all of your mortgage for you? That might be possible if you are willing to rent out rooms in your home or buy a duplex, where you can rent out the other half!
Consider buying homes to rent out or flip. – Maybe it’s more economical for you to buy an investment property before buying your own home. As you build equity in this home, you can use it as a stepping stone to buy your family’s home later. The nice thing about buying homes to fix up is that you can potentially add considerable value to the home with your renovations, which typically provide a quicker reward than simply waiting on the property to appreciate in value.
Consider purchasing a vacant lot to build a “tiny” or manufactured home on (or opt to build in general). – While it’s highly important to consider your use before purchasing land, you may find that you can save money by going a less traditional route. Maybe you don’t need that much space, or perhaps your future renters will be fine in close quarters. Tiny and manufactured homes can make for a great option if you are on a budget or just need less space and want less maintenance overall!
Consider buying a condo or a townhouse, and perhaps new construction homes. – Although these options usually come with a smaller or no private yard, these types of homes are usually considerably less expensive than single family homes while still providing your family with ample modern living space. New construction builders also regularly offer incentives, which could potentially help you with better loan conditions or the ability to save on closing costs when you opt to use their preferred lender for the purchase. *
If you are on a very tight budget and would like to live within commuting distance to Charlotte, I highly recommend considering Gastonia (NC), York (SC), Rock Hill (SC), and Chester (SC). There are also many lovely rural communities on the outskirts of Charlotte in just about every direction (within a 25–45-minute drive) that might prove to be more affordable for you compared to living inside city limits. Living a bit further out can also be a savvy decision when looking into newer construction, since some builders, such as True Homes, are building affordable homes in planned communities that provide a reasonable commuting distance while still being located near natural areas that are perfect for those who love to enjoy the outdoors!
Regardless of which option sounds the most interesting to you and what you think about your current financial situation, I’d love to speak to you about your options and help you get connected to a lender that you can trust! I know that talking about such a large purchase can be really intimidating at the beginning, but the great thing is that you can talk to professionals for free and I believe that there is never any harm in looking into the process and coming away more informed regardless of what you ultimately decide to do.
*Qualification and details will depend on your particular situation.
This guide is intended to be used as general information only. It is important to note that the author is a real estate agent and is NOT licensed in law, loan, finance or tax matters. Therefore she cannot give any definitive advice on these topics. If you have any questions about any of the topics mentioned, it is advisable for you to seek out properly licensed professionals so that you can obtain current information that is relevant to your specific situation.
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