In addition to being a personal finance expert, I'm also a real estate attorney and licensed title agent.
Here is why buying a house in 2024 is still a good idea.
The elephant in the room is high interest rates. There are three reasons why this may actually create a housing opportunity!
As Warren Buffet advised, “Be fearful when others are greedy, and be greedy when others are fearful.”
3 Top Reasons to Buy a House in 2024
1. Less people buying houses
People scared off by high interest rates means less competition in the housing market. That's why we saw a sharp drop in housing prices during the first half of 2023. This general trend is likely to continue.
Here is the FRED chart of Median Sales Price of Houses Sold for the United States (MSPUS), if you are interested.
Predicting the housing market's trajectory for 2024 involves considering several evolving factors. With the continuing fallout from the COVID-19 pandemic and its economic and political reverberations, the housing market has witnessed significant fluctuations. As of 2023, indicators suggest a gradual stabilization post-pandemic, with continued demand driven by low mortgage rates, albeit against a backdrop of inventory shortages and escalating home prices.
2. Refinance later when rates fall
Sure, interest rates are high now, but they won't always be. If you take advantage of lower prices now, you can refinance at a lower rate later. You can have your cake and eat it, too! Benefit from lower prices now and lower interest rates later. Win. Win.
Here is the FRED chart of 30-Year Fixed Rate Mortgage Average in the United States (MORTGAGE30US), if you are interested.
History of Interest Rates Over the Last 30 Years
The only thing we know for sure is that interest rates WILL change.
Over the past three decades, interest rates in the United States have traversed a rollercoaster of highs, lows, and gradual shifts, mirroring the intricate tapestry of economic fluctuations and policy interventions.
The journey began in the early 1980s, a period marked by staggering interest rates reaching historic peaks around 20% as the Federal Reserve battled rampant inflation. As the decade progressed, deliberate measures tamed inflation, leading to a gradual decline in rates by the late 1980s.
The 1990s witnessed a more stable environment, characterized by moderate interest rates as the economy found its footing. Yet, this tranquility gave way to a new narrative in the early 2000s, with rates plummeting to historical lows in response to economic downturns, including the aftermath of 9/11 and the dot-com bubble burst.
The mid-2000s saw a rise in rates amid economic improvement but were swiftly followed by the housing crisis, prompting drastic cuts by the Federal Reserve to counter the financial fallout.
Subsequently, a prolonged phase of historically low rates characterized much of the 2010s, aiding recovery post-financial crisis and continuing into the 2020s amid the COVID-19 pandemic's disruptive impact on the economy. This tumultuous 30-year journey underscores the dynamic interplay between economic forces and central bank policies shaping the trajectory of interest rates.
3. Negotiate a reduction in housing price because of high interest rates
Use higher interest rates to negotiate a reduction in your home's price commensurate with the additional costs of financing.
When negotiating, maintain a respectful yet firm stance. Highlight any flaws or needed repairs that might justify a lower offer -- especially the problem of high interest rates -- and use this information to negotiate a price reduction.
Always be prepared to walk away if the seller isn't willing to meet your terms. With less buyers in the 2024 market, you will have more options!
In addition to high interest rates, consider including other negotiation points besides the price, such as closing costs, home repairs, or additional amenities. Present a well-reasoned offer supported by the above market data and articulate your reasons for the proposed price.
Engaging a skilled real estate agent or negotiator can also bolster your position and enhance your negotiation strategy. But you may need to feed them the right arguments! Real estate agents don't know everything.
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