March 11, 2024 1:30 pm

Insert Lead Generation
Nikka Sulton

As you contemplate real estate investment in 2024, understanding the current market dynamics is paramount. The mortgage rate, a pivotal factor, has steadily risen since 2023, settling at an average of 6.84% for a 30-year loan as of January 31, 2024. This increase is indicative of inflationary pressures and the Federal Reserve’s concerted efforts to tighten monetary policy.

Yet, mortgage rates alone don’t paint the entire picture for prospective investors. A comprehensive analysis involves delving into various facets of the market. Consider the intricate interplay of supply and demand, evaluate the rental income potential, scrutinize the prospects for property appreciation, and factor in the tax benefits associated with property ownership. By weighing these elements, you can make a nuanced and informed decision aligned with the broader dynamics influencing real estate in the current landscape.


Why Some Investors Might Consider Purchasing A Property

  • Demand and supply dynamics: The multifamily real estate market, like other industries, is significantly impacted by the interplay between demand and supply. The fundamental need for shelter makes real estate relatively resilient during economic downturns. With a housing shortage in the U.S., demand remains robust. Even in challenging economic conditions, people necessitate a place to live, unlike their ability to adjust consumption of other goods and services.
  • Time in the market: Observations reveal that hesitation in real estate investment often stems from the desire to time the market perfectly. Some investors yearn for the low-interest rates of a year or two ago, making current rates appear daunting. However, this perspective may be influenced by recency bias. Looking back, the Federal Reserve funds rate was above 4% in 2007, and the ’90s saw rates exceeding 5%. Despite these conditions, deals happened, and investors found success. Emphasizing the significance of time in the market over timing, historical trends showcase that successful ventures transcend short-term rate fluctuations.


Risks Of Investing In Real Estate Right Now

Certainly, real estate investment carries inherent risks that require awareness in today’s economic landscape. Key risks include:

  • Economic instability: This factor can profoundly affect real estate investments, causing higher vacancy rates and reduced rental income profits. Prospective investors must ensure sufficient reserves, either personally or through an investment firm, to withstand market fluctuations.
  • Rising interest rates: High rates can have a major impact on real estate investments, as they drive up borrowing costs and make it more difficult to maintain positive returns.


Buy now, or wait?

Should I Invest In Property Now? The decision to buy now or wait poses a significant challenge for potential homeowners navigating the current housing market. Recent surges in home prices, coupled with the Federal Reserve’s measures to curb inflation, have propelled mortgage rates to new heights. This confluence has swayed many prospective buyers towards opting for the “wait” strategy. Notably, existing home sales saw a 1.7 percent dip from January 2023 to January 2024, as reported by the National Association of Realtors (NAR). The Fannie Mae Home Purchase Sentiment Index for February 2024 aligns with this sentiment, revealing that a significant 83 percent of consumers perceive it as an inopportune moment to purchase a house.

However, amidst this prevailing caution, there are signs of a changing landscape for buyers across various regions. After enduring a prolonged period of challenges, buyers now find themselves in a more advantageous position. Key indicators, such as days-on-market statistics, reflect this shift, offering buyers extended timeframes for decision-making. According to NAR data, homes spent an average of 36 days on the market before being sold in January, a notable increase from the 29-day average in the preceding month.


Is now a good time to buy a house?

Mortgage rates, although down from the October peak of 8 percent, still hover around 7 percent. Simultaneously, home prices have witnessed a consistent year-over-year increase for seven consecutive months, as per January NAR data. While these factors might give pause to potential buyers, making a decision to buy now has its merits. Purchasing at this juncture enables the immediate commencement of equity building and shields against potential future mortgage rate hikes. Rising rates not only pose challenges to monthly budgets but also translate into higher interest payments over the loan’s lifespan.

Stacey Froelich, a broker with Compass in New York City, advises against delaying a purchase if a suitable property is found, emphasizing the unpredictability of market timing. The perspective aligns with the long-term nature of home investments. Melissa Cohn, regional vice president of William Raveis Mortgage in Connecticut, echoes this sentiment, highlighting the inverse relationship between mortgage rates and home prices. She encourages buyers to consider the principle of “Marry the house and date the rate,” implying that securing the right property now is paramount, with the option to refinance available in the future.


In general, if you can answer yes to these three questions, now is a good time to buy.


  1. Assess your credit: Before seeking a mortgage, check your credit score. Lenders offer the best rates to those with excellent scores. In the fourth quarter of 2023, the median credit score for mortgage borrowers was 770, according to the Federal Reserve Bank of New York. A history of on-time payments positions you as a low-risk borrower, increasing your chances of securing the lowest mortgage rates.


  1. Save for a down payment: Alongside maintaining timely bill payments, ensure you have a substantial amount saved for a down payment. A larger upfront payment reduces the amount borrowed, subsequently lowering interest payments. Additionally, having extra cash reserves is favorable, providing a financial cushion for unexpected expenses, a factor appreciated by lenders.


  1. Consider your stay duration: Homeownership involves closing costs, making it essential to anticipate a more extended stay to justify these one-time expenses. Beyond the purchase price, closing costs can amount to thousands. Ensure stability in your plans, either committing to a more prolonged residence or having the financial capacity to retain the property and potentially rent it out. Selling too soon after purchase may result in significant tax implications.


What if there’s a recession?

The probability of a recession in 2024 is now at 45%, as per Bankrate’s recent survey. Recessions pose risks for homebuyers, especially if job security is uncertain. Lenders may be hesitant to approve loans during economic downturns. Additionally, a recession’s impact on the local real estate market can affect your homebuying experience. A hard-hit area may witness fewer potential buyers, reducing the chances of homes selling and limiting your options.

Despite the challenges, there are potential advantages to buying a home during a recession for those with financial stability. Reduced competition in the market can offer opportunities to find desirable properties that may have been more competitive in a healthier economy, making it a strategic investment for the future.




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