62% of Buyers Are Willing to Wait for Lower Home Prices and Mortgage Rates. But When Will They Arrive?

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Holding out for better housing market conditions to buy? Read on to see why you may end up waiting a long time. 

It’s pretty fair to say that today’s real estate market is a tough one for buyers. Not only are home prices high, but a lack of inventory is making it harder for buyers to find suitable homes without having to make compromises. And then there’s the cost of signing a mortgage loan to think about.

Mortgage rates have been elevated for well over a year now. And they’re unlikely to return to the record lows buyers took advantage of in 2020 and 2021 anytime soon. As such, a lot of would-be buyers may be biding their time, waiting for housing market conditions to improve.

In fact, in a recent report by Bank of America, 62% of prospective home buyers say they’re willing to wait for real estate prices and/or mortgage rates to fall before buying a home, down from 85% just six months ago. But if that’s the mindset you’ve adopted, you should know that you may end up waiting a really long time to buy.

Housing market conditions are unlikely to shift dramatically this year

There’s a good chance that in the course of 2024, mortgage rates will fall a modest degree and real estate inventory will open up a bit. We could even see a modest dip in home prices.

But all told, buyers should not expect things to change dramatically.

A big reason mortgages are more expensive to sign these days is that the Federal Reserve spent much of 2022 and 2023 raising interest rates in an attempt to cool inflation. Now the good news is that rate cuts are a possibility in 2024. But they’re unlikely to be drastic, which means we may only be looking at a small drop in borrowing rates for home buyers.

Meanwhile, a big reason the housing market lacks inventory is that current homeowners don’t want to give up the fabulous mortgage rates they may be sitting on. Since rates aren’t expected to drop a large degree this year, homeowners are unlikely to be motivated to sell. And a continued shortage of real estate inventory is likely to keep home values elevated.

You may not want to keep waiting

If you’re holding off on buying a home until mortgage rates fall back below 3%, you may be waiting a really long time. We may not see the rates mortgage lenders were offering in 2020 and 2021 again for decades, if at all.

Similarly, it could take a long time for housing inventory to increase and for home prices to fall. So if you’re positive you want to own a home and you can afford one today, you may want to consider moving forward — provided you’ve really crunched the numbers.

As a general rule, your total monthly housing expenses should not exceed 30% of your take-home income. And that 30% should account for all of your recurring expenses as a homeowner — mortgage payments, property taxes, homeowners insurance, and HOA fees, if applicable.

If you can manage to find a home whose ownership costs come in at or below 30% of your take-home pay, the sooner you buy it, the sooner you can begin building equity in it. Plus, you can always track mortgage rates and look into refinancing your mortgage to lower your monthly payments once they drop.

Today’s housing market conditions may, unfortunately, be here to stay for a while. Accepting that could help you make the right move in the coming months, whether it’s pursuing a home purchase or deciding that you’re better off renting for the foreseeable future.

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