2024 Home Buyer Resolutions

Every year, Ilyce and Sam offer their readers New Year’s resolutions for home buyers, sellers and their personal finances. These are their 2024 Home Buyer Resolutions.

Have you made your 2024 home buyer resolutions yet?

It’s been a tough few years for home buyers. Since the start of the pandemic, mortgage interest rates rose from a low of about 2.5 percent for a 30-year fixed-rate mortgage to a high of around 8 percent, before falling back in the last few weeks of the year to less than a bit under 7 percent.

At the same time, home prices rose dramatically. At the start of the pandemic, in March, 2020, the median price of homes was $280,700, according to the National Association of Realtors. By March, 2023, it was $379,500. And by June, the median home price hit $415,700, before dropping back just below $400,000.

The skyrocketing price of homes coupled with sky-high mortgage interest rates meant buyers had to dramatically lower their sites if they wanted to buy a home. When mortgage interest rates are at 3 percent, purchasing power is far higher. You can buy a home priced at three, four or even five times your household income, depending on the amount of debt and down payment cash you have. But when interest rates are 7 to 8 percent, buyers find they can only buy a home priced at two or two-and-a-half times their household income.

That’s a pretty stark difference. “Housing affordability is the worst it has been in the lifetime of most Americans and there are no indications that it’s going to be any easier to buy or rent a home anytime soon,” wrote David M. Dworkin, President and CEO of the National Housing Coalition, in the December 17th edition of the NHC Member Brief.

Even though interest rates are starting to come down, they’re far higher than they’ve been in years. In addition, there is still a housing shortage to contend with, as the U.S. still isn’t building enough homes.

“We think that the U.S. housing market is around 4 million units short nationwide. It seems to be widespread across the country, but we cannot say on specific local markets,” said Lawrence Yun, chief economist of the National Association of Realtors.

For the first time, many of those who want to buy a home are considering being renters for life instead. In our opinion, that would be a critical, long-term financial mistake. Buying a home builds wealth over time. The equity gives you a cushion in case of emergencies. It allows you to plan your housing costs due to having a fixed-rate mortgage. And, you can always refinance when rates drop – which they will eventually. Perhaps not to 3 percent, but certainly below where they sit today.

So if you want to buy a home in 2024, take heart. Here are a few resolutions you should make:

2024 Home Buyer Resolution #1: Save more than you think you’ll need. Trust us, you’ll need it.

When it comes to buying a home, you’ll need a down payment, cash reserves (typically three months of mortgage, tax, and insurance premiums in the bank), and enough to pay your moving expenses. It’s likely your new home may need any or all of the following: paint, carpet, drapes or blinds, cleaning equipment, furniture or furnishings. All of that takes cash, too.

2024 Home Buyer Resolution #2: Get your credit score over 760, if possible.

The average credit score in the U.S. is around 700. But, seniors have higher credit scores and they pull up those of Millennials and Gen Z. So first-time buyers typically get hit with higher mortgages than you might see quoted in the media.

If you have a credit score over 760, you’ll typically get the lowest interest rate and best terms from a variety of lenders. And that will help you get the most for your money.

2024 Home Buyer Resolution #3: Make a housing budget and stick to it

It’s tempting to peruse websites like Zillow and Redfin and fall in love with a house you can’t afford. So find out ahead of time what you can afford, then resolve to stick to that budget. If you need more space or a particular school district, figure out in advance what trade-offs you’re willing to make in order to get the things you need in a home.

2024 Home Buyer Resolution #4: Listen to the experts you’ve hired

If you’ve hired an experienced agent (who works regularly in your neighborhood of choice), home inspector, and attorney (if you’re in a state that uses attorneys to close house deals), be sure to listen to their advice.

Sam has worked with buyers who have decided to purchase a home in flood plains. In one case, Sam let the buyer know that this might not be the best home to buy. In addition to the actual risk of flooding, there are limitations on expanding a home in a flood plain and insurance can be expensive.

Even when you try to help out a buyer, sometimes they won’t take advice. Sam thought that the risks of owning a home in a floodplain outweighed the benefits, considering that future buyers may not want to touch the home and flood insurance may be unaffordable in the future.

Without flood insurance, you can’t get a mortgage. Just about every lender requires that insurance policy if you’re buying in a flood plain.

At the end of the day, it’s up to you to decide whether to buy a particular home. You may feel as though you’ll never find another home that you’ll like, so you have to make an offer. But here’s what Ilyce’s mother, Susanne, used to tell her buyers: “There will always be another house.”

2024 Home Buyer Resolutions