Is It a Good Time to Buy a House?

If you're wondering if now is a good time to buy a house, ask this instead: Is it a good time in my life to buy a house?

Housing market trends give important context, so we’ll look at those numbers here. But ultimately, whether this is a good time to buy a house depends on your financial situation, life goals and readiness to become a homeowner.

» MORE: Should I buy a house? How to tell if you're ready

Let’s explore both aspects of the homebuying journey: the housing market and your own readiness to buy a home.

How’s the housing market right now?

These are some factors affecting buyers in today's market.

Mortgage rates: Lower than a year ago

The interest rate on a 30-year fixed-rate mortgage averaged 6.75% annual percentage rate (APR) for the week ending Oct. 31, up 15 basis points from last week and down 104 basis points from a year ago, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of 1%.

Average weekly mortgage rates

Averages are for the week ending Oct. 31, 2024, according to rates provided to NerdWallet by Zillow.

• What’s happening now: Mortgage rates have risen steadily for the past five weeks, partially thanks to a stronger-than-expected September employment report. But if you’ve been house hunting for a year or more, today’s rates feel like a relief: They’re more than a full percentage point lower than this time in 2023.

• What might come next: Generally, mortgage rates rise and fall in anticipation of the Federal Reserve’s next move to the federal funds rate (more on that below). With the Fed making one big cut and signaling more to come, we’re likely to see mortgage rates continue an unsteady decline through the end of 2024.

You can't influence average rates, so focus on the things you can control:

• Shop around for the best deal. Especially given today's higher rates, buyers can save $600 to $1,200 per year by applying for loans from multiple mortgage lenders, according to a February 2023 study by Freddie Mac, the government-sponsored entity that buys conforming loans from mortgage lenders.

• Make sure you can afford the monthly mortgage payment. A home affordability calculator can help you crunch the numbers.

• Lock in your rate. After getting approved for a home loan, consider locking in the mortgage rate until the loan closes to protect against further rate increases.

» MORE: NerdWallet's mortgage interest rates forecast

Inflation and the economy: The Fed (finally) lowers the federal funds rate

The Federal Reserve, the nation’s central bank, guides the economy with two goals: encouraging job growth and keeping inflation under control. The Fed doesn’t directly set mortgage rates. However, it does set the federal funds rate, which influences interest rates for loans including mortgages.

With inflation slowly easing, the Fed announced an aggressive 50-basis-point cut to the federal funds rate on Sept. 18. The Fed also indicated more cuts are on the way before the end of the year, although timing is uncertain. We’ll find out the Fed’s next move after its next meeting, Nov. 6-7, 2024, but most experts are anticipating a cut of 25 basis points.

» MORE: How the Federal Reserve affects mortgage rates

Supply of homes for sale: Inventory slowly growing

We’re not in a buyer’s market quite yet. But after a few years of slim pickings, inventory is finally improving, according to the National Association of Realtors (NAR).

In September, the number of homes for sale grew to a 4.3-month supply, meaning it would take a little more than four months at the current pace for all listed properties to sell. While monthly inventory growth has been slow, that’s a big jump from a year ago: In September 2023, the market had a 3.4-month supply of homes for sale.

“More inventory is certainly good news for home buyers as it gives consumers more properties to view before making a decision,” NAR Chief Economist Lawrence Yun said in a news release.

» MORE: Homebuying season: What recent data suggests for 2024

Home prices: Steep and still climbing

The national median price for existing homes sold in September was $404,500, up 3% from September 2023, according to the NAR, following 15 straight months of year-over-year price increases.

Sales of existing homes — properties that were owned and occupied before going on the market — dropped 1.0% from August to September to a seasonally adjusted annual rate of 3.84 million. Sales slumped 3.5% compared to September 2023.

A look at last month’s home sales can provide a useful pulse check. But the future health of the market depends on changing economic trends and other wild cards, including the presidential election .

“Home sales have been essentially stuck at around a four-million-unit pace for the past 12 months, but factors usually associated with higher home sales are developing,” Yun said. “There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy. Perhaps, some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election.”

All four U.S. regions — Midwest, Northeast, South and West — saw year-over-year price increases in September. Here's a regional look at median prices and year-over-year price changes:

• Midwest: $306,600, up 5%.

• Northeast: $467,100, up 6%.

• South: $359,700, up 0.8%.

• West: $616,400 up 1.7%.

» MORE: What to expect when buying a house this year

Competition: Steady, but less intense than last year

Some good news: Compared to last year, competition has cooled off. The September 2024 Realtors Confidence Index, a survey of the NAR’s members, highlights these key market indicators year over year:

• Bidding wars aren’t the norm. A home listed for sale received an average 2.4 offers in September, the same amount as last month and down only slightly from 2.6 offers per home last year.

• Fewer homes are selling above list price. In September, 20% of homes sold above listing price, down from 26% a year ago. 

• Homes are staying on the market longer. Houses stayed on the market for a median 28 days in September — seven days longer than September 2023, when the median was 21 days. Last month, 57% of respondents reported that homes sold in less than a month. A year ago, that figure was 69%.

Overall, though, demand still outpaces supply. This is hardly a mellow market: Good homes sell quickly, and buyers should still expect competition out there. If you’re ready to buy, get a mortgage preapproval so you’re prepared to make a strong offer. Once mortgage rates drop, competition will only go up. There’s no time like the present to start shopping.

Homebuying readiness: Should I buy a house now or wait?

Ask yourself these questions to explore whether you're ready to buy a home.

Are you prepared to put down roots?

Think about your life goals, relationships and interests. How long can you see yourself living in this location?

Ideally, you'd want to remain in the home long enough for rising property values and your equity to exceed the costs of buying and selling, including real estate commissions and mortgage closing costs. That will typically take several years.

You could also be subject to capital gains taxes if the home appreciates in value and you sell it after less than two years.

» MORE: Avoid capital gains on real estate

How's your job security?

A mortgage is a big commitment and can become a stressful burden after a job loss, so it's not a good time to buy a home if you think you'll get laid off.

Wait until your employment is stable before thinking about buying a house.

» MORE: What happens if you lose your job before closing on a mortgage?

Are you financially prepared?

Here are the three main ingredients to evaluate.

Savings

You'll need money for a down payment and mortgage closing costs as well as for moving and other expenses after you buy the home. The down payment requirements vary by the type of mortgage and the lender. The more you put down, the lower your monthly mortgage payment.

The typical down payment for first-time buyers is 8% and for repeat buyers is 19%, according to an NAR survey of home buyers who purchased a primary residence from July 2022 through June 2023.

» MORE: How to save money for a house

Credit

Lenders generally offer the best mortgage rates and terms to borrowers with credit scores of 740 and above, although you can qualify for a mortgage with a score in the 600s. The options are much slimmer, and loan costs can be higher for borrowers with a score in the 500s.

If your credit is marginal, it might make sense to postpone buying a house and use the time to work on building your credit.

The average FICO credit score for closed mortgage loans to purchase homes in the past 30 days was 736, according to mortgage data provider ICE Mortgage Technology.

» MORE: The credit score needed to buy a house

Debt

Lenders look at your debt-to-income ratio (DTI) to help determine whether you qualify for a mortgage. Your DTI is the percentage of your monthly gross income that goes toward monthly debt payments, including housing costs, as well as car, student loan, credit card and other debt obligations. Lenders like to see a DTI under 36%, although it's possible to qualify with a higher ratio. The lower your DTI, the better your chances of qualifying for a mortgage and getting offered the lowest available rate.

The average DTI for purchase mortgages in the past 30 days was 39%, according to ICE Mortgage Technology.