Navigating Challenges in the
Homebuying Process 2024

The landscape of homebuying has always been filled with obstacles, but as we venture into 2024, prospective homeowners are facing a unique set of challenges. From low inventory and increasing prices to competitive bidding, the journey to homeownership has become increasingly complex and difficult. Whether you’re a first-time buyer or a seasoned investor, understanding these challenges is essential for making informed decisions in today’s ever-changing real estate market.

As you start to look into buying your dream home in 2024, there are a number of particular challenges that you should be aware of throughout the process. Some of them are new, some of them old, but all of them are in play today and will be for the foreseeable future. Here are some of those challenges:

Challenge #1: High Mortgage Rates, High Selling Prices

Unfortunately, this one is unavoidable, no matter where or how you buy your house. Mortgage rates have been gradually increasing over the past couple years, spiking at 8% in October of 2023, after the historical lows of 2.5% to 3.5% experienced in 2020 and 2021.

Selling prices have crept up to historical highs in much the same way as mortgage rates, creating a uniquely high barrier-to-entry for prospective homebuyers in the current market. As of February 2024, the nationwide median selling price for homes was set at $384,500 according to the National Association of Realtors (NAR). Although median selling prices can and will vary heavily depending on where you are in the country, you can generally count on mortgage rates to remain fairly high for most available properties.

Challenge #2: Low Inventory (Seller’s Market)

NAR data shows that as of February 2024, housing inventory is significantly lower than what would be needed for a balanced market, let alone a buyer’s market. For a balanced market, there would generally need to be 5 to 6 months’ worth of supply of housing inventory, and NAR assessed that there were only 2.9 months’ worth available in February.

Low inventory creates a seller’s market, with high demand and low supply creating a highly competitive environment where bidding wars are more likely to start. Home sellers will not shy away from incentivizing or letting a bidding war between prospective buyers continue until they receive the most favorable deal possible, so prepare to pay over the asking price when you start making your offers.

This competitiveness is only exaggerated by a recent influx of cash buyers. Because they don’t have to rely on financing approvals, these buyers can close deals with sellers much faster than your average homebuyer going through a lender, making them more attractive buyers as a whole.

Challenge #3: Down Payments

Down payments are another unavoidable aspect of buying a house – both lenders and sellers will expect you to have the capacity to provide one as a part of a deal. In a time when core inflation is on the rise and projecting to remain high for the foreseeable future, saving for a down payment becomes more strenuous. It’s not uncommon to frequently have to tap into your savings for essential goods and services to weather periods of high inflation, and each time that happens, it takes away from the pool of what could potentially be used for a down payment on a house.

As a whole, 2024 is projecting to be a very challenging year for prospective homebuyers. With seller’s market conditions, high selling prices, and recently spiked mortgage rates any homebuyer should proceed with caution and be prepared to pay a bit more than expected, for both down payments and interest. This likelihood is exaggerated in a competitive buying environment where bidding wars are commonplace and cash buyers are plentiful. If you’re looking at buying a home this year, be prepared for some setbacks and keep a close eye on trends in the market and in the economy to look for an opportunity.