For the past couple of years, it's pretty much been bad news for would-be home buyers. Not only have mortgages gotten increasingly expensive to sign, but home prices have risen despite the higher cost of putting a mortgage into place.
In January, U.S. home prices increased 5.8% on a year-over-year basis, according to data from CoreLogic. But the news isn't all bad. CoreLogic also projects that annual home price growth will slow to 2.6% by January of 2025.
Furthermore, the Federal Reserve is expected to start cutting interest rates later on this year. Once that happens, it could lead to a modest drop in mortgage rates. So all told, it may be easier to buy a home around this time next year than it is now. And if you make these moves in the next 12 months, you can put yourself in an even better position to purchase a home.
1. Boost your credit score
Mortgages tend to be large loans by nature. So mortgage lenders want some degree of reassurance that you're likely to repay your home loan as you're supposed to.
The higher your credit score, the more confident a mortgage lender might be in your ability to repay your loan. So it pays to boost your credit score ahead of your mortgage application to not only increase your chances of getting approved for a home loan, but also, to potentially snag a more competitive interest rate.
There are different steps you can take to boost your credit, but one of the most effective ones is to pay your incoming bills on time consistently. That's because your payment history carries more weight than any other factor when calculating your credit score.
Another option for boosting your credit score is to pay off existing credit card debt. The lower your credit utilization is, the higher your score might climb. Plus, having less credit card debt can be a good thing from a mortgage application perspective because lenders also tend to look at your debt-to-income ratio, which measures your total monthly debt payments relative to your paycheck.
Finally, don't underestimate the importance of reviewing your credit report for errors on a regular basis. Spotting and correcting a mistake could lead to a higher credit score. You're entitled to a free copy of your credit report every week from the three major credit bureaus -- Experian, Equifax, and TransUnion.
2. Sock money away for a down payment
While home price gains might slow in the course of the next year, that doesn't mean a 2025 home purchase will be inexpensive. To put yourself in the best position to afford a home, focus on saving as much as you can for a down payment.
If you're able to put down 20% on a conventional mortgage, you can avoid private mortgage insurance, a costly premium that's tacked onto your housing costs. And even if making a 20% down payment on a home isn't doable, remember, there's not a lot of housing inventory on the market these days, so you may have to settle for a home that needs work. The more money you're able to save in the coming months, the more options you'll have for tackling necessary repairs early on.
It's definitely been a challenge to purchase a home in recent years. And it may not exactly be a piece of cake in 2025, either. But the fact that home price growth is expected to slow is a good thing for buyers. So now's the time to make a plan that allows you to jump on that opportunity.
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FAQs
Sock money away for a down payment
Should I buy a house now or wait for a recession? ›
If your credit score is strong, your employment is stable and you have enough savings to cover a down payment and closing costs, buying now might still be smart. If your personal finances are not ideal at the moment, or if home values in your area are on the decline, it might be better to wait.
Will 2026 be a good year to buy a house? ›
However, increases should slow between 2024 and 2026, and rates may even decline in 2027. Among the factors that could impact mortgage rates in the next 5 years are inflation, Federal Reserve policy, and economic growth. Homebuyers should consider locking in a low mortgage rate now, as rates are expected to rise soon.”
Will the housing market crash in 2025 in the USA? ›
Actually, most industry experts do not expect it to. Housing economists point to five main reasons that the market will not crash anytime soon: low inventory, lack of new-construction housing, large amounts of new buyers, strict lending standards and fewer foreclosures. Is 2024 a good time to buy a house?
Should I sell in 2024 or 2025? ›
Interest rate is likely will be better. House price in 2025 is likely to be lower than 2024 based on the current trend. 2026 is too far to predict. But if I were you, I would try to sell in 2024 IF price is still high and buy in 2025 when interest rate is lower and hopefully price is lower.
Will 2024 be a better time to buy a house? ›
In summary, buying a house in California in 2024 may be a good time for some buyers, depending on their personal and financial situation. The housing market is expected to rebound from a sluggish year in 2023, with more supply and demand, higher prices and affordability, and lower mortgage rates and inflation.
Is it risky to buy a house before a recession? ›
However, it is difficult to time the market. Therefore, you might buy a home at a great price, but the home you buy may be worth less before the recession ends. Risk of Foreclosure – During recessions job losses increase. If you lose your job or have a reduction in income you may not be able to afford the payment.
Will my house be worth more in 5 years? ›
Based on historical averages of 3.5% of home value growth per year, property prices will rise a total of about 18 to 20% in 5 years. The math is simple: 3.5% a year for 5 years, compounding annually. The key is to do the math as compounding because your home value will continue to build.
What will the mortgage rate be in 2026? ›
The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.
Will my house increase in value in 10 years? ›
This is a subjective question that will depend on the individual real estate investor. Generally speaking, the higher the appreciation rate the better. In America, home appreciation rates range from 2-6% when looking at the real estate market over a period of 10 years or longer.
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
How much will my house be worth in 2030? ›
The state where house prices are predicted to be the highest by 2030 is California, where the average home could top $1 million if prices continue to grow at their current rate.
Will houses be more expensive in 2030? ›
California recently ranked among the top three states where buying a house will be the most expensive by 2030, according to a new study. Data analysts at SmartSurvey found that houses in the Golden State are predicted to cost 20.4 times more than the average yearly income.
Should I sell my house now before a recession? ›
Should I sell my house now, before there's a recession? Recessions mean belt tightening and potential layoffs. If your area is hard-hit by job losses, the number of qualified buyers will be severely limited — if you're concerned, it might be best to sell before that (potentially) happens.
Will 2024 be a better year to buy? ›
"2024 is bound to be a better year for homebuyers, if only because of how terrible 2023 was," says John Graff, CEO at Ashby & Graff Real Estate. Graff anticipates falling interest rates and increasing inventory could result in more opportunities for homebuyers in the months ahead.
Will my house be worth less in 2024? ›
The majority of forecasts indicate that house prices in the US are expected to rise or remain stable in 2024. The predictions from various economists suggest that mortgage rates are expected to rise in 2024 before potentially cooling to lower than how the year began.
Will recession bring home prices down? ›
A recession can impact the housing market in several ways. Typically, buyer demand weakens due to economic uncertainty, potentially leading to price drops or mortgage rates typically drop. However, the current situation is unique, with already high interest rates and low housing inventory.
Is a recession a good time to get into real estate? ›
Meanwhile, real estate is a hedge against inflation and has tax advantages. Even with inventory levels driving up prices, investing in real estate during a recession could still result in significant long-term returns. If you're willing to hold on to your investment, you can benefit from the eventual market rebound.
Is it harder to buy a house now than in the Great Depression? ›
Conversation. The median annual pay during the Great Depression was 22% of the cost of an average home. Today, it's 14%. It's harder to buy a house today than it was during the Great Depression.
Should you buy during a recession? ›
It becomes a bit more important to focus on top-quality companies in turbulent times, but, for the most part, you should approach investing in a recession in the same manner you would approach investing any other time. Buy high-quality companies or funds and hold on to them for as long as they stay that way.
