Potential home buyers have faced challenges for an extended period due to increased home prices and rising mortgage rates. While the latter might persist, home prices may experience a decline during the second half of 2023, which buyers should prepare for.
Is a Drop in Home Prices Likely?
Vanguard anticipates a 5% decrease in U.S. home prices during the latter half of the year, a notable reduction.
The cost of obtaining a mortgage loan during the second half of 2023 remains to be determined. However, if borrowing rates decrease alongside home prices, buyers may be better positioned to make an offer than they have been. This is an opportunity worth seizing.
A crucial variable for home prices will be inventory. The housing market has faced a significant supply shortage nationally for several years, and there is no clear indication that inventory will substantially increase during the latter half of the year.
Nonetheless, Vanguard is confident that home prices will experience a decrease. While this may be unfavourable for sellers, it is excellent news for prospective buyers.
Preparing to Buy a Home
Although home prices may decline during the second half of 2023, they are not expected to plummet. Therefore, buyers will likely still need a substantial down payment to purchase a home. Begin increasing your savings now to have the necessary funds available for a down payment if a suitable opportunity arises. If you receive a tax refund, consider using it for home-buying purposes.
Simultaneously, examine your credit score. If it is outside the upper 700s or higher, work towards improving it. A higher credit score will increase your chances of securing a competitive interest rate on a mortgage when you apply.
To enhance your credit score, ensure timely bill payments and reduce credit card debt. Reviewing your credit report for errors is also advisable. If any inaccuracies are present, take the opportunity to correct them to avoid negatively impacting your ability to secure an affordable mortgage later in the year.
While it is not guaranteed that home prices will decrease in the coming months, it is promising that a financial institution like Vanguard anticipates such a change. If you have been waiting for the right moment to buy, now is the time to increase your savings and elevate your credit score to position yourself for success.
Additionally, prioritize the qualities and features you desire in a home. Limited options may remain a reality, even if home prices soon decline. As a result, it is crucial to determine which home features are essential and which are not.
In addition to these preparations, it’s also wise to research various mortgage options and secure pre-approval from a lender. Pre-approval will give you an idea of how much you can borrow and help you establish a realistic budget for your home search. This will allow you to act quickly when the right opportunity presents itself.
Begin familiarizing yourself with the local real estate market by attending open houses and connecting with experienced real estate agents. An agent specializing in your desired area can provide valuable insights and help you navigate the potentially shifting market.
Furthermore, be prepared to act swiftly when the right home becomes available. Given the unpredictable nature of the housing market, waiting too long to make an offer could result in missed opportunities. Be prepared to make some compromises, as your ideal home might not be available, but do not sacrifice your must-have features.
Lastly, maintain a long-term perspective when searching for a home. Remember that purchasing a home is a significant investment, and it’s essential to consider not only the current market conditions but also the potential for growth and appreciation in the future. This approach will help you make a well-informed decision that can benefit you for years.
While the possibility of declining home prices in the second half of 2023 is promising for potential buyers, it’s crucial to be prepared for this opportunity. Strengthen your savings, improve your credit score, research mortgage options, engage with the local real estate market, and establish priorities. By doing so, you will be in the best position to seize the opportunity when the time is right.
