Should I buy a house now, or wait?

Buy now, or wait? That’s the question prospective homeowners have been struggling to answer in today’s housing market. Home prices have been skyrocketing recently, and the Federal Reserve’s work to tame inflation sent mortgage rates soaring, too.

The combination has led many would-be buyers to pick the “wait” side of the equation. The volume of existing home sales was down 3.3 percent from February 2023 to February 2024, according to the National Association of Realtors (NAR). And, according to the Fannie Mae Home Purchase Sentiment Index released in March 2024, an overwhelming 81 percent of consumers believe it’s a bad time to buy a house.

However, after being at a constant disadvantage for the past few years, things have started to look better for buyers in many parts of the country. For example, days-on-market figures are way up, giving buyers more time to make an informed decision. NAR data shows that homes typically spent 38 days on the market before selling in February, up both month-over-month and year-over-year.

And February’s National Housing Report from RE/MAX, one of the biggest real estate brokerages in the country, reported a sharp uptick in new listings as the spring homebuying season approaches, up 17 percent from January. “The February jump in sales activity illustrates the strength of demand in many markets. Buyers are out there looking for homes,” said RE/MAX president Amy Lessinger in the report. “As the market has continued to rebalance, both buyers and sellers seem to be adjusting their plans and making moves they may have had on hold for a while.”

So, is it time to buy a home? Or is it better to wait on the sidelines, in the hopes that either prices or rates see a significant drop soon? And what if there’s a recession? Here are some key considerations to help determine the way forward.

Is now a good time to buy a house?

Mortgage rates have backed off from the 8 percent highs hit in October, but they’re still around 7 percent. And home prices are high as well: February NAR data showed that prices have risen year-over-year for eight consecutive months. Together, these factors might dissuade you from buying right now, and that’s understandable.

No matter which way the real estate market is leaning, though, buying now means you can start building equity immediately. It also means avoiding the potential for additional mortgage rate increases later: Rising rates can spell serious trouble for your monthly budget, and they also result in paying more in interest over the life of the loan.

“If a buyer finds a property they would like to call home, they should not delay,” says Stacey Froelich, a broker with Compass in New York City. “You cannot time the market, and a home should be a long-term investment.”

“When mortgage rates drop and more buyers come back into the market, home prices will rise,” Melissa Cohn, regional vice president of William Raveis Mortgage in Connecticut recently told her newsletter subscribers. “Remember, you ‘Marry the house and date the rate.’” To put it another way, buy now if you find the right place — you can always refinance later.

In general, if you can answer yes to these three questions, now is a good time to buy.

1. Do you have excellent credit? Anytime you’re borrowing money, start by checking your credit score. The best deals on mortgages will be available to those with the best scores — in fact, the median credit score for mortgage borrowers in the fourth quarter of 2023 was a very high 770, according to the Federal Reserve Bank of New York. If you have demonstrated that you are a low-risk borrower with a history of on-time payments, you’ll be in line for the lowest mortgage rates a lender offers.
2. Have you saved enough for a down payment? In addition to paying your bills on time, you should be sitting on a sizable chunk of change for a down payment. The more you can pay upfront, the less you’ll have to borrow (and so the less interest you’ll have to pay). Make sure you’ll have plenty left over, too: Lenders like to see additional cash reserves that can provide a cushion if something unexpected happens.
3. Are you planning to stay in the home for a while? Beyond the purchase price, buying a home comes with closing costs that can run thousands more. So, to justify those one-time transaction costs, it’s wise to be reasonably certain that you won’t move again anytime soon — or that you’ll be financially stable enough to hold on to the property and rent it out. Selling a home very soon after buying can have serious tax implications.

Should I buy a house now or wait?

Ultimately, the decision of when to buy a home is up to you. Life goes on, whether the timing is perfect or not. If you’re anxious to become a homeowner, you’ve met the criteria above and you’re financially stable, go ahead and start house-hunting.

If you’re holding out for lower mortgage rates, a bit of patience might be in order. They have been volatile lately, topping 8 percent in October before falling back below 7 percent, and now slightly above 7 percent again. That’s more than a full percentage point swing in just a few months.

Next steps

Trying to buy a house right now might feel overwhelming, but waiting too long can present challenges as well. Review your finances in detail, and think about how much you’re able to pay upfront as a down payment. Be sure to take the pulse of the town in which you’re hoping to live. Then, talk with an experienced local real estate agent to figure out whether you should buy now or wait until the market is a bit more friendly to your bank account.

https://www.bankrate.com/real-estate/should-i-buy-a-house-now-or-wait/