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. Bankrate did a deep dive to help us answer the question:

The combination has led many would-be buyers to pick the wait side of the equation. The volume of existing home sales was down 1.7 percent from January 2023 to January 2024, according to the National Association of Realtors (NAR). And, according to Fannie Mae, an overwhelming 83 percent of consumers believe it’s a bad time to buy a house.

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. Days-on-market figures are way up, giving buyers more time to make an informed decision. 

And January’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. It’s encouraging to see the surge in new listings, as that can be a sign of things to come. If new listings continue to emerge and interest rates drop a bit over time, 2024 could be a year of great opportunity.

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?

Purchasing a home in the current real estate market not only allows you to immediately start building equity, but it also helps you avoid potential increases in mortgage rates in the future. These rate hikes can significantly impact your monthly budget and result in paying more in interest throughout your loan.

Essentially, if you have found your dream home, it is wise to act quickly and not wait for the market to change. Timing the market is difficult and a home should be viewed as a long-term investment. It is worth noting that as mortgage rates decrease and more buyers enter the market, home prices are likely to increase. Therefore, it is important to focus on the property itself and not solely on the interest rate when making a decision to purchase. Remember, you can always consider refinancing in the future if necessary.

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. 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?

The decision of when to buy a home is up to you. Regardless of the circumstances, life will continue on. If owning a home is a top priority for you and you meet the necessary qualifications and have a stable financial situation, then go ahead and begin your search for the perfect house.

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 up above 7 percent again. That’s more than a full percentage point swing in just a few months.

Of course, it’s impossible to predict where rates will land by summer. But here are three instances in which it might make more sense to wait out the market for at least a while:

  1. If home values in your area are dropping: The country’s median home price hit a record high in June 2022, according to NAR data. Since then, some hot metro areas have seen significant drops in median sale prices. Take Austin, Texas, for example: Redfin data shows that the median price in Austin in June 2022 was $620,000. By June 2023 that was down to $601,500, and by the beginning of 2024 it was down much further to $509,280. These declines may not be done yet, so it could pay to be patient for a bit longer.
  2. If inventory in your area is increasing: When there are more properties on the market to choose from, buyers enjoy more bargaining power. Since many buyers have been sitting on the sidelines due to the interest rate environment, some areas have seen a jump in inventory. 
  3. If your personal finances could use some love: The biggest reason to wait is if your current financial situation is not ideal. If you are expecting a sizable commission check or bonus, an inheritance or some other windfall that would make a big difference in your down payment, waiting until it arrives makes sense. And if your credit score is low, waiting is also smart. Take some time to improve your credit and pay down your debt so you can qualify for better loan terms.

Analyze Your Local Market Carefully

When considering the purchase of a house, the decision to buy now or wait heavily relies on your desired location. Despite what may be portrayed in the media, the real estate market is highly localized and can differ significantly between markets, even within the same state. In the current homebuying climate, it is crucial to find a knowledgeable real estate agent who is familiar with your specific area, including your neighborhood, and can effectively guide you through its distinctive characteristics.

What if There’s a Recession?

The odds of a recession in 2024 now stand at 45 percent, according to Bankrate’s most recent survey. And as you might imagine, recessions are a risky time to buy a home. If you lose your job, for example, a lender will be much less likely to approve your loan application.

Even if the recession doesn’t affect you directly, if your area is hard-hit, that could have a serious effect on the local real estate market. Fewer people with the means to buy means a lower chance of homes selling, which could keep homeowners from listing and decrease your options as a buyer.

There are some potential upsides to buying a home during a recession, though, if you’re financially able to do so. Notably, there will be less competition, which could help you find a great property that you otherwise couldn’t and make a great investment in your future.

Next Steps

Purchasing a house at this time may seem daunting, but delaying the decision could also lead to difficulties. It is important to thoroughly assess your financial situation and consider the amount you can afford to put down as a down payment – our local lenders can help with that. Additionally, it’s crucial to familiarize yourself with the community you wish to reside in. Consult with a knowledgeable real estate agent in the area to determine whether it is best to make a purchase now or wait until the market is more favorable for your budget.

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