Should you wait to buy a home?

Prospective home buyers face some difficult decisions in this economic climate. With interest rates rising significantly over the past year, the mortgage Has been more expensive. Meanwhile, amid relatively low inventory, the housing market has seen a strong price increase since the pandemic.

But now the situation may change Bail rate And prices are falling from recent highs. That said, they are still better than pre-pandemic levels. And it’s hard to say whether the real estate market will tilt more toward buyers or whether sellers will benefit more.

While there are generally no easy answers, potential home buyers may want to consider the pros and cons of buying now versus waiting to buy a home, as we’ll explore in this article.

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Why you should buy a home now

Some of the top reasons why you might decide to buy a home now include:

Rates may rise again

The average 30-year fixed-rate mortgage rate sits at around 6.32%, According to the St. Louis Fed, based on Freddie Mac data. This is down from a recent high of around 7% in November 2022. But that doesn’t mean rates will continue to fall, especially in the short term.

More inflation, for example, could push borrowing costs higher. For the second quarter of 2023, some agencies are forecasting a slight increase in rates, while others expect a slight decrease, according to its analysis. Mortgage report.

So, if you are worried about rate hike, you can decide to buy now. Later, if rates drop significantly, it may be affordable RefinancingYou have to take closing costs into consideration though.

Explore your mortgage rate options to see if it’s worth it to you

Inventory may decrease

Housing inventory typically begins to rise in the spring Before summer peaks, so looking for a home now can give you a relatively good selection to choose from. If you wait too long, your options may be slim.

The total number of homes for sale in the US as of February 2023 is up 15.9% year over year Redfin. And homes are staying on the market for a median of 52 days, compared to 25 days a year ago. These trends may indicate that home buyers have some opportunities to get deals on homes that have been on the market for some time

If you wait too long, the trend may reverse. Considering the number of newly listed homes fell 22.6% year-over-year, total inventory could potentially decrease as long-listed homes sell.

Start enjoying your new home

While buying a home is an important financial decision, it can also be an emotional one. That’s not to say you necessarily want to be led by your passion, but you may feel comfortable spending more if it gives you peace of mind and personal happiness.

Perhaps paying a slightly higher mortgage rate now is a worthwhile tradeoff than waiting a year. So, for some people, finding a good home now is reason enough to move forward with a purchase, rather than waiting to see if the situation improves.

Why should you wait to buy

While there are many good reasons to consider buying a home now, you may decide to wait to buy based on the following factors:

Rate may decrease

The recent drop in mortgage interest rates may be the start of a larger, longer-term rate drop. Although predicting the future is difficult, Federal ReserveFor example, projects that the federal funds rate will rise slightly this year before falling in 2024 and beyond.

The Fed does not directly control mortgage rates, but there is a correlation between the Fed’s actions and the broader interest rate environment. Therefore, some potential home buyers may wait to see if mortgage rates drop further.

Check your mortgage rate options here to see if it’s worth waiting

Prices may drop

Along with mortgage rates, home prices could also potentially decrease in the future. Median sales prices fell 1.1% year over year, according to Redfin. Therefore, some potential home buyers may prefer to wait and see if prices drop further. That said, prices can be difficult to predict and vary based on local market conditions. It’s possible that prices may also rise, so choosing when to buy a home may depend on your willingness to take price risk as opposed to your preference.

Your financial situation may change

Another reason to consider waiting to buy a home is that your financial situation may change. If you’re worried about your job security, for example, that might be a good reason to wait, because you don’t want to make such a big financial commitment if you think you might lose your paycheck. On the flip side, maybe you’re working toward a promotion or you’ve been able to increase your savings rate. waiting until Your financial situation Improvements can enable you to make a larger down payment, for example, which can make your monthly mortgage payments more affordable.

Bottom line

Ultimately, deciding when to buy a home can be a complicated decision. If you buy now, you can start enjoying home ownership sooner, but you may also be better off saving more money. In many cases, the decision comes down to determining what you’re comfortable with, as acting now or waiting can both come with risks and tradeoffs.

Talking to professionals like financial advisors and housing counselors can help you come to a decision that makes sense of where you are in life.