Buy Now or Wait a Year? What Home Buyers Should Do to Avoid Making a Big Mistake
Homeownership has long been said to lead to financial stability. That’s because when you own a home, you have an opportunity to build equity in an asset whose value can appreciate over time.
In fact, many seniors wind up in a pickle once retirement kicks off because they don’t have savings, and their Social Security benefits aren’t enough for them to cover their living costs. But since many seniors own their homes outright, they can often borrow against their home equity to bail themselves out when money gets unreasonably tight.
But while homeownership clearly has its perks, today’s housing market is very tough to navigate. That holds true whether you’re an everyday buyer or a real estate investor looking to add an income property to your portfolio. And for that reason, you may be better off waiting a year to buy rather than moving forward with a near-term offer.
Housing market conditions just aren’t good for buyers
In August, there was a 3.2-month inventory of available homes for sale, according to the National Association of Realtors (NAR). But it generally requires a minimum four-month supply to be enough inventory to meet buyer demand.
When housing inventory is lacking, sellers get the upper hand. And that gives them the leeway to charge a premium for their homes, forcing buyers to overpay.
In fact, the NAR reports that, as of August, the median existing home sold for $389,500. The good news is that it’s substantially lower than June’s median sale price of $413,800. But it still represents a 7.7% uptick from August 2021.
The combination of limited inventory and high home prices makes this a bad time to buy. And costly borrowing rates certainly aren’t sweetening the deal.
Mortgage rates have risen sharply since the start of the year. And in light of recent rate hikes on the part of the Federal Reserve, it’s likely that borrowing for a home will remain expensive for the rest of the year and well into 2023. So all told, it’s really just not an optimal time to be making an offer.
What does 2023 have in store for mortgage rates?
It’s fair to assume that housing inventory will pick up in 2023 and home prices will come down to some degree, both of which would be good for buyers. It’s mortgage rates, however, that are the real wild card.
While they may be high today, there’s a chance they could be even higher toward the tail end of 2023. And there’s really no way to know.
As such, if you put off your home-buying plans a year, you do run the risk of getting stuck with a higher interest rate on the mortgage you take out. But you might also benefit from more housing inventory and lower home prices. So all told, it’s a trade-off.
But either way, today’s housing market conditions are pretty brutal for buyers. And since we know that with certainty, it’s fair to say that waiting a year to buy is probably your best bet.
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