Buying a home is full of questions. Should we? Shouldn’t we? Can I afford to? Can I afford not to? All these questions are deeply personal, which means their answers will depend on your financial situation and long-term goals.
Of course, if you know that buying a house is one of your goals, it’s hard not to think about how to time the market, your likely interest rate, what the Federal Reserve might do next, home prices, closing costs, your credit score, property taxes, you name it. And these are all important considerations, to be sure. Buying a home is a big decision, but so is waiting to buy a home.
It’s a common dilemma potential homebuyers face: whether to take the plunge now or wait for a more opportune time. But here’s the thing: That “more opportune time” is almost never clear until that time has passed.
It’s only with some hindsight that you’re able to compare current housing market conditions to what was, and see where the opportunity was—past tense. (If everyone could time the market perfectly, we’d have buckets more millionaires than we do.)
So let’s take that out of the game for a minute and simply focus on the pros and cons of buying a house right now—as the market exists today.
Pros of Buying a Home Now
1. Seller incentives still exist
Everyone wants a buyer’s market and, lucky for you, that’s arguably where the housing market is today in many areas. What we mean by that is that many sellers who have listed their homes today are motivated to sell.
During periods of slower market activity, sellers may offer incentives to move their homes. These could range from covering your closing costs to including appliances or home upgrades.
2. Less competition
Another indication that the current market is a buyer’s market today is that there’s less competition. Naturally, if there were more competition, that would make it a seller’s market. A less competitive atmosphere can give you more negotiating power and possibly a higher likelihood of securing the home you love at a more reasonable price.
3. Moderate appreciation rates
Today’s housing market isn’t in a period of rapid appreciation. This might seem like a drawback at first if you’re buying a home, but it can actually benefit potential homebuyers. Slower appreciation rates mean that home prices are rising at a more manageable pace. This gives buyers the opportunity to enter the market without the fear of rapidly escalating prices.
Remember 2021, when prices seemed like they were going up by five figures every time you blinked? Yeah, so do we.
4. Build home equity sooner
Let’s go back to that moderate appreciation. If your home does continue to appreciate, then the more time you have to enjoy it, the better. Appreciation at any pace means more money in your pocket over time as you build home equity.
On the flip side, if you delay buying a house, you also delay any appreciation potential for that would-be investment.
5. Refinance at a more favorable time
Buying a home right now doesn’t mean you’re locked into your mortgage terms forever. You always have the option to refinance when interest rates are favorable. This can lead to lower monthly mortgage payments or even a shorter loan term, both of which can improve your long-term financial situation.
6. Benefits to your family and well-being
The value of buying a house goes beyond the financial aspect, though of course that is important. It provides a stable place to call home, raise a family, and create lasting memories. Owning a home allows you to personalize your living space and establish roots in a community. And the peace of mind that comes with that is invaluable.
7. Predictable monthly mortgage payments
Rent prices typically increase over time. Sometimes they go up by a lot, and sometimes just by a little, but chances are high that, year over year, you’ll be paying more for that rented pad.
Unfortunately, you’ll also be paying someone else’s mortgage loan—while their asset appreciates.
Buying a home allows you to lock in a fixed mortgage payment, providing stability and predictability in your monthly housing costs. Inflation, a housing crisis, rising interest rates, a change in the landlord’s living situation—none of it will ever impact your housing or payment again as long as you’ve got that fixed-rate mortgage loan.
Cons of Buying a Home
1. High interest rates
You can’t talk about the pros and cons of buying a house right now without discussing mortgage interest rates. There’s no doubt that they’re higher than they were a few years ago.
You can always try to time the market and hope interest rates go down, but there are a few things to consider. First, interest rates may not actually go down. If that happens, will it price you out of the real estate market completely? Will you have to delay your home purchase for years on end?
What if you do that, just to see rates come back to today’s numbers a year or two from now?
Let’s say this goes your way and interest rates do drop. How much appreciation potential will you have lost before that happens?
There’s also the potential that many others are waiting for a rate drop to buy a house. If interest rates drop, will all those buyers flood the market? If so, that could send home prices even higher, making it difficult to secure the home of your dreams.
Solutions to These Problems
Today’s interest rates can be a buzzkill when you’re thinking about buying a home. Luckily, there are programs in place to ease this burden. They include the 3-2-1 buydown, which temporarily lowers the interest rate on your mortgage by 3 percentage points the first year, 2 percentage points the second year, and 1 percentage point the third year. After that time, your mortgage reverts back to its original rate.
There’s also the 2-1 buydown, which—you guessed it—lowers your rate by 2 percentage points the first year, then 1 percentage point the second year before going back to the original rate. These buydowns are temporary solutions to lower your monthly mortgage payment, but remember that you can also refinance when rates are more favorable.
Another option is paying for points to lower your fixed-rate mortgage. When you pay for discount points, you lower your interest rate for the life of the loan, typically by a much smaller amount than a buydown would. The upside is that you can permanently lower your mortgage rate by, say, 0.125% to 0.5%, which can mean big savings over 30 years.
Is It a Good Time to Buy—for You?
The right solution for you—not to mention the right time to buy—will always be dependent on your unique goals and financial situation.
Evaluating the pros and cons of buying a house right now can certainly give you some clarity on whether this is the best decision for you. But keep in mind that no housing market will ever seem perfect when you’re in the middle of it. The current housing market presents potential homebuyers with unique opportunities and challenges.
Engaging a trustworthy real estate agent and loan officer can be a great starting point for getting the conversation rolling. We’re here anytime you’re ready to talk about your options. You don’t have to be ready to buy to review your financial situation, goals, and strategies for achieving them.
Give us a call today.