“Should I buy a home now or wait?” It’s the question every real estate agent gets asked at least five times a day.
During my two decades in the real estate industry, I’ve always emphasized how purchasing a home is both a significant financial commitment and a completely personal decision. I can’t decide for you.
The current housing market isn’t easy. Yet despite higher prices, rising mortgage rates and potential economic uncertainties, there are always compelling financial reasons to consider buying a home.
Let’s take a brief look at the difference between renting and buying. Buying a home with a fixed-rate mortgage means you can lock in your monthly payments, which makes budgeting easier. Owning a home protects you against the volatility and unpredictability of rental markets, offering you stability and control. It also means you can alter and improve your property to meet your needs without restrictions from landlords.
The biggest gain of owning a home is building equity over time. With every mortgage payment you make, you’ll be one step closer to owning your property outright, which can enhance your financial wealth as the property value increases. The home you buy today could be worth much more in the future.
All that said, let’s dig into when it makes sense to buy, when it makes sense to wait and whether there’ll be a housing market crash.
When it makes sense to buy a home
Buying a home often coincides with key life events, such as reaching a stable point in your career or relationship, getting married or having children. As your family grows, your housing needs may evolve: more bedrooms, a bigger yard or proximity to good schools. A new home can provide the space and environment for your family’s comfort and growth.
If you expect to stay in the same location for many years, buying a home can offer the personal stability, financial commitment and community ties that renting can’t. This is particularly important if you value consistency in your daily life.
Fundamentally, however, you’ll first need financial stability to make sure you can comfortably manage the upfront costs and ongoing financial obligations of homeownership.
Here’s a useful financial stability checklist:
Good credit: With a higher credit score you can score a lower interest rate, which makes homeownership more affordable and saves you money over the life of the loan.
Stable income and job security: Having a reliable source of income ensures that you can meet your mortgage payments without strain and avoid foreclosure.
Longer time horizon: If you plan to stay in your home for many years, short-term dips in property value are less impactful. A longer time horizon allows you to ride out market fluctuations and benefit from eventual appreciation in property value.
Sufficient emergency fund: You’ll want to have a financial cushion that can cover several months of living expenses, including mortgage payments, in case of unforeseen circumstances, such as job loss or medical emergencies.
When it makes sense to wait to buy a home
Buying a home is a significant milestone, but it’s sometimes more prudent to hold off. Waiting could be beneficial if the market is exceptionally high and a correction might be coming. However, the primary focus should be on your personal and financial readiness, not trying to time the real estate market.
The housing market is influenced by multiple factors, such as the broader economy, interest rates and geopolitical events. Real estate cycles are unpredictable by nature, so don’t spend time trying to forecast the peaks and troughs. Renting allows you to hold off on buying until you are fully ready to commit to buying a home.
Here are some key reasons to wait to buy a home:
Financial instability: If you’re experiencing financial uncertainty, such as irregular income, insufficient savings or high existing debt, it’s better to stabilize your finances before committing to a mortgage.
Career or life uncertainty: If your job situation is in flux -- perhaps you’re considering a career change or facing a potential relocation -- it might be better to wait until your professional life is more stable. Likewise, if you’re expecting changes in your personal life, like a marriage or children, it’s good to wait until you can find the right housing match for your long-term needs.
Shorter time horizon: If you don’t plan to be in the home for more than five years, or you’re not able to buy a home that would fit your future needs, then it may be best to wait.
Is the housing market going to crash?
Although there are economic uncertainties, such as adjustments in interest rates and inflation, a severe and widespread crash isn’t likely in today’s market. Limited housing supply and strong homebuyer demand are keeping home prices up, which cushions against such a crash.
For a housing market crash to occur, there would need to be a significant increase in supply alongside an influx of distressed sales, where homeowners are forced to sell their properties due to financial difficulties.
The housing market has a long history of resilience. Over time, it tends to recover from downturns and homes continue to appreciate, highlighting its strength as a long-term investment.
Regardless, the potential for a housing market crash shouldn’t be decisive in determining whether or not you buy a home. You should always focus more on your personal circumstances -- for example, if you are financially stable and if buying aligns with your long-term goals -- rather than speculate about the market. That way your homebuying decision is still sound even if the market were to dip temporarily.
The wait vs. buy game: What else to consider
The decision to buy a home has many complicated and layered considerations. Though understanding market dynamics like supply and demand is important, your financial stability and long-term living needs are the most crucial elements to consider.
Also, remember that while national housing trends can provide a key backdrop, real estate markets are local. The economic health of the region, local employment rates and even neighborhood development plans can impact whether it’s wise to buy a home in a particular area. Make sure to research local market conditions and trends, since they directly affect property values and the quality of life in the area.
Finally, as I tell all my clients, you can focus only on what’s in your control. If you don’t purchase a home right now, you’ll be buying time to focus on the controllables so you can become a homeowner in the future.
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