Should I Buy a House Now or Wait? 10 Questions to Ask Yourself

DISCLAIMER: As a friendly reminder, this blog post is meant to be used for educational purposes, not financial advice. If you need assistance navigating the question, “Should I buy a house now or wait?” HomeLight always encourages you to reach out to your own advisor.

To buy or wait to buy? That is the question on many homebuyers’ minds in this fluctuating market. But the answer isn’t as clear cut as “now” or “later.” As we’ll see, both the economy and local trends come into play, as well as your personal finances and job prospects. There’s a lot to consider, and the decision may seem overwhelming.

By examining current market analyses and addressing expert opinion, we’ll help you think through the timing of your home purchase, both generally and personally, in the 2023 real estate landscape.

The market outlook: Is now a good time to buy generally?

According to top real estate agents across the country surveyed by HomeLight, the seller’s market that dominated most of 2020 and 2021 shifted in 2022 and into 2023. The days of massive bidding wars are behind us; 98% of agents report that bidding wars in their market were either nonexistent or declining as of late 2022.

Chris Carozza ranks in the top 1% as an agent and brokerage partner in Stamford, Connecticut. He says, “It’s still a very active market. It’s not crazy, where you’d see five to seven offers within a week at $50,000 to $100,000 over asking. But it’s still a very strong market.”

This could be good news for buyers in general, but let’s dive a little deeper into some key components that influence whether or not this is a good time to buy.

Step one: Find an agent!

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Inventory: Are there enough homes for sale right now? 

Higher inventory levels lead to a better scenario for buyers. More homes for sale means you not only have more options to choose from, but you also tend to get better prices.

In the latest data available, 72% percent of agents say inventory is rising, a drastic increase compared to 33% last quarter.

However, not all inventory is up to snuff. According to our survey, 86% of agents believe sellers are overconfident, resulting in a lack of basic home prep in three particular areas:

• 65% of agents note that sellers are unwilling to take on deferred maintenance, a necessity if they want to sell.
• 57% of agents believe listed homes have too much clutter, reducing their value in a buyer’s market.
• 39% of agents cite a lack of curb appeal when sellers put their home on the market.

Buyers will need to evaluate inventory carefully by getting necessary inspections and negotiating repairs if they intend to buy now.

Pricing: Are homes priced to sell right now?

Higher inventory and lower demand typically equal lower prices. U.S. home prices dropped for the third straight month in a row in November, and are predicted to decrease 8% to 10% by August 2023. Some research and investment firms are predicting housing prices could fall as much as 20%.

• 90% of agents say that price reductions are more common, compared to 34% last quarter.
• 30% of agents expect home prices in their market to remain flat over the next six months.
• 46% of agents expect home prices in their market to continue to fall, and only 22% expect to see home prices increase.

However, in our Fall Agent Insight report, agents noted that many sellers are reluctant to adjust their initial list prices to this reality. As such, you may see homes sit on the market for a while as sellers come to terms with this new norm. If prices in your market seem inflated, it may be better to wait it out a bit.

Financing: How do mortgage rates play a role right now?

According to Forbes, “The average mortgage rate for a 30-year fixed is 6.66%, more than double its 3.22% level at the start of the year.” This rapid uptick is making buyers a little uneasy, thus driving down demand.

The National Association of Realtors confirms: “More potential homebuyers were squeezed out from qualifying for a mortgage in October as mortgage rates climbed higher.” This led to a 5.9% decline in existing home sales, according to their data. This trend continued in November with a 7.7% dip in sales, and December’s final numbers will likely show similar declines.

Nevertheless, experts are optimistic that interest rates will level off in 2023 rather than continue to rise at the same pace. And when compared to double-digit interest rates over the past few decades, 6% is still quite reasonable. If all other factors are in place, buyers need not let interest rates deter them from buying now.

Economy: Will inflation affect a purchase right now?

The latest economic data indicates 7.1% inflation for 2022 as a whole. That means if your monthly expenses were $5,000 a year ago, you’re now looking at $5,350. That’s a significant hit to any budget.

Carozza says, “Everything costs more money right now, and rates are higher. So buyers have to figure out what they can realistically afford without going into more debt on a monthly basis.”

While rising inflation may lower consumer confidence and purchasing participation in general, homebuyers could actually see it as motivation to buy now. Here’s why:

• Possible rent increases. As more and more states move toward rent control, landlords are almost forced to make inflation-based increases to rent. (Because they can no longer keep rent steady for years and then make a big increase to market price when the next tenant moves in.)
• Possible interest increases. Yes, experts believe that interest rates will hold steady. But historically, the Fed has used an increase in interest to combat rising inflation. So if inflation gets out of control in 2023, those experts could be proven wrong.

Bottom line, the real estate market, in general, may be in the middle of some changes, but it’s more of a shift back to normal than it is a “crash”. Carozza says that buyers don’t need to anticipate anything like the Great Recession of 2008. “Realtors can’t see into the future. I do see a correction [coming], but I’d be absolutely shocked if the market falls off a cliff.”

The individual factors: Is now a good time to buy personally?

Market research aside, buyers need to evaluate whether or not this is a good time to buy a house on a personal level.

Buying now is the best idea for some people

It may be a good time to buy a home if you can answer “yes” to these five questions:

1. Do you have a high credit score?

In order to obtain a mortgage to purchase a house, lenders will pull your credit report and look at your credit score. While each lender is different in what score ultimately disqualifies an applicant, a general rule of thumb says that you’ll need a credit score of at least 500 for an FHA loan and 620 for a conventional loan. However, higher scores typically give you access to better rates and terms, an aspect that’s important if you plan to buy now.

2. Do you have a sufficient down payment?

It’s possible to obtain a home loan with as little as 5% to 10% down (lower for certain programs). But a down payment of 20% or more will significantly decrease your monthly payment because you won’t be charged private mortgage insurance (PMI). Given the current interest rates, buyers who can put down at least 20% of the purchase price put themselves in a better position to buy now.

3. Will you be living in the home for a while?

Closing on a home presents a significant expense — typically about 2% to 5% of the loan. On a $300,000 home with 20% down (thus, a $240,000 loan), that means you’d pay $4,800 in closing fees at a minimum. When you look at that sum over five or ten years of home ownership, it’s not that bad –– but it’s definitely not something you’d want to pay twice in a few years’ time!

4. Are you in a position where buying makes sense?

The nation’s median rent rose 7.45% year-over-year, a figure that’s on track with inflation but still above interest rate increases. As such, some current renters may find that buying a home now is worth it because it puts them in a better financial situation.

However, “my rent just went up again” shouldn’t be the only reason to buy now. Keep in mind that a combination of higher interest rates and higher prices has driven the average mortgage payment up by 39% in the last 18 months. Thus, buyers should still take care to run the numbers if they intend to buy now.

5. Are you in a position to negotiate?

Since sellers seem to be reluctant to price (and update) their homes to market standards, buyers will need to be prepared to negotiate if they buy now. Come to the offer table prepared with fair market pricing data in your area. Don’t get talked out of contingencies that work to your advantage. And ask for necessary repairs to be made before closing. (Tip: working with a great agent can help take the stress out of these negotiations!)

Waiting out the market is the best idea for other people

On the other hand, it may be best to wait a while to buy a house if you answer “no” to any of these questions:

1. Is there a high inventory of available homes in your desired buy area?

As mentioned above, inventory levels affect pricing. With fewer houses listed for sale, purchase prices go up, because sellers know that buyers have fewer options to choose from. Low inventory can also create bidding wars and a lack of negotiating power on the buyer’s side.

A good buyer’s market is one with plenty of choices available. If your desired market location is lacking in inventory, it might be best to put your house shopping off for a while.

2. Do you have a low debt-to-income ratio?

Debt-to-income (DTI) ratio expresses the amount of your monthly income that currently goes toward paying off debt. Lenders look at this figure to determine the riskiness of offering a mortgage.

To calculate your debt-to-income ratio, total up all your current financial obligations and divide that figure by your total income. Typically, lenders want to see a DTI ratio of 36% or lower, though some may stretch to 43% with additional loan terms. Any higher, and your mortgage application will likely be denied, so work on paying off some debt before pursuing a home purchase.

3. Can you afford the moving expenses and home ownership costs?

If a down payment is going to deplete all your savings, it might be best to wait a while before buying. Don’t forget that buying a house also requires moving into it –– and that’s not cheap! Average moving costs run around $1250 for local moves and $4890 for long-distance moves.

Carozza says, “Moving is stressful and expensive. That’s another reason why you don’t want to be moving every other year.”

And after moving in, you’ll also be responsible for all the maintenance costs. As a rule of thumb, be sure to budget between 1% to 3% of the home’s value each year for maintenance. For the first year, it’s best to err on the high side, since you’ll probably have some repairs and updates you want to make immediately.

4. Do you anticipate a stable job and family situation for the next few years?

As already established, it makes better financial sense to be in a home for at least a few years. So as you’re evaluating readiness to purchase, be sure to account for any potential job transfers on the horizon. Up to 45% of relocations can be attributed to occupational reasons.

Also, consider whether or not you plan to add children to your household. According to the U.S. Census Bureau, families with young children make up 20.5% of all moves, making that demographic the most likely to move. Home size and proximity to extended family may drive those relocations. If there’s an imminent job or family change, maybe hold off on buying a house.

5. Do you have a clear picture of what you want?

Similarly, make sure that you (and your partner, if you have one) know exactly what you want in a house before jumping into a purchase. Make a list of non-negotiables as well as a list of desires.

Carozza says, “Buyers should not have to talk themselves into liking the house. It’s a big commitment, so if they’re not one hundred percent on board with the house and comfortable with where they’ll be coming home every day, then I wouldn’t buy the house.”

Conclusion: Weigh your readiness to buy a home now

Ultimately, the decision to buy a house now or wait is a personal one. Nothing is ever set in stone when it comes to the general economy and real estate markets. The best you can do is make sure that you have your own financial world in order, then do what’s right for your particular situation.

HomeLight’s Home Affordability Calculator and Down Payment Calculator can help you better understand the costs associated with buying a home. Along with the 10 buyer-assessment questions above, these free tools can help you get a better picture of what safe budgeting looks like.

A good local real estate agent can also help you assess your readiness to buy now. After all, they know the current realities of your market at a micro level. HomeLight can connect you with a top-performing agent in your area. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.

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