Should you wait to buy a home?

Prospective homebuyers face some tough decisions in this economic environment. With interest rates rising significantly over the past year or so, mortgages have gotten more expensive. Meanwhile, the housing market experienced a strong price upswing since the pandemic, amidst relatively low inventory.

However, conditions may be changing now with mortgage rates and prices falling from recent highs. That said, they're still elevated compared to pre-pandemic levels. And it's hard to say whether the real estate market will tilt back more toward buyers or if sellers will gain more of an advantage.

While there are generally no easy answers, prospective homebuyers may want to weigh the pros and cons of buying now vs. waiting to buy a home, as we'll explore in this article.

Not sure what mortgage rate you'd qualify for? Explore your mortgage options and find out now!

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

Average 30-year fixed-rate mortgage rates sit around 6.32%, according to the St. Louis Fed, based on Freddie Mac data. That's down from recent highs of around 7% in November 2022. But that doesn't necessarily mean rates will continue to fall, especially in the short term.

Further inflation, for example, could push borrowing costs higher. For the second quarter of 2023, some organizations predict a slight increase in rates, while some expect a slight decrease, according to an analysis by The Mortgage Reports.

So, if you're worried about rates rising, you might decide to buy now. Later on, if rates fall significantly, it could then be cost-effective to refinance, though you'll have to take closing costs into account.

Explore your mortgage rate options to see if it's worth it for you.

Inventory may decrease

Housing inventory typically starts to rise in the spring before peaking in summer, so searching for a home now could give you a relatively good selection to choose from. If you wait too long, however, your options might thin out.

The total number of homes for sale in the U.S. is up 15.9% year over year as of February 2023, according to Redfin. And homes are staying on the market for a median of 52 days, compared with 25 days a year ago. These trends could indicate that homebuyers have some opportunities to score deals on homes that have been on the market for a while.

If you wait too long, the trends may reverse. Total inventory could potentially drop as longer-listed homes get sold, considering that the number of newly listed homes is down 22.6% year over year.

Start enjoying your new home

While homebuying is an important financial decision, it can also be an emotional one. That's not to say that you necessarily want to lead with your emotions, but you also might be comfortable spending more if it brings you peace of mind and personal enjoyment.

Perhaps paying a slightly higher mortgage rate now, compared with, say, waiting a year, is a worthwhile tradeoff. So, for some people, finding a good home now is reason enough to go forward with a purchase, rather than waiting to see if conditions improve.

Why you should wait to buy

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

Rates may fall

The recent drop in mortgage interest rates could potentially be the beginning of a larger, long-term decrease in rates. While it's hard to predict the future, the Federal Reserve, for example, projects that the federal funds rate will increase slightly this year before falling in 2024 and beyond.

The Fed doesn't directly control mortgage rates, but there's a correlation between the Fed's actions and the broader interest rate environment. So, some prospective homebuyers might wait to see if mortgage rates fall further.

Check your mortgage rate options here to see if it makes sense to wait.

Prices may fall

In addition to mortgage rates, home prices could also potentially fall in the future. The median sale price is down 1.1% year over year, according to Redfin. So, some prospective homebuyers might prefer to wait and see if prices drop more. That said, prices can be hard to predict and can differ based on local market conditions. It's possible that prices could increase too, so choosing when to buy a home could depend on your willingness to risk prices moving against your favor.

Your financial situation may change

Another reason to consider waiting to buy a home is that your financial situation may change. If you're feeling uneasy about your job security, for example, that could be a good reason to wait, as you might not want to take on 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 improves could enable you to put down a larger down payment, for example, which could make your monthly mortgage payments more affordable. 

The bottom line

Ultimately, deciding when to purchase a house can be a complex decision. If you buy now, you can start enjoying homeownership sooner, but you also might be better off saving more money. In many cases, the decision comes down to figuring out what you're comfortable with, as acting now or waiting can both come with risks and tradeoffs.

Speaking with professionals such as financial advisors and housing counselors might help you come to a decision that makes sense for where you're at in life.