Should you wait to buy a home? Here's what experts say to do

After 10 consecutive rate hikes, the Federal Reserve decided this month to hold the target interest rate at 5% and assess the effectiveness of its efforts to curb inflation. Since the Federal Reserve began its streak of interest rate hikes in March 2022, mortgage rates have also increased, making the homebuying process more challenging.

At the same time, home prices surged during the pandemic, and despite recent cooling, a shortage in housing supply continues to support these high prices.

Amid these circumstances, the primary question on many homebuyers' minds remains: Should I buy a home now or wait? The answer will depend on your financial situation, goals and risk tolerance level. Below, we'll take a deeper dive into both sides of the question for better understanding, so you can make the best decision for you and your family.

Start by exploring your mortgage rate options here and see what rate you qualify for.

Why you should consider buying a home now

After home sellers enjoyed a period of rising home values, the market may be shifting in favor of buyers in some parts of the country. According to the March Case-Shiller U.S. National Home Price NSA index, home prices declined for seven consecutive months.

"We are actually in a buyer's market for homes for the first time in 10 to 15 years," says Tawan Davis, founder and CEO of the Steinbridge Group, an investment firm with a sizable focus on and portfolio in real estate. "If a buyer is prepared, it may actually be a time when they can influence price and terms in ways not recently available."

Home prices may be another reason to consider buying now. High demand, low supply and other factors are broadly supporting home prices despite cooling in some areas. "As long as the economy does not enter a severe recession, housing could be a heads you win, tails you don't lose situation," says Michael Ashley Schulman, CFA at Running Point Capital Advisors. "If you buy now and interest rates increase from here, monthly mortgage payments will probably increase even if home prices come down a little, but you'll be locked into a lower than market rate; and if interest rates decrease, home prices may jump higher, and you could refinance your home to a lower mortgage rate."

Afifa Saburi, a senior researcher for Veterans United Home Loans, notes that "home prices will vary by market, but due to housing supply constraints, home prices are more likely to remain stable rather than depreciate. For a buyer who is looking to purchase a home in today's market, it may make more sense to avoid a 7.2% annual increase in rent and lock in a fixed monthly mortgage payment that is not going to increase year after year."

Explore your mortgage purchasing options here now to see if now if the right time for you to buy.

Why you should consider waiting to buy a home

According to a recent report from Fannie Mae, 65% of consumers believe it's a bad time to buy a home. Many would-be homebuyers are waiting for mortgage rates to drop. Although mortgage rates are currently averaging 6.69% on a 30-year fixed-rate loan, an April 2023 report from Fannie Mae forecasts these rates will dip below 6% in the latter half of the year.

While a little over half a percent rate decrease doesn't seem like much, it represents substantial savings over time. For example, if you purchase a $400,000 home with a 20% down payment, your monthly payment on a 30-year fixed-rate mortgage with a 6.69% interest rate would be $2,062.77. However, the same loan with a 5.90% mortgage rate comes with a lower monthly mortgage payment of $1,898.04, a savings of $116.73 each month. At 6.69% interest, you'd pay $422,596.24 in total interest over the life of the loan but only $363,293.26 with the 5.9% loan, or $59,302.98 less.

"As a financial advisor, I would recommend to my clients to wait at least a year before they actually buy a home in this market," says Young Pham, financial advisor and investment analyst at BizReport. "Buying a home right now would be overpaying, but that is not what I am worried about. As mortgage rates rise and housing prices remain elevated, it is likely that these factors will weigh down heavily on demand," Pham adds.

The bottom line

Should you wait to buy a home? While the preceding opinions help us shed light on the current housing market, the answer to this question is personal and specific to you and your unique circumstances.

It's also worth remembering that trying to time the market may be futile because of a wide array of variables at play, including economic conditions and supply and demand. Adds Dana Cornell, CEO and founder of Cornell Capital Holdings: "Like any market, variables will shift both ways inevitably as they always have. A proper response involves analyzing the area of the country, your credit rating—which determines how much and what type of debt you qualify for—and so forth. One thing that many people are not accepting at this point is that it took 40 years to get to essentially 0% interest rates. It is unlikely we will experience that again anytime soon."

Learn more about your mortgage purchasing options and rate eligibility here now.