With housing prices going through the roof in some cities and interest rates threatening to follow suit, many potential homeowners are wondering, “Is it a good time to buy a house?”
The short answer is this: The right time to buy a house depends on your financial situation. What may be a perfect time for your neighbor to buy a house may not be a good time to start your home buying journey.
Let’s look at what exactly affects the market, how to know if you’re ready to buy, and determine whether it is a good time to buy a house.
Does the market matter when you’re buying a house?
Despite rising inflation and added pressure on household budgets, the housing market in the United States still has a reasonable amount of momentum going.
With fewer homes for sale, home prices have remained high. But that growth is beginning to slow down. And the higher interest rates are resulting in less competition for the homes that are still available.
Benefits to home buyers in the current market
One of the main benefits of buying in the current market is enjoying the benefits of homeownership sooner. With less competition, you can potentially own your home sooner. And the sooner you own your home, the sooner you start building equity in the property.
Even with higher interest rates, you immediately begin to build equity in your home. A larger down payment increases your home equity on day one, and every mortgage payment thereafter adds to it.
Equity in your home not only increases your overall net worth, but you can always tap into that equity through a home loan or line of credit in the future—typically at rates lower than other borrowing options.
Another benefit to buying a home in the current market is stability. With rising rents in many cities, renters can experience an increased stress level worrying about whether they can afford to pay the higher rates.
Knowing that you don’t have a landlord who can evict you from your home with little to no warning can bring immeasurable peace of mind. It’s important to remember, however, that if you fail to make your mortgage payments, your lender can foreclose on your home. That’s why having a clear understanding of your finances before you buy is essential.
Lastly, it’s worth noting that the sense of community many homeowners feel adds to their overall well-being.
How do I know if I’m ready to buy a house?
When it comes to buying a home, potential buyers need to consider more than just the current state of the housing market or interest rates.
To know if now is the right time to buy a home, borrowers should also consider their broader financial situation.
Are you financially ready to buy a home?
To know whether you’re financially ready to buy a home, start by asking yourself these questions:
- Do you have regular employment or a reliable source of income?
- Have you saved enough for a downpayment?
- How is your credit—good, bad, or excellent?
- How much debt do you have?
- Do you currently have a manageable budget (or a budget at all)?
If you have a steady job, savings for your down payment, good credit and low debt—now might be a good time to buy a home.
Should I buy a house now or wait until 2023?
If you’re worried about rising inflation, are struggling to save for a downpayment, or are worried about keeping your job during a potential recession, it might make sense to wait to buy a home.
Additionally, if you’re looking for a new job, getting married or plan on having children this year, you may benefit by waiting to buy a home—even if home prices and interest rates drop.
What are the home prices in my preferred area?
As of September, the average cost of a home in the United States was $384,800, a drop of more than 6% from three months earlier. June’s median home price of $413,800 was a new record high.
With higher home prices, having an experienced local agent can be beneficial. The right agent can help you find a suitable property and negotiate a reasonable price because they understand local and national real estate markets.
A local agent can help you get the greatest value for your home-buying dollar—and avoid overpaying for a property. Additionally, getting preapproved with a reputable lender will give you a loan amount to keep in mind while house hunting.
Is now a good time to buy a house for first-time buyers?
Taking inventory of your financial and emotional well-being can help determine whether you should buy a home now or wait.
Buying a home can provide security, set you up for financial success, and create a great sense of personal accomplishment.
When you first begin to make mortgage payments, you’ll be paying a bigger chunk of interest—and that can be a good thing.
The IRS allows homeowners to deduct a percentage of their mortgage interest payments which can lower the overall amount of taxes you have to pay.
Lower interest rates with adjustable-rate mortgages
Home buyers who opt for an adjustable-rate mortgage (ARM) can lock in an interest rate lower than conventional mortgage rates. Currently, the interest rate for 30-year fixed-rate mortgage rates is sitting at 7.20%, which can feel pretty steep for many first-time homeowners.
By comparison, eligible borrowers can lock in a 5.44% interest rate for five years with an adjustable-rate mortgage. ARMs can be a good tool for getting great mortgage rates if you plan to refinance or sell the home before the initial locked-in period ends.
So, when is the best time to buy a house?
Though there may be benefits in waiting to buy, ultimately, the best time to buy real estate, in this or any economy, is when you are emotionally and financially prepared.
There are pros and cons to every market and more importantly, there’s never going to be a perfect time in the market to buy. What works for you (such as having less competition due to high rates or a lot of inventory to choose from) might not work for someone else.
How to get the upper hand in home buying
HomeScout is more than just a listing search tool—it’s your home buying dashboard.
With HomeScout, you can access unfiltered MLS listings, unique photos, and updates, helping you book viewings fast when you find a home you are interested in.
HomeScout also helps you keep up-to-date on communications with your lender and real estate agent—you’ll never miss another email or important message again.
HomeScout is free and gives you access to a home buying support team that streamlines communication while protecting your personal information.
No agent? No problem.
HomeScout can help you connect with the right agent for your situation if you don’t already have a trusted local real estate rep.
Get started with AAA Banking
If you’ve found your perfect home, have the money saved, and are ready to take action—licensed loan officers at AAA Banking are waiting to help.
Whether you’re ready to start your application online or want to browse millions of home listings, we focus on providing the information you need to make the right home buying decision for your family.
Get in touch with AAA Banking today.
Photo by MART PRODUCTION