Rates Are Getting Higher… Should You Wait To Buy A Home?
Unless you live under a rock, you’ve likely heard that rates are on the rise. As a result, it could be tempting to wait for rates to drop before you buy a home. But with rent also trending higher, waiting might actually be the riskier option. You’ve got questions, we’ve got answers. And by the end of this we’ll help you have a better understanding of why now might be your most opportune time to buy a home.
Are We In A Hot Or Cold Housing Market?
The quick answer? Neither and both. Let’s start by defining what it means for the housing market to be “hot” or “cold.
In a hot market, buying is extremely competitive because there’s low housing inventory. As a result, the available houses tend to get snapped up quickly and at higher purchasing prices.
“Housing inventory” or “housing stock” refers to the number of new houses being built and existing houses already for sale. When COVID hit, housing inventory tanked. People stayed in their homes, and new builds were delayed by supply chain issues and labor shortages. As the pandemic raged, rent prices shot up and created a demand for houses that couldn’t be met.
Now, however, we’re seeing the market cool rapidly. While homes continue to sell quickly, inventory is on the rise. This quick cooling phase was triggered, at least in part, by rising interest rates. With higher rates, buyers are being more selective, which means homes that were selling within the first three days a few months ago are now sitting for an average of three weeks.
Should I Wait To Buy A Home?
Suppose your rent is higher than a theoretical mortgage, and you’re financially ready to buy a home. In that case, purchasing now may be the best move, especially if you’re comfortable staying in your new home for a few years to weather market fluctuations and build equity.
On the other hand, if you’re not financially secure and have strict standards regarding location or housing type, you may want to wait, especially if your rent is low and has remained stable thus far. Just know that the market isn’t expected to cool off soon, so it could be a good idea to use this period to save money, pay off debts, and improve your credit rating.
Ultimately, whether you buy a home now or later depends entirely on your individual circumstances, and we recommend that potential buyers be hyper-realistic about theirs.
I’m Ready To Buy A Home! How Should I Prepare?
If you’ve decided that it makes sense for you to buy a home now, there are some tactics you can use to give you an advantage. One of the less tangible but just as impactful preparations is reframing what your house hunting journey will look like and managing expectations. Below are some strategies to help you become an adaptive, informed, and resilient buyer that succeeds.
Homebuyer tactics and expectations:
- Secure mortgage pre-approval before shopping for a home. Sellers will take you more seriously if you already have financing, and if you find your dream home, you won’t want to delay closing to approve your loan.
- Expect to pay more when you buy a home in today’s market. It’s competitive out there, and plenty of buyers are still putting in offers over the asking price and putting earnest money deposits down. If there’s no wiggle room in your budget to make these tactics possible, consider getting a cheaper home to free up funds.
- Expect to make compromises when house hunting. Make a list of what you want in a future home, and circle which items you’re willing to let go of. If you can’t find a house in the ideal neighborhood, ask your realtor to show you areas that are similar or ones you haven’t considered.
- Anything you can do to sweeten the deal will make you more attractive to a seller. Write a personal letter explaining what the house means to you, be flexible on their move-out window, and don’t ask them for repairs or special favors.
- Remember, everyone needs a shelter and you can potentially refinance in the future. With no sign of rates going down in the near future (and even potentially going up), waiting to buy could cost thousands more in the long run.
The bottom line? It’s important not to compromise yourself, no matter how much you want to buy a house. Don’t empty your savings or put yourself in a bad situation (like moving into an expensive home that needs costly repairs). Keep shopping if the house you choose requires sacrifices that will hinder your future.
Need Help? Talk To A Hixon Lending Expert Today.
Still not sure if you should wait to buy a home or take the plunge now? At Hixon, we have experience and knowledge that can guide you through market fluctuations and protect you from common pitfalls so that you can buy a home you love! Contact Hixon today to see how our lending experts can help you.