Is It Better to Wait or Buy a House Now?

Buy now, or wait? That’s the question prospective homeowners are grappling with in today’s housing market. Home prices have surged recently, and the Federal Reserve’s efforts to combat inflation have driven mortgage rates higher as well.

This combination has led many potential buyers to opt for waiting. Existing home sales volume decreased by 1.9 percent from April 2023 to April 2024, according to the National Association of Realtors (NAR). Additionally, the Fannie Mae Home Purchase Sentiment Index from May 2024 indicated that 79 percent of consumers believe it’s a bad time to buy a house.

However, there are signs that the market may be becoming more favorable for buyers. Days-on-market figures have increased, providing buyers with more time to make informed decisions. NAR data shows that homes typically spent 26 days on the market before selling in April, up from 22 days the previous year. Available housing inventory, although still low, is rising—up 9 percent month-over-month and 16.3 percent year-over-year, according to NAR.

April’s National Housing Report from RE/MAX, one of the largest real estate brokerages in the country, also noted a significant increase in new listings, up 18.2 percent from April 2023. “We’ve started the busy homebuying season on a very good note,” said RE/MAX president Amy Lessinger in the report. “This has happened without a significant drop in interest rates—suggesting that buyers and sellers may be less likely to delay their plans this year.”

So, is it a good time to buy a home, or is it better to wait in hopes that prices or rates will drop significantly soon? And are there still concerns about a potential recession? Here are some key considerations to help determine the best course of action.

Mortgage rates have eased slightly from the 8 percent highs reached in October, but they’re still above 7 percent. Meanwhile, home prices continue to rise, with April NAR data showing year-over-year price increases for 10 consecutive months. These factors might make you hesitant to buy right now, and that’s understandable.

Regardless of the current market conditions, buying now allows you to start building equity immediately. It also helps you avoid potential future mortgage rate increases, which can significantly impact your monthly budget and increase the total interest paid over the life of the loan.

“If a buyer finds a property they would like to call home, they should not delay,” says Stacey Froelich, a broker with Compass in New York City. “You cannot time the market, and a home should be a long-term investment.”

Melissa Cohn, regional vice president of William Raveis Mortgage in Connecticut, echoes this sentiment, telling her newsletter subscribers, “When mortgage rates drop and more buyers come back into the market, home prices will rise. Remember, you ‘marry the house and date the rate.’” In other words, if you find the right home, buy it now and consider refinancing later if rates decrease.

Generally, if you can answer yes to these three questions, now is a good time to buy:

Do you have excellent credit? Before borrowing money, check your credit score. The best mortgage deals are available to those with high credit scores. The median credit score for mortgage borrowers in the first quarter of 2024 was a very high 770, according to the Federal Reserve Bank of New York. If you have a history of on-time payments and a high credit score, you’ll qualify for the lowest mortgage rates.

Have you saved enough for a down payment? Besides having a good credit score, you should have a substantial amount saved for a down payment. The larger your down payment, the less you’ll need to borrow and the less interest you’ll pay over time. Additionally, lenders like to see that you have extra cash reserves as a financial cushion for unexpected expenses.

Are you planning to stay in the home for a while? Beyond the purchase price, buying a home incurs closing costs that can amount to thousands of dollars. To justify these one-time transaction costs, you should be fairly certain that you won’t need to move again soon or that you’ll be financially stable enough to hold onto the property and rent it out if needed. Selling a home shortly after purchasing can also have significant tax implications.

Ultimately, the decision of when to buy a home is up to you. Life moves forward, regardless of whether the timing is perfect. If you’re eager to become a homeowner, meet the criteria mentioned above, and are financially stable, go ahead and start house-hunting.

If you’re waiting for lower mortgage rates, a bit of patience might be wise. Rates have been volatile recently, peaking at over 8 percent in October 2023, then dropping below 7 percent, and now rising above 7 percent again. That’s more than a full percentage point swing in just a few months.

While 1 percent might not seem like much, it can significantly impact how much house you can afford over the long run. For example, using Bankrate’s mortgage calculator, if you buy a $350,000 home with a 20 percent down payment, the monthly payment for principal and interest on a 30-year loan at 7 percent interest is $1,862. The same loan at 8 percent raises those monthly payments to $2,054 — $192 more each month. That’s over $2,300 more each year, or $69,000 over the life of the loan.

Predicting where rates will land by summer is impossible. However, here are three scenarios where waiting might be advantageous:

  • If home values in your area are dropping: The median home price in the U.S. hit a record high in June 2022, according to NAR data. Since then, some hot metro areas have experienced significant drops in median sale prices. For example, in Austin, Texas, Redfin data shows that the median price dropped from $620,000 in June 2022 to $604,000 in June 2023 and further down to $570,000 by April 2024. If this trend continues, it might be worth waiting a bit longer.
  • If inventory in your area is increasing: More properties on the market give buyers more bargaining power. Due to the high-interest rate environment, many buyers have been sitting on the sidelines, resulting in increased inventory in some areas. However, NAR data shows that the country overall had just 3.5 months’ worth of housing supply in April — still much too low to meet demand.
  • If your personal finances could use improvement: The biggest reason to wait is if your current financial situation is not ideal. For instance, if you’re expecting a sizable commission check, bonus, inheritance, or another windfall that would significantly boost your down payment, it makes sense to wait. Additionally, if your credit score is low, taking time to improve it and pay down debt can help you qualify for better loan terms.

Deciding whether to buy a house now or wait largely depends on the specific area where you want to live. Real estate is a local market, and conditions can vary significantly even within the same state.

Take, for instance, the April Redfin data from North Carolina’s Research Triangle cities of Raleigh and Chapel Hill, which are only about 30 miles apart: In Raleigh, the median home price is $425,000, marking a solid 9 percent increase from last year. Meanwhile, in nearby Chapel Hill, the median price experienced a dramatic 24.4 percent drop, yet it remains higher at $548,000. That’s a considerable difference between two nearby markets.

In today’s homebuying market, it’s more crucial than ever to find a real estate agent who has deep knowledge of your local area—down to your specific neighborhood—to help you navigate its unique characteristics effectively.

According to Bankrate’s most recent survey, the odds of a recession within the next 12 months are at 33 percent. As you might expect, buying a home during a recession can be risky. If you lose your job, for instance, getting approved for a loan becomes much more difficult.

Even if you are not directly affected by the recession, a hard-hit local area can significantly impact the real estate market. Fewer potential buyers mean lower chances of homes selling, which could discourage homeowners from listing their properties, reducing your options as a buyer.

However, there are some potential advantages to buying a home during a recession if your finances are stable. With less competition in the market, you might have a better chance of finding a great property that would otherwise be out of reach.

Buying a house right now might seem overwhelming, but waiting too long can also present challenges. Start by thoroughly reviewing your finances and determining how much you can afford for a down payment. Assess the housing market in the area where you want to live, and consult with an experienced local real estate agent. They can help you decide whether it’s better to buy now or wait until the market conditions are more favorable for your budget.