There are definite benefits to owning a home rather than renting one. Not only can homeownership lend to more financial stability, but there's something to be said for getting to call the shots rather than follow the rules a landlord establishes.
But even if you're not looking to buy a home to live in yourself -- say, you're an investor looking to add another rental property to your real estate investing portfolio -- there are benefits to having another living space in your name. That shouldn't, however, tempt you to rush out and make an offer on a home today.
Quite the contrary -- today's housing market favors sellers in a very big way. And so it could pay to sit tight and try again in a year.
Image source: Getty Images.
Prices are still soaring
Home price gains have slowed down in recent months. That's the good news for buyers. The bad news is that home prices are still quite elevated across the board. And if you buy a home today, you could end up overpaying.
As a real estate investor, that could make it difficult to turn a profit down the line should you choose to sell. And as a regular buyer, it could put you in a tough position if your circumstances change and you wind up needing to sell your home a few years after purchasing it.
As such, it pays to wait for home prices to drop to more moderate levels. Right now, there are limited bargains to be found. And when those great deals do hit the market, buyers tend to pounce -- meaning you're more likely than not to wind up in a bidding war, which is something you may want to avoid.
Compounding the issue is that borrowing is expensive these days. Mortgage rates are notably higher now than they were a year ago. And while we don't know what the next 12 months have in store, it's possible that rates will start to creep back downward by mid-2023.
Granted, we shouldn't expect the record-low borrowing rates buyers enjoyed during the latter part of 2020. But rates could reach more attractive levels than they're sitting at today.
Inventory is still lacking
While real estate inventory has picked up since the start of the year, as a whole, the housing market still lacks properties for sale. That means that if you attempt to buy a home now, you might not only pay an exorbitant price but also be forced to compromise on the features you want. That could lead to a scenario where you sorely regret your decision down the line.
All told, today's housing market is a tough one for buyers to navigate. So why put yourself through it? Granted, rental demand is strong right now, so if you're an investor looking for an income property, it could pay to keep at it if there's a specific market you've researched and are hoping to enter. But otherwise, waiting a year to buy might really work to your benefit.
