- There are clear benefits to owning a home versus renting one.
- But buying conditions are really unfavorable due to a number of factors.
It's just a really bad time to buy.
If you've been renting a home for many years, you may be at the point where you're tired of paying a landlord's mortgage and would rather start paying your own. And if you've managed to save up for a nice down payment, you may be eager to go out and purchase a home immediately.
There are definite benefits to owning a home, including reaping tax breaks, getting to build equity, and not having to follow a landlord's rules. But today's housing market is just about as tough as it gets from a buyer's perspective. And you may actually want to put off buying a home for these three key reasons.
1. Home prices are up
In March, the median existing home sold for $375,300, according to the National Association of Realtors (NAR). That represents a 15% increase from the year prior.
For the past couple of years, home prices have been extremely inflated. And so if you buy a home now, you might end up overpaying for it.
Now if you end up staying in that home for 15, 20, or 30 years, that may not be a big deal. But you never know what curveballs life might throw at you. You might think you're buying your forever home only to end up having to move in two or three years. And if you overpay for a home now, you might lose money when you go to sell. On the other hand, if you wait a year or two to buy, you may find that home prices drop to more moderate levels.
2. Housing inventory is low
The NAR reports that in March, there was about a two-month supply of available homes on the market. That's not a very large number at all.
In a normal housing market, you're looking at a four- to six-month supply of available homes. Today's low inventory means the demand for homes exceeds supply, which explains why home prices are so elevated.
Plus, since there aren't many homes to choose from, you may find you're forced to compromise on key features, whether it's layout, square footage, or outdoor space. If you wait a few more years to buy, you might enjoy a housing market that offers more choices.
3. Mortgages have gotten more expensive
Mortgage rates have risen sharply since the start of 2022, to the point where they recently reached a 13-year high. Now, if you happen to be in a position to buy a home in cash, that's not an issue. But most buyers can't do that (and many shouldn't do that, even if the option technically exists). And so if you buy a home right now, you're apt to get stuck paying more to borrow -- and grappling with higher monthly payments as a result.
If you wait a few years to buy a home, it gives mortgage rates time to cool off and dip downward. And while we're unlikely to see the record-low rates that became available during the second part of 2020 and much of 2021, we might see rates fall to levels that are much lower than what buyers are seeing today.
Buying a home is a big deal, and it's important to do so at the right time. You may be excited to purchase a home, but for the reasons above, waiting could end up being a better decision.
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