4 Reasons Why Graham Stephan Says Now Is the 'Worst Possible Time' to Buy a Home

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  • Graham Stephan is a real estate investor, finance expert, and YouTube personality.
  • He recently said 2022 is the worst time to buy a home, offering multiple reasons why you shouldn't buy a property now.
  • Mortgage rates are high, it's expensive to buy otherwise, and if you have to sell soon after, it will be difficult to turn a profit.

Thinking of buying a home soon? You may want to reconsider.

Graham Stephan is a popular YouTube personality who offers lots of financial advice. He's also a real estate investor, so you might expect him to be a fan of purchasing properties.

Recently, though, Stephan wrote on Twitter, "Now is one of the worst possible time [sic] to buy a home." He went on to explain on his Substack exactly why purchasing a property in 2022 may not be a good idea.

1. Mortgage rates are really high

The most obvious reason why would-be home buyers may want to put off purchasing a property is the fact that mortgage rates are really high right now. In fact, as Stephan explained on Twitter, "30-year mortgage rates have just crossed 7%!"

While this may not seem terrible if you're used to credit card interest rates -- which tend to be upwards of 15% -- the reality is that it's substantially more expensive than mortgages have been in recent years. Stephan provided some numbers to show just how dramatic this rate increase is.

"For some context on how bad this is, for a $500,000 mortgage, you end up paying nearly $439,000 more over 30 years as the interest rate increases from 3% to 7%," Stephan said. "That's around 90% of the total mortgage value!"

Rates were below 3.00% for much of the early stages of COVID-19, and a rate this high is a dramatic increase. The good news is, if rates drop, you could refinance later. But if you have flexibility in when you purchase a property, Stephan is right in suggesting you may not want to take out such an expensive loan right now.

2. Many people regret rushing to buy a home

In his Substack newsletter, Stephan offered some other reasons why 2022 isn't a good time to buy. Specifically, he warned many people end up rushing to purchase a property -- especially if they already locked in a lower rate with a mortgage lender before rates rose, or if they are enticed by the fact that sellers seem to be lowering their prices.

However, he said rushing could lead to regret, with 75% of home buyers wishing they'd made a different decision if they were too quick to move forward. Stephan warned that you should take the big picture into account, including extra expenses and responsibilities, before deciding if moving forward is right for you.

He's absolutely right to suggest waiting until you are certain you are ready because homeownership is an expensive commitment, and it can be hard to sell without losing a fortune if it turns out you weren't really prepared.

3. There are big opportunity costs to buying

Stephan also pointed out the opportunity costs associated with purchasing a home, including the fact you won't have as much money to invest if you're tying a lot of your cash up in a property purchase.

Now, he did say that a house can be a good investment. But, he said that some expenses (such as transaction costs and repairs) don't necessarily offer you a return. If you aren't prepared to make other investments while also covering housing costs, you could be giving up a lot of investment earning power.

4. Selling at a profit may be difficult

Finally, Stephan warned it could be hard to sell at a profit now.

"The last two years have been crazy, with supply chain blockages and labor shortages, and lack of housing inventory pumping up home prices to extraordinary levels, meaning that anyone who had bought a home before the COVID crisis would have made huge profits by flipping their houses two years later," Stephan said. "But this rapid increase in rates is not sustainable, and we're not even talking about the real cost of buying a house which is in the transaction itself."

On this point, he's absolutely right in suggesting that it's unlikely prices will keep rising like this forever.

You should be sure to take these four reasons into account when deciding if you should buy in 2022. You don't want to end up regretting your choice if you make a hasty decision or stretch to spend more than is comfortable for your budget.

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