73% of Americans Think It's a Bad Time to Buy a Home. Here's Why They're Right

Today's housing market is a glaring challenge for many reasons.

Prospective home buyers have been struggling with a tough housing market since the middle of 2020. And things have only seemingly gotten worse since then.

Each month, Fannie Mae releases a survey to gauge home buyer sentiment. In its March report, 73% of respondents said that now's a bad time to buy a home, and only 24% felt that today's market is friendly to home buyers. Unfortunately, those thinking it's a bad time to buy are spot-on for these key reasons.

1. Home prices are up

The demand for homes has been very strong for the past year and change. And that's driven the price of properties way up.

In February, the median existing home sale price was $357,300, according to the National Association of Realtors (NAR). That represents a 15% increase from a year prior. It also marks 120 consecutive months of year-over-year price increases, which is the longest-running streak on record.

Clearly, higher home prices go hand-in-hand with affordability issues. Many first-time buyers in particular are finding it difficult to break into the housing market.

2. Housing inventory is lacking

In February, the inventory of available homes for sale sat at just 870,000 units, according to the NAR. That represents a 1.7-month supply of available homes.

A more common supply is four to six months' worth, and in that scenario, it creates a more equalized housing market for buyers and sellers. Right now, that glaring lack of inventory is giving sellers a clear upper hand, and buyers who want a property have no choice but to pay the sky-high prices sellers are demanding. 

3. Mortgage rates are rising

Although home prices have been high for well over a year, during the latter part of 2020 and all of 2021, buyers were able to take advantage of low mortgage rates. But interest rates have been climbing since the start of 2022, and they rose a lot in March.

Now, the average 30-year mortgage rate is hovering around 5%. Historically speaking, that's not the highest rates have gone -- not even close. But in the context of recent years, that's not exactly a competitive rate. And when you throw expensive borrowing rates on top of inflated home prices, you get a scenario where many buyers simply have to bow out.

Should you buy a home today?

Today's housing market is a tough one -- even if you're a relatively strong borrowing candidate. If you can swing a home at today's prices and want to move forward with plans to buy, by all means -- go for it. But pulling out of the market and waiting for things to cool off is a move that might serve you better financially.

Remember, even if you can afford a home at today's prices and borrowing rates, what happens if home values plunge in a few years just as you need to sell? At that point, you could end up taking losses. That's why it could pay to sit tight and wait for property values to come down -- which may happen as mortgage rates continue to climb.