Michelle Singletary Says Don't Buy a Home Right Now. Here's Why

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  • The combination of rising interest rates and high home prices make purchasing a home far more expensive than it was this time last year.
  • Until all your ducks are in a row, buying a home now can lead to financial distress.

If you can wait it out, you're likely to spend less for a new house.

Michelle Singletary has written the nationally syndicated column "The Color of Money" for more than 25 years. After spending a quarter of a century writing about personal finances, Singletary knows a thing or two about financial stability. Here's why Singletary says now is a bad time to buy a home:

High home prices and rising interest rates create an (im)perfect storm

Rising interest rates combined with sky-high housing prices make today the wrong time to take on a mortgage. If you're currently in a home that's too small, Singletary suggests finding a way to make it work until the housing market improves for buyers. Let the kids share a room, or take the dog for a walk if you don't have a yard. In other words, compromise until the ball is back in the buyer's court.

For those of us who crave instant gratification, that piece of advice can be hard to swallow, but not as difficult as Singletary's next suggestion.

Singletary says that moving in with a parent, sibling, or someone else you're close to is a great way to get your finances in order. In fact, she says she's a huge believer in shared housing and multigenerational living situations.

Singletary says, "If you're just out of college and living with parents, stay, stay, stay until rents and housing prices stabilize."

The finance guru admits that people hate when she makes this suggestion. Still, it can work.

An emergency account is essential

Although Singletary and her husband both work, she says she's always planning for the next pandemic, job loss, or other emergency. If you don't have enough put away to carry you through a period of unemployment, you're not ready to purchase a home.

How much you need in an emergency account varies, but a good rule of thumb is to have enough put away to pay six months' worth of bills. If you're a worrier, you may want more.

Your credit score can make all the difference

The difference between a high credit score and a middling credit score makes a huge difference when it comes to buying a house. According to World Population Review, the median price of houses sold in 2022 is $428,700. Let's say you put 20% down on a house costing that much. That would be $85,740.

You've got a great credit score, so you're offered an APR of 5.5%. With a property tax bill of $5,000 per year and homeowner's insurance running $1,200 annually, your monthly mortgage payment would be $2,464.

However, with a weaker credit score, your APR might be closer to 8%, making your total monthly payment $3,033.

It's in your best interest to boost your credit score as much as possible before heading out to house hunt.

Signs point to a cooling market

Per The Washington Post, the number of homes on the market during the week ending July 9 was 28% higher than the number on the market the same week last year. In addition, more homes have been listed this year in 13 of 16 weeks.

There's no doubt that homes continue to sell quickly, but in some areas of the country, they are staying on the market longer than they did last year. In more than three-fourths of the markets analyzed by Redfin, more than 25% of sellers had to drop their asking price in June.

The bottom line is this: If you don't have to buy a home right now, wait it out. If you do, make sure you'll still be on solid financial footing -- even after the mortgage is signed.

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