Only 25% of Americans Think Now Is a Good Time to Buy a Home

A young man and woman speaking with their realtor who's holding a tablet in an open house.

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Are buyers needlessly pessimistic, or are they on to something?

Key points

  • Fannie Mae reports that most people don't think it's a good time to buy.
  • Rising mortgage rates, low inventory, and high home prices are all factors in that sentiment.

While 2021 may have been a challenging year to buy a home, so far, the same seems to hold true for 2022. And Americans largely agree.

Only 25% of Americans think now is a good time to purchase a home, according to the January Fannie Mae Home Purchase Sentiment Index. Not only that, but last month's index fell to its lowest level since May 2020.

Why the pessimism on home buying?

There are several reasons that make the start of 2022 a less-than-ideal time to enter the housing market as a buyer. For one thing, home prices are still extremely high. That's made buying a challenge for those on a budget.

Secondly, housing inventory is extremely limited, and that's giving buyers fewer homes to choose from. It's also putting buyers in a position where they need to engage in bidding wars to get an offer accepted. But bidding wars are notorious for raising home prices, which helps explain why homes are so expensive today.

What's more, we're starting off 2022 with higher mortgage rates. In fact, rates have been higher over the past few weeks than they were at any point in 2021.

Last year, prospective buyers with great credit who qualified for low interest rates on their mortgages could use those low rates to help offset higher home prices. But as 2022 moves along, that's becoming increasingly less feasible, with rates climbing from week to week.

To be clear, mortgage rates are still competitive from a historical standpoint. But when we compare today's rates to the record-low rates we saw from mid-2020 through the latter part of 2021, they seem high. And that's apt to be a big reason why buyers are less enthusiastic about the prospect of house hunting in today's market.

Should you buy a home today?

If you're in the market for a new home, buying today could mean locking in a relatively affordable mortgage rate before rates climb further. At the same time, though, it could mean paying a premium for a home, whereas waiting a few months might result in home prices coming down.

A big reason homes are so expensive right now is that buyer demand is still strong. But as mortgage rates climb, buyer demand could wane, driving property prices downward. Therefore, you might really need to ask yourself: Do I want to lock in a lower interest rate now on a higher-priced home, or possibly lock in a higher interest rate on a lower-priced home?

To be clear, we don't know for sure that rates will climb and home prices will come down later on this year. But there's a good chance that will happen.

Of course, if you're not confident in your ability to afford a home right now, then you should absolutely hold off on buying until you're able to shore up your finances a bit more, or sock away more funds for a down payment. Regardless of what the general public thinks, if you have any reason to believe right now is a bad time for you to buy a home, then that's the advice you should heed the most.

Our Research Expert