Should You Give Up on Buying a Home in 2022?

You may want to unless you're in a bad housing situation right now.

A lot of people who had trouble purchasing homes in 2021 told themselves to sit tight and wait until 2022. The thought was that waiting would potentially lead to more real estate inventory and a drop in home prices.

But that hasn't happened. Instead, inventory remains sluggish, home prices remain sky-high, and bidding wars are still a mainstay in the world of residential real estate. Making matters worse, however, is that mortgage rates have risen sharply since the start of the year. So while buyers last year at least got to take advantage of affordable borrowing rates, those are no longer on the table.

If you're having a difficult time navigating today's housing market, you may be wondering whether it pays to push off homeownership plans another year. And while you may not like the answer, in many cases, it's a resounding "yes."

It still pays to wait

If you buy a home right now, you're likely to do the following:

• Overpay for the property you buy
• Settle for at least one feature you aren't thrilled with
• Spend more money on mortgage interest in the course of financing your home

For these reasons alone, it generally pays to give up on buying a home in 2022 and see if inventory picks up in 2023. The main reason home prices are through the roof right now is that there's not nearly enough inventory to meet buyer demand. But once inventory increases, that supply-demand gap should narrow, thereby bringing home prices down. 

Of course, waiting does mean taking the risk that mortgage borrowing will get more expensive. But if home prices come down enough, the savings there may be more than enough to compensate for slightly higher mortgage rates. 

Let's remember, too, that the average 30-year mortgage rate has been sitting at well above 5% for months. So even if the average rate for that loan product nears or hits 6% next year, that's not such a huge stretch from where rates stand today. But if home prices drop 10% due to an uptick in inventory, that's apt to make a much larger difference for buyers all in.

Why you may want to move quickly

Because it's gotten so expensive and difficult to buy a home, the demand for rentals has increased a lot over the past year -- and some landlords are taking advantage by jacking up rents. If that's the scenario you're in, and you're paying a ridiculous amount of money to rent a home where you live, then it pays to look at buying this year. This especially holds true if you have great credit (which could translate to a lower interest rate on a home loan) and a decent amount of money socked away for a down payment.

But unless things change drastically in the coming months, there's a good chance 2022 will end up being a hard year to buy a home from start to finish. And if you wait things out, it could work to your financial benefit.