Buy now, or wait until 2024? That’s the question prospective homeowners are struggling to answer in
today’s housing market. Home prices skyrocketed throughout the pandemic, and the Federal Reserve’s
work to tame inflation has sent mortgage rates soaring, too. That combination is leading many would-be
buyers to pick the “wait” side of the equation. In fact, according to the Fannie Mae Home Purchase
Sentiment Index released at the close of 2022, only 21 percent of consumers believe it’s a good time to
buy a house.
However, things are starting to look better for buyers in many parts of the country. A January
2023 report from real estate company Knock predicts that 36 U.S. markets will become buyer’s markets
by the end of the year — including plenty of desirable places like Phoenix, Denver, Dallas and Las
Vegas. Prices are already starting to decline, or at least to increase at a lower rate, and many experts
foresee that remaining the case all year.
So, is it time to buy a home? Or is it better to wait on the sidelines in the hopes that prices or rates see a
significant drop soon? The decision ultimately comes down to your finances. Here are some key
considerations to help determine the way forward.
If you buy now, you can start building equity immediately. That’s true no matter which way the real
estate market is leaning at the time. A key point for today’s market, though, is that buying now means
avoiding the potential for additional mortgage-rate increases later.
“If a buyer finds a property they would like to call home, they should not delay,” says Stacey Froelich, a
broker with Compass in New York City. “You cannot time the market, and a home should be a long-term
investment. In the end, higher mortgage rates will cost a buyer more monthly if they are financing.”
Rising rates can spell serious trouble for your monthly budget. For example, on a $450,000 30-year
loan with a 6.5 percent interest rate, the monthly payment is just over $2,844. If that rate jumps to 7.5
percent, the payment leaps to more than $3,146. Plus, you’ll wind up paying a lot more in interest over
the life of the loan.
In general, if you can answer yes to these three questions, now is the time to buy.
Anytime you’re borrowing money, start by reviewing your credit report and your credit score. The best
deals on mortgages will be available to those with high credit scores of 740 and above. If you have
demonstrated that you are a low-risk borrower with a history of on-time payments, you’ll be in line for
the lowest mortgage rates that a lender offers.
In addition to paying your bills on time, have you managed to save a fair amount of money, too? If you
are sitting on a sizable chunk of change that can make a big dent in your down payment, now is a good
time to buy. Make sure you’ll have plenty left over, though. Lenders feel more comfortable loaning you
money if you have additional cash reserves that can provide a cushion if something unexpected
In addition to the purchase price, buying a home comes with closing costs that can run between 2 and 6
percent of the property’s price. So, to justify those one-time transaction costs, it’s wise to be reasonably
certain that you won’t move again anytime soon — or that you’ll be financially stable enough to hold on
to the property and rent it out.
If you want to become a homeowner but are waiting for mortgage rates to decline, a bit of patience
might be in order. Fannie Mae predicts that 30-year mortgage rates will average 6.3 percent throughout
t 2023 before falling to 5.7 percent in 2024.
While six-tenths of a percentage point might not sound like much, it can make a big difference in how
much house you can afford over the long run. For example, if you buy a $350,000 home with a 20
percent down payment, the monthly payment for principal and interest on a 30-year loan with a 6.3
percent interest rate is $1,733. The same loan at a 5.7 percent interest rate brings those monthly
payments down to $1,625. That’s more than $100 of savings each month — adding up to more than
$1,200 a year, or $36,000 over the life of a 30-year loan.
Of course, it’s impossible to predict where rates will really land by the end of the year, but here are three
instances in which it might make more sense to wait out the market:
If you looked at the market in the late spring of 2022 and opted to wait, you probably made a wise move
— in many areas, that was the pricing peak. Since then, some metro areas have seen significant drops in
median sale prices. A January 2023 report from Redfin shows that prices in San Francisco dropped by
more than 10 percent at the end of 2022, and other big-ticket cities, including Los Angeles, Seattle,
Boston and even New York, also saw price declines. Those declines may not be done yet, so it could pay
to be patient for a bit longer.
When there are more properties on the market to choose from, buyers enjoy more bargaining power.
Since a lot of buyers have been sitting on the sidelines due to the interest rate environment, many areas
are seeing a jump in inventory. According to National Association of Realtors data, the country had just
2.9 months worth of housing supply in December — still very low, but up more than 10 percent from the
The biggest reason to wait is if your current financial situation is not ideal. For example, if you are
expecting a sizable commission check, an inheritance or some other windfall that would make a big
difference in your down payment, waiting until it arrives makes sense. And if your credit score is low,
waiting is also smart. Take some time to pay down your debt and improve your credit so you can qualify
for better loan terms.
Deciding whether you should buy a house now or wait ultimately comes down to where you want to call
home. Regardless of national headlines, real estate is hyper-localized and can vary greatly from one
market to another.
Consider this January data from Redfin: In Milwaukee, the median sale price of a home rose by 4.3
percent in the past year, and the typical home sits on the market for 55 days. But just a couple hours
south in Chicago, home prices dropped by more than 5 percent in the same time frame, and the typical
home sits on the market for a much longer 90 days.
In today’s market, it’s more important than ever to find a local real estate agent who can help you
successfully navigate the process. “The right broker will be privy to what inventory might be coming to
market or a particular situation with a seller or building,” says Rachel Glazer, a broker with Compass in
New York City.
Trying to buy a house right now might feel overwhelming, but waiting too long can present challenges as
well. Review your finances in detail, and think about how much you can save up for a down payment. Be
sure to take the pulse of the town in which you’re hoping to live. Then, talk with an experienced local
real estate agent to figure out whether you should buy now or hang tight until the market is a bit more
friendly to your bank account.