Should I buy a house now, or wait?

In general, if you can answer yes to these three questions, now is the time to buy.

1. Do you have excellent credit?

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.

2. Have you saved enough for a down payment?

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

happens.

3. Are you planning to stay in the home for a while?

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.

Should I wait to buy a home?

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:

1. If home values in your area are dropping

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.

2. If inventory in your area is increasing

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

year before.

3. If your personal finances could use some love

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.

Examine your local market carefully

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.

Bottom line

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.