Should I buy a house now, or wait?

Buy now, or wait? That’s the question prospective homeowners struggled to answer throughout 2024, as home prices skyrocketed and the Federal Reserve’s work to tame inflation sent mortgage rates soaring.

The combination has led many would-be buyers to pick the “wait” side of the equation. The median sale price of an existing home in the U.S. hit an all-time-high of $426,900 in June 2024, and while it has dipped a bit since due to seasonality, February’s median of $398,100 was still the highest-priced February ever, according to the National Association of Realtors (NAR). And, according to the February Fannie Mae Home Purchase Sentiment Index, more than three-quarters of consumers — 76 percent — believe it’s a bad time to buy a house.

However, after being at a constant disadvantage for the past few years, things have actually started to look up for buyers in some respects. For starters, mortgage rates are off their 8 percent peak in late 2023, with the 30-year fixed rate averaging 6.76 percent as of mid-February, according to Bankrate’s weekly survey of large lenders. This certainly helps with affordability. In addition, days-on-market figures are up, giving buyers more time to make an informed decision. NAR data shows that homes typically spent 42 days on the market before selling in February, up from 38 days a year ago. And available housing inventory, while still on the low side, has risen significantly — up a healthy 17 percent year-over-year, per NAR.

So, is it a good time to buy a home? Or is it better to wait on the sidelines, in the hopes that either prices or rates see a significant drop soon? And what if there’s a recession? Here are some key considerations to help determine the way forward.

Is now a good time to buy a house?

Mortgage rates have backed off from the highs hit in late 2023, but they’re still elevated. And home prices are sky-high, with NAR’s February data reflecting an incredible 20 consecutive months of year-over-year increases. Together, these factors might dissuade you from buying right now, and that’s understandable.

No matter which way the real estate market is leaning, though, buying now means you can start building equity immediately. It also means avoiding the potential for mortgage rate fluctuations later: Rising rates can wreak havoc on your monthly budget, and they also result in paying more in interest over the life of the loan.

“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.”

“Remember, you ‘marry the house and date the rate,’” Melissa Cohn, regional vice president of William Raveis Mortgage in Connecticut, has told her newsletter subscribers. To put it another way, if you find the right place, buy now — you can always refinance later if rates do drop significantly.

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

1. Do you have excellent credit? Before you start house-hunting, check your credit score. The best deals on mortgages will be available to those with the best scores — in fact, two-thirds of new mortgage borrowers in the third quarter of 2024 had high credit scores above 760, according to the Federal Reserve Bank of New York. 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 a lender offers.
2. Have you saved enough for a down payment? In addition to paying your bills on time, you should be sitting on a sizable chunk of change for a down payment. The more you can pay upfront, the less you’ll have to borrow (and so the less interest you’ll have to pay). Make sure you’ll have plenty left over, too: Lenders like to see additional cash reserves that can provide a cushion if something unexpected happens.
3. Are you planning to stay in the home for a while? Beyond the purchase price, buying a home comes with closing costs that can run thousands more. 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. Selling a home very soon after buying can have serious tax implications.

Should I buy a house now or wait?

Ultimately, the decision of when to buy a home is up to you. Life goes on, whether the timing is perfect or not. If you’re anxious to become a homeowner, you’ve met the criteria above and you’re financially stable, go ahead and start house-hunting.

If you’re holding out for lower mortgage rates after another potential Fed rate cut, well, keep in mind that the past few cuts did not bring lower rates with them.

Your mortgage rate can make a big difference in how much house you can afford over the long run. For example, Bankrate’s mortgage calculator shows that 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 6.5 percent interest rate is $1,770. The same loan at 7.0 percent brings those monthly payments up to $1,863 — $93 higher every month. That’s $1,116 each year, or more than $33,000 over the life of the loan.

Of course, it’s impossible to predict where rates will land eventually. But here are three instances in which it might make more sense to wait out the market for at least a while:

1. If home values in your area are dropping: The country’s overall median home price may be near the record high, but some individual areas have still seen price declines. Such 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 substantially: When there are more properties on the market to choose from, buyers enjoy more bargaining power. Many areas have seen a jump in inventory recently, which certainly helps. But according to NAR, the country overall had 3.5 months worth of housing supply in February — still too low to meet demand.
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 or bonus, 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 improve your credit and pay down your debt so you can qualify for better loan terms.

Analyze your local market carefully

Deciding whether to buy a house now or wait depends a lot on where you want to call home. Regardless of national headlines, real estate is a local game and can vary greatly from one market to another, even within the same state or metro area.

Consider this February Redfin data from North Carolina’s Research Triangle cities of Raleigh and Chapel Hill, only about 30 miles away from each other: Raleigh homes cost a median of $436,250 and spend about 45 days on the market before selling. But in nearby Chapel Hill, the median home costs much more at $522,500 and yet sells in less time: only 28 days. That’s a notable difference.

In today’s homebuying market, it’s more important than ever to find a real estate agent who really knows your local area — down to your specific neighborhood — and can help you successfully navigate its unique quirks.

What if there’s a recession?

Talk of a possible recession has been increasing lately, and as you might imagine, recessions are a risky time to buy a home. If you lose your job, for example, a lender will be much less likely to approve your loan application.

Even if a recession doesn’t affect you directly, if your area is hard-hit, that could have a serious effect on the local real estate market. Fewer people with the means to buy means a lower chance of homes selling, which could keep homeowners from listing and decrease your options as a buyer.

There are some potential upsides to buying a home during a recession, though, if you’re financially able to do so. Notably, there will be less competition, which could help you find a great property that you otherwise couldn’t.

Next steps

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’re able to pay upfront as 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 wait until the market is a bit more friendly to your bank account.

FAQs

• Is now a good time to buy a house?

  We’re in a volatile time for real estate. Prices are hitting record highs, mortgage rates remain stubbornly elevated and some economic experts still believe we could be heading for a recession. A high-interest-rate climate gives you less buying power, so buyers who opt to wait for lower rates may find themselves able to afford a higher-priced house, due to the lower mortgage payments. But there’s no guarantee that rates will go down, even if the Fed cuts interest rates again. Ultimately, whether it’s a good time to buy depends on your personal circumstances. If you need to move now, go for it: Shop around for the best deal possible, and remember, you can always refinance later if rates do decrease.

• Can I buy and sell a house at the same time?

  Yes — lots of people buy a new house while selling their old one at the same time. However, it does create some additional challenges, especially if you’re showing your home while still living in it. It’s important to work with an expert real estate agent who can help you find the right buyer and the right listings to look at. You’ll also want to stay close with your loan officer, to make sure the complexities of putting the proceeds from your sale toward your new down payment are as smooth as possible.

• Is the housing market going to crash?

  Housing experts do not think so. While there is certainly some economic uncertainty swirling right now, most experts believe that the housing market will not crash. Home prices may decline in some areas, but it won’t be catastrophic — think of it as more of a soft landing.