Is 2022 Really the Right Time To Buy a House?
Each month, Andy’s answering a question that he wishes more clients would ask him, addressing timely topics that he thinks are worthy of the spotlight.
Is 2022 Really the Right Time To Buy a House?
I know what you’re thinking:
Housing prices are at an all-time high, Andy, and mortgage rates are skyrocketing.
Why the heck would I buy a house right now?! Surely my best move is to wait for the inevitable crash and purchase during the next recession, right?
Actually, no. I firmly believe that while times have been better for purchasing a home, now is a (relatively speaking) good time to buy. And the data backs me up.
Let me explain why qualified homebuyers shouldn’t wait any longer than necessary to strike a deal.
That crash you keep hearing about? It’s not likely to actually happen.
Many casual observers have noted that conditions now seem very similar to the era directly preceding the 2007 housing market crash — housing prices soaring, exponentially more buyers buying, etc.
As you all know, this period was followed by one of the biggest downturns in the history of the housing market. But you should keep in mind, that was a once-in-a-lifetime event.
The market crash was caused in large part by high interest loans being given to huge numbers of under-qualified recipients. As the market rose, those recipients could no longer make their payments, which of course, led to the bursting of the bubble.
Since then, strict government regulations have been put in place to ensure that these events don’t repeat themselves.
There has also been considerable pent-up demand for housing as Millennials and even some Gen Z-ers start families. We began to see these signs pre-COVID, and while buyers' now want and need different features in their homes, the desire to own doesn’t appear to be letting up yet.
Long story short, there won’t be a massive dip in housing prices anytime in the near future.
What about mortgage rates? Are they going to come down soon?
Unfortunately, according to most analysts, the answer to this question is a firm no.
You don’t have to be a trained financial pro to realize that things are getting more expensive. This is due to several complex factors — rising domestic inflation and uncertainty in Eastern Europe are just a few contributors to rising costs. If these patterns continue, it is likely that mortgage rates will continue to rise for several years. So, if you’re waiting for rates to come down, you’ll be waiting for a while.
It’s actually likely mortgage rates will go up more before they take a downturn.
If you can afford it, now is the best time to buy.
Buying a home is a big purchase. For many, it’s the biggest purchase they’ll ever make in their lives. So, I understand the desire to wait for a better price. But if you’re ready (or needing) to move and you have the proper financial resources, I highly suggest you buy now. Keep in mind, those of you selling a home will likely be getting top dollar for your existing home as well. By acting now, you can sit back and relax in your new home as you watch housing prices continue to rise.
The more important question: Can you afford the monthly payment?
Buying a home is a lot like long-term investing. If you’re planning to live somewhere for the next 10+ years, worrying about buying at a high point is the wrong way of thinking. With long-term investments, you can weather temporary downturns.
If you can afford to buy it now, then buy it. Don’t wait for the housing market to drop. It’s the same idea of waiting to invest in the market for a market dip — the whole time you’re waiting to get in on the action you're missing out on dividends and the potential to grow your investment.
Instead, think of it in terms of a monthly payment. You’ll pay for shelter regardless of if you own or rent. It’s a necessary expense. So, if the monthly expense fits within your financial plan, I say, Go for it!