If you find yourself in the market to purchase a house in 2022, you are probably asking yourself if it’s a good time to buy a house. That’s a fair question. With rising interest rates, inflation, and home prices, it can feel like the card are stacked against you.
However, there are opportunities in every market and economy to buy a house.
Is it a good time to buy a house in 2022?
If you are currently shopping for homes, assessing whether it’s a good time to buy a house starts with whether you should buy one in 2022. The answer to this question depends on you.
What’s your reason for wanting to buy a house. What’s motivating you to want to stop renting. These are key questions you need to answer.
If you are tired of renting because you feel like you are wasting your money, or you are tired of not being able to make the house your own, that’s not going to change.
If you chose to continue renting:
- Gas will still be high
- Inflation will still be increasing
- Food will still be expensive
- Rent can still go up
- You still have to pay a house not each month
Whose house note will you pay? Your’s or the landlords.
If you decide to purchase a house you have to deal with that as well:
- Interest rates are higher than last year
- Home prices continue to rise
- Inventory is still low
When Is It A Good Time To Buy House?
The truth, it can be a good time to buy a house in any market, and it can be a bad time to buy a house in any market. Determining whether or not you should buy a house is less about the market and more about your personal situation.
Are you able to afford buying a house?
This is the biggest question you have to ask yourself. This is why it’s so important to set a monthly budget so you know what you can and can’t afford.
Factors to consider when buying a house:
- Can I afford the monthly payment?
- Do I have a down payment?
- Is there room in the budget for home maintenance expenses?
- Do I plan to live in the house for the next 5 years?
- Is my employment stable?
- Will still have money left for emergencies after closing?
You should be asking yourself these types of questions when purchasing a home regardless of the economy or housing market. Making a good financial decision starts with planning.
The best way to know that you are ready to buy a house is that you have a financial plan and you can stick to it.
Why Now Is a Good Time to Buy a House
If you listen to the news or your brother’s friends cousin who bought a house in 1979 or 2008 or 2015, you may walk away discouraged. You have to be careful listening to people telling you that you should or should not buy a house.
As we’ve already discussed buying a house is a personal choice. It needs to be backed up with a plan and a budget. If you’ve run the numbers and think you are ready here a few reasons why it’s a good time.
Rent is Still Wasted Money
If you are paying rent every month, you are still paying a mortgage it’s just not yours. Now understand, there is nothing inherently bad about renting.
Renting is a great way to get out on your own, and begin to build your life. However, if you’ve been renting for more than a couple of years ask yourself if this is the best financial move for you.
Cons of Renting:
- You don’t build equity
- Rent payments increase over time
- No Remodeling or making the house your own
- Strict rules from the landlord
- It’s not yours
Renting is still going to be renting no matter what the housing market does. While you may be locked into a lease right now, rent prices will rise with the rest of the market.
As inventory raise rent, you’ll begin to feel the impacts of a higher rent payment each month. However renting isn’t all bad, here’s some pros of renting:
Pro’s of Renting
- No maintenance costs
- Easier to move
- No property taxes
- Less responsibilities and liability
Interest Rates Are Still Low
You might think I am crazy right now. It’s all over the news and interest that interest rates are rising faster than they ever have. This is true, but they are rising from the lowest that they have ever been.
Though interest rates have risen much higher than they have been in the last two years, they are still normal for most of history. The low rates we’ve seen over the last 10 years are rare and have never happened before.
In fact those low rates are a major reason we are seeing the inflation skyrocket the way that it has. Interest rates in the 5 percent to 6 percent range are still normal.
What’s even better is that when you own your own house, you can refinance it rates ever do fall. Many mortgage experts are predicting that interest rates will come back down at some point in 2023.
So don’t let these rates scare you from purchasing a house as long as you can afford it.
The Market is Slowing Down
The housing market for the last two years has been crazy. Multiple offers, paying ten’s of thousands of dollars over the listed price, and no inventory have benn the norm.
This created a problem for homebuyers, especially first-time home buyers. However, now with the correction we are seeing in the housing market, things are slowing down.
With the housing market slowing down, you’ll have more opportunities to find the perfect home.
Benefits of the Housing Market Slowing Down:
- More homes on the market
- Less offers per house
- Homes are less expensive
As the market slows more and more, you’ll be able to find good deals on homes in your area. A slow down isn’t a need to panic. A slow down isn’t a crash. Be patient and know your budget.
Why Now Is Not A Good Time to Buy a House
So, what are some reasons that make it tougher to buy a house now than before?
Inflation and Looming Recession
The cost of everything we need is more expensive today than it was a year ago. Gas, groceries, household goods, (maybe not toilet paper) utilities, insurance… everything.
This has an effect on your budget and what you have available to spend on your mortgage each month. This is why having a monthly budget and sticking to it is so important.
However there is no doubt that if you are having to pay an extra $400 or $500 (maybe more) just to live that’s going to hurt your wallet. If you aren’t currently paying rent or having to cover these expenses it may be better to wait.
The Housing Market is Still Hot
Even though we are seeing a slow down in the housing market, it’s a slow down from a boom period. The slow down is going to help us get some much needed inventory on the market, and provide more opportunitie.
We are unlikely to see homes lose their value. In fact most of the economist predict that homes are still going to appreciate over the next few year, just at a single digit pace.
When you have a hot housing market, you are less likely to get offers accepted if they aren’t full price or over asking price. Homebuyers who are financing their homes are also at a disadvantage to cash buyers.
Sellers May Not Sell
If potential sellers were able to buy or refinance their home at a record low interest rate, they will be less likely to sell their home. With mortgage rates at 10 yr highs, and the price of homes up it might be better for them to wait.
The flip side to this is that they can likely sell their home for more than they paid for it, but whether or not that’s worth it will depend on each person. Many people may choose to keep their homes because of the low fixed costs.
How to Prepare To Buy a House Right Now
So now that you’ve seen the pros and cons of buying a house right now, is it a good time for you? If you think it is let’s talk about how to properly prepare.
1. Set a Budget
The most important part for you to do is set a monthly budget. It doesn’t matter if you are buying a house in the best of times or the worst of times, if you don’t know how much you are spending each month, you don’t really know what you can afford.
Netflix, restaurants, weekend trips, they all eat away at your monthly income and you need to make sure you have them recorded. Chances are if you are going to buy a house, it’s going to cost you a little more each month than you currently spend. Set a budget and get clear on what you can afford.
2. Understand Your Market
Do some research on your city, town, or subdivision you want to buy in. Understanding what’s happening in your local market will help you win the house you love and get the best deal.
Questions to ask about your market:
- How long our houses staying on the market before they sell?
- What percent of homes are seeing price cuts?
- Is inventory starting to increase or decrease?
These questions can help you find areas where you might have an advantage and will help you in negotiation. A local real estate agent should be able to help you with this data as well
3. Get Pre-Approved
Getting pre-approved before you start looking at houses is more important now than ever. Interest rates are higher now than they have been. Home prices have also increased and even insurance is more expensive in many places.
All of these things mean that your mortgage payment is likely to be more than it was even six months ago. By working with a reputable mortgage lender, you can get an idea of what your next house is going to cost you. In addition you’ll be able to set the proper budget and look at homes in the right price range.
Good or Bad The Right Time to Buy is About You
The bottom line when it comes to what you should do, is it’s up to you. If you have a legitimate need or desire to buy a house, buy one.
But…
Do your homework. Know your budget, know your market, and plan. Be prepared to stay in the home for a while, and be ready to refinance if rates job by keeping your credit solid.
If you do these things you’ll put yourself in good shape at a time when you have less competition to buy.
