House Hunting: The Art of Timing and the Cost of Waiting

  • September 27, 2023
  •   •  
  • 3 min. read time
House for sale. A stunning real estate photograph of a suburban

When it comes to investments, a lot of folks say that timing is everything. Sounds good on paper, right? But let’s be real, when you’re thinking about making a big investment like buying a house, trying to time the market is like chasing a unicorn. Sure, we all wish for a world where both interest rates and house prices are in the basement, but that’s about as rare as a shooting star.

Remember the big housing price drop in 2007 during the Great Recession? Yeah, that was a rollercoaster. And then in 2020, the pandemic made home prices play hide and seek. But apart from those blips, it’s mostly been business as usual.

Of course, home prices have their ups and downs, driven by stuff like the overall economy, interest rates, and what’s happening in your neighborhood. Speaking of interest rates, those are like the secret sauce controlled by the Federal Reserve. They’re the only ones who really know what’s up with interest rates, and they sometimes have to do some last-minute tweaking.

But hey, no worries, right? You’re thinking of waiting it out until houses are raining from the sky, and interest rates are so low you’d think they’re on clearance.

But what if that never happens? What if mortgage rates decide to do a rocket launch to the moon instead? Housing inventory could become scarcer than Bigfoot sightings. And as for prices, well, they dance to the beat of their own drum.

Bottom line, market timing might sound good in theory, but while you’re waiting for the perfect alignment of stars, someone else might snatch your dream home.

The Waiting Game

Putting off a big money move like buying a home can make sense sometimes, like if you need to work on your credit, save up for a down payment, or build an emergency fund. But if you’re just twiddling your thumbs waiting for the stars to align in the housing market, it might be time to consider the cost of playing the waiting game.

In this world of rising inflation, the price tags on everything keep going up. Unfortunately, that can eat into your housing budget, leaving you with less cash to put down on your dream pad.

And remember, a home is like any other product on the shelf—it’s not immune to price hikes. While some markets have calmed down a bit in the past year, nobody can say for sure if that trend will stick around. The wild card here is interest rates. If they take a nosedive, demand could spike again, and the epic house bidding wars of 2021 might make a comeback. So, no guarantees of lower prices there.

On the flip side, if interest rates decide to climb, there might be less competition in the market, but those rates will gnaw away at your housing budget. They can even tack on extra bucks—sometimes hundreds—to your monthly mortgage payments.

Renting Costs

Now, let’s talk about your current housing situation. If you’re renting, you’re basically paying someone else’s mortgage (your landlord’s), and you’re probably dealing with annual rent hikes.

So far, this year has seen average rent increases of around 3.3%, according to NerdWallet. But in some places, like Hartford, Connecticut (7.3%), Buffalo, New York (6.3%), Chicago (6%), and Boston (5.8%), rent hikes are way steeper.

One of the perks of owning a home is that your monthly mortgage payment stays put if you’ve got a fixed-rate loan.

And here’s another nifty thing about mortgages: You can refinance them. It’s like giving yourself a safety net. You can buy a home now to cash in on lower prices and less competition, and then refinance whenever interest rates decide to play nice.

And trust us, interest rates will eventually behave. The real estate market operates in cycles, and this interest rate party won’t last forever. When it’ll end, though, is anyone’s guess.

Don’t forget, that homes tend to appreciate over time, even if they take a few price dips here and there. Just look at the median price of homes sold in July—it hit $406,700, according to the National Association of Realtors, and that’s with interest rates at 7.3%!

Ready to Make the Move?

So, if you’ve got your financial ducks in a row but you’re waiting for the perfect moment to buy a home, consider that the right time might be right now. You can always refinance down the road, and you don’t want to miss out on your dream home if rates or prices decide to do a moonwalk.

Got more questions? Click here to chat with a Preferred Rate Mortgage Advisor in your area. They can fill you in on your unique financial situation and what’s cooking in the housing market.