Lately, I have been speaking to some younger radiologists about what to do in this housing market. Interest rates are climbing. With that, housing prices continue to rise, making homeownership even more expensive. Moreover, many folks want to start a family in a “big-enough” house to meet their needs. But, monthly payments are climbing higher and higher to pay off a 15 or 30-year mortgage. Is it worthwhile to wait, or should you jump right into the housing market? Let’s discuss some of the benefits and disadvantages of delaying vs. waiting so you can make the right decision for yourself.
Reasons Why Buying A Home May Not Make Sense In This Housing Market
You Are Not A Partner Or Tenured Attending Yet
This rule works. You never know for sure what will happen before you can claim the status of a shareholder or partner. I know countless stories of folks buying their houses only to discover that they did not receive their vaunted position. Some, then, feel the need to leave. And, with that, you will probably have to sell your house. Rarely, when this happens, do you make money on the transaction because of all the fees and taxes that you will pay with little or no equity. Even worse, if the market turns bad for sellers, you may not be able to sell your house. So, regardless of the interest or economy, it is usually not in your best interest before you know you will stay in the area.
Higher Payments And Not Enough Down Payment For This Housing Market
Getting a mortgage below three percent in the current mortgage market will no longer happen. So, you can expect your payments to be a lot higher than they would have been just a few months ago. This situation is especially true when you have not built up enough downpayment. So, if you don’t have the cash to make the new payments based on higher mortgage interest, don’t purchase the property. You will become “house poor.” And you will not be able to build wealth so quickly outside of your house.
You May Need To Move Again
Maybe you are thinking about changing jobs. Or, you are thinking about buying a house for your current family, but you are about to give birth to a set of twins. If you have a good chance that you will have to move soon after purchasing your house, it is better to delay the purchase until you know what you will need. Transaction costs and taxes for buying and selling real estate are prohibitively expensive. Moreover, these costs don’t even include the hassle of moving and purchasing a place twice. So, if you need to move soon, you are better off waiting until you know what you want!
Renting Can Be Cheaper Than Owning In This Housing Market
In some situations, renting can be a better and less expensive option than owning a place. In high cost of living areas, especially, buying a home can be unaffordable. Mortgage payments can dwarf what you would pay for a monthly rental. But, you need to do the math to see if it works out this way.
Reasons Why Buying A House Now May Not Be So Bad In This Housing Market
Just Because Interest Rates Are Rising Doesn’t Mean Housing Prices Will Fall
Sure, rising interest rates can affect the demand for housing. However, historically speaking, many periods of rising interest rates have not included a time of declining prices. And that is because housing prices are subject to many other factors such as availability, demand, employment in the neighborhood, and more. So, if you buy a house now, it does not necessarily mean you will lose your shirt even though you are paying more for the house and the mortgage interest.
Yes, Interest Rates May Go Down After Going Up- You Can Refinance!
Just because interest rates are high now does not mean that they will remain the same forever. Remember, buying a house is a long-term purchase, and you will likely own it through higher and lower interest rate environments. So, you may have the opportunity to decrease the interest you pay later. The longer you hold on to your house, the more likely that this situation will happen to you.
You Need A Place To Live- So Why Not Build Equity?
Perhaps, you have a family and need a decent-sized place to live now. Sure, you could find a rental now. However, if you have a stable situation, it may pay to build equity in a house. Of course, that assumes that you have saved up for an emergency fund, home down payment, and paid off a significant chunk of your loans. But why not build roots and own something if it makes sense?
You Are In A Stable Situation
Maybe you have become a partner or have loads of family around, and you know that you will be around for a very long time. The longer you stay in one place, the more likely you will ride out any downturns in the housing market. And the more likely that you will come out ahead when you finally decide to move.
Should You Pull The Trigger In This Housing Market?
Waiting to buy a house or purchasing a home is a personal decision based on many factors, some of which I have listed above. So, consider the amount you have saved, your job situation, your family, and the deal you will get when making this decision. Currently, buying a house is not a simple decision as interest rates and prices are relatively higher, but it can make sense!