To buy a house or wait: That is the question on many people’s minds. You don’t have to look far to see many news articles about housing affordability concerns amid elevated interest rates and the prospect of a recession. But do all these trends mean that it’s not a good time to buy a house? Ultimately, the decision depends the most on your financial situation. At the same time, market conditions do matter, which should also factor into your decision.

If your finances and long-term goals require you to move, then housing market conditions can help or hinder the process. At the same time, every market has particular challenges and advantages for buyers and sellers. This makes it paramount to examine the situation as a whole to come to the best decision for you.

What Should I Consider Before Buying a House?

1. Finances

When it comes to buying a house, there is a general rule of thumb: the stronger your financial profile, the less other factors matter. Suppose you have adequate savings, a stable income, an excellent credit score, a low debt-to-income ratio, and enough money for closing costs and a 20% down payment.

In that case, you have a better chance of buying a house under diverse circumstances. However, external factors like interest rates can affect your fixed-rate mortgage payment, but the more you can put down, the less you will pay, especially if you put enough down to avoid mortgage insurance.

Mortgage trends play a major role in making homeownership accessible. After all, the majority of homebuyers borrow from a lender.

Higher interest rates increase mortgage payments, which can price buyers out. On the other hand, lower interest rates make buying a house more favorable due to lower monthly mortgage payments.

If you are borderline on affording a house, an increase in rates can become a roadblock. To combat this, your state and the federal government have programs to help borrowers with lower incomes buy a house. While there are restrictions, these deals can help more people become homeowners despite challenging times. Special mortgages, like an FHA loan, are geared to assist first-time homebuyers with a home purchase.

  • Did you know: 1% down mortgages just became available. Trends have pointed to making homeownership more accessible through loan subsidies too. It pays to check out these options to understand your full potential.

3. Housing Market Conditions

Are you in a buyer’s or seller’s market? These conditions can affect how much leverage you have. Here are just a few factors that affect the market:

4. Inflation

This “raises” home prices because the dollar is worth less than before. Inflation can slow down home sales because of affordability concerns, especially when wages haven’t caught up with the new prices. Even when a list price looks higher than in years prior, it retains the same home value but with inflation factored into the equation.

5. The Season

In Spring and Summer, things tend to “heat up” as many people see these seasons as prime time to move. At this time of year, there are more interested buyers, so more sellers list to try and get top dollar.

But suppose you want less competition as a buyer. In that case, winter and fall can also present opportunities for you, giving you more leverage if the seller is also on a time constraint, such as trying to avoid foreclosure or needing to time a move right for their own needs, like buying a new construction home.

6. Interest Rates

Lower rates mean more affordable mortgages, while higher interest rates make mortgages more expensive. This influences buyer behavior and who the market favors.

7. Housing Inventory

Now, this is the “sneaky” factor that can significantly influence price due to the tried and true rule of “supply and demand.” If fewer homes are available, even elevated interest rates can’t lower home prices too much since the value of a home is also in its rarity. On the other hand, if there are a ton of homes on the market, sellers must compete for buyers, which often means lower prices.

8. Local Market Conditions

Each housing market has unique stats like price trends, inventory levels, and demand. If you plan to move to a new location, you can either be at an advantage or a disadvantage.

For example, if you have a high-paying remote job and want to move to a market with lower property values than your current area, you will have an easier time finding a dream home you can afford. If you need to move to a more expensive market, you need to be more careful in your home search — or compromise by commuting.

Consider Buyer’s Market vs. Seller’s Market

All the factors in the previous section combine to create what the real estate industry calls a buyer’s or seller’s market. In a seller’s market, the conditions favor homeowners who want to sell their homes. In a buyer’s market, buyers have more leverage and can call more shots.

If you are a renter looking to buy a home, then a buyer’s market will benefit you more since you only need to worry about that side of the transaction. However, if you are a homeowner looking to sell an existing home and buy a new one, you need to balance the pros and cons of selling in a buyer’s market with buying a new home.

Oddly enough, buyers can use a seller’s market to their advantage. When more people are priced out of buying, it gives qualified homebuyers more leverage in negotiating upgrades and closing cost help, making the higher house price and mortgage worth it.

In all markets, working with a real estate agent ensures you get the best deal regardless of interest rates, trends, or what side of the transaction you are on.

Personal Circumstances

Consider your situation the “wild card” factor determining whether it’s a good or bad time to buy a house.

Maybe you got a dream job offer with a substantial raise. This particular circumstance makes a “bad” market matter less. You can even get an advantage because there are fewer buyers in a seller’s market.

Or, maybe your current home isn’t meeting your needs. This can be a wide range of factors related to your commute, the size of the house, surrounding amenities, and more. Buying a new home, even in a “bad” market, can improve your lifestyle and even cost almost the same if you make strategic changes like shortening a commute or moving near parents offering free childcare.

On the other hand, if you plan on moving in a couple of years, trying to sell a home after needing to build more equity can be a risk. It’s probably better to rent. Also, if you’re in a stage of life with heavy responsibilities, then moving may be too difficult to manage in your season due to sheer logistics. However, you can simplify things through Marketplace Homes’ new construction home solutions, which eliminate the need to move twice and can even turn your first home into a rental!

Should I buy a house now?

Ultimately, the decision to buy a house will be based on your circumstances and goals. It is vital to consult with a financial advisor and a real estate professional to get personalized advice on whether you should buy a house or not. Getting the ball rolling with a mortgage lender can also give you a good idea about where you stand financially before you start looking for a home. For more homebuying tips, follow the Marketplace Homes blog!