Should I Buy a House Now or Wait Until 2023?
As we begin 2022, most people are making resolutions of some sort. These could be as simple as drinking more water or reading a certain number of books, but many people also have large financial goals like buying a home. Recent years have seen the prices of homes rise sharply, and some people worry about if the market will crash or if they can get a better deal by waiting until 2023 or later. If you’re weighing a decision like this, you’ll need to consider not just the larger real estate market but also when homeownership makes sense for you. As you look for homes for sale in Champions Gate, we’ve compiled everything we know about when to buy a home and how to make that decision.
Real Estate in 2022
You may have heard people casually say things like we are currently in a seller’s market or that interest is low but prices are high, but what does that really mean?
Coming into 2022, sellers do have a distinct advantage. Demand for homes is high and supply is low, meaning that they are in control of a desirable asset. Not only does this mean that homes can be priced at the top of their value, but most listings are under contract very quickly, and bidding wars may even be a part of the process. In most scenarios, buyers will need to be fast in their decision-making and ability to go above the asking price or take on closing costs themselves.
But it’s also a good time to be a buyer when it comes to interest rates. These rates are not set by the government, but the economy’s general health has a huge impact on them, and they are currently extremely low compared to recent years. This means that when you take out a mortgage loan, your monthly payment may be lower, and you will pay less money over the life of your loan.
Will Prices Go Down?
One of the main reasons people may hesitate to buy a house today is that prices have climbed in the last few years, and this sometimes leads to a crash later where prices decline sharply. This is part of what happened in 2008 that led to the recession and a large number of foreclosures. Because of this history, a number of regulations have been put into place to prevent this from happening again and devastating the economy.
Experts believe that prices in 2022 will not drop significantly over the next year, and they may continue to rise. But while prices are not expected to drop, the rate of price growth is expected to slow to well below average. According to Fannie Mae, year-over-year inflation will drop to 4.4% in the second quarter of 2023 and 2.9% by the end of the year. This is about half of the normal rate as of 2019, before the COVID-19 pandemic began.
The floor for prices has been permanently raised, so you shouldn’t expect to see houses below the value they have been listed for today, but the same rate of growth will not continue into 2023.
Will Interest Go Up?
The year 2021 saw an all-time low in the average 30-year fixed mortgage rate, coming in a 2.65%. With this in mind, it’s inevitable that mortgage rates will rise, but the question is how much and when. The average rate rose about 0.5% in 2021, and about the same rate of growth is expected this calendar year. The expectation is for rates to gradually drift higher as the year progresses, in part due to the Federal Reserve’s plan to speed up the unwinding of the bond market and raise short-term interest rates.
Market experts are estimating rates in the range of 3% to 4% by the end of 2022, which is higher than they are today but still low in the overall history of mortgage rates.
Reasons to Wait Until 2023
With these forces in mind, there may not be an urgency to purchase a home in 2022. The feeling that everybody else is buying a house shouldn’t push you into making a decision you aren’t financially ready to take on. Some people worry that a low demand means if they don’t buy now, all the “good” houses will be gone, but this isn’t true. People will continue to move and free up inventory, and new construction is increasing after the shortages of 2021, so there will be plenty of options whenever you choose to purchase.
Each market also operates independently, so the location where you would be buying a home can impact your decision here. Some markets may be in extremely “hot” buying cycles, while others are more stagnant. A local real estate agent will be able to provide guidance on your local market.
Reasons to Buy a Home in 2022
There are compelling reasons to purchase a home now, even if you are unsure about current market conditions.
The biggest reason is low interest rates, which will help lower the amount you pay over time. Even if interest rates shot up dramatically in the next few years, you would be locked in through your mortgage and benefit from the 2022 rates for the life of your loan.
Additionally, it isn’t just home prices that are high, as rents have gone up significantly as well across the country. Continuing to pay a high rent while waiting for a lower price on a home may not be fruitful- you could be spending the same amount in monthly payments but building no equity during that time period.
No expert can predict with certainty how the market will evolve over 2022. As new strains like Omicron emerge, elections begin, and the economy continues to shift, prices could make a sharp turn in either direction. If you are ready for homeownership and can financially handle the process, it may be worth taking the risk now.
Considerations for Buying in 2022 vs. 2023
In addition to the market factors, there are a number of other things home buyers may want to think about as they begin looking for their next home.
Age Matters
Millennials are at the peak age for first-time home buying, but they will likely remain at a disadvantage compared to their older counterparts. This is in part because homes are much more expensive now than they were when baby boomers and older generations were buying their first home, but also because those generations tend to stay in their homes for longer. This leaves the younger buyer in need of financial help to make a down payment or needing to use government-backed programs like FHA loans.
Shop Smart
Because of the speed at which houses are being sold, it’s important to keep a close eye on new listings and even listings that are “coming soon.” When you do see something you like, make an appointment to see it as soon as possible and be prepared to make a decision and extend an offer on the spot.
That said, you shouldn’t overpay for a house either. Prices are high, but stay within your budget, and make offers that are reasonable and not just designed to out-bid the next person. Remember, if your offer is too high, an appraisal gap could jeopardize the deal.
It can be helpful to compare home prices from the prior year in the same area and make sure the growth rate is around the national average.
Consider the Season
Many people don’t think of homes as a seasonal good, but it’s true that prices and availability change over the course of the year. Spring is usually the time when the most listings are available, as the school year is ending and people are taking the chance to relocate, but this also means prices may be higher. On the contrary, winter usually has lower prices but less listings. If you are setting a deadline to move, consider factors like these, as well as when contractors or movers may be the busiest. Snow won’t be a problem if you’re moving to Florida, but weather can be a factor in deciding how difficult a move could be.
Your Own Readiness
The most important factor to take into consideration is whether you are ready to be a homeowner. This has an expected financial component, as you’ll need to be prepared for upfront costs like a down payment as well as the monthly mortgage payments. You should also consider costs like maintenance or repairs, HOA fees, property taxes, changes to utilities, and anything else that could pose a financial burden.
Beyond the money, you should also ask yourself if you are ready to settle down in one home for a period of time and where that might be, as well as if you are content to be responsible for anything that goes wrong in your home. If these sound like welcome responsibilities, 2022 is a great time to begin shopping for your new home.
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