If you’ve been considering a home purchase for a couple of years—and even if you haven’t—you probably know how volatile the housing market has been. Since the arrival of the pandemic, the world of real estate has been through a whirlwind, with plummeting interest rates and limited supply creating intense competition among would-be buyers.
But now, things have changed. Interest rates are on the rise as the Fed aims to curb inflation, and listings are staying on Zillow or Redfin for more than 24 hours before being marked “pending.” So is 2023 finally the right time to buy?
How’s today’s housing market?
One reason the housing market has cooled so substantially over the last year: the number of homes available remains low relative to demand. And thanks to the 2021 surge in home sales, the home values of the limited remaining properties for sale has skyrocketed, pricing out some buyers entirely—especially if you’re looking in an expensive real estate market, like New York.
On the other hand, the rising mortgage rates and home prices have made the market less competitive—so if you are in a good enough financial position to buy, you may do so at a less-frantic pace. That could mean taking your time to shop around and find a property you actually love and placing a bid at, or just slightly above, asking—rather than vying (and paying) to outbid a dozen other hopeful prospective buyers. Still, high buyer demand, higher mortgage interest rates, and a relatively small housing supply can make the dream of homeownership a difficult one, especially for first-time homebuyers.
How home buyers can decide on timing
The frustrating truth: at the end of the day, whether or not it’s a good time to buy a house has far more to do with your personal financial situation than market conditions—which are always in flux and impossible to accurately predict. To figure out the affordability of a new home, you must look first to your own personal finance situation and then the whims of the housing market. For example, if you’re still working toward paying off credit cards or student loans, you may not have enough money to make your monthly payment with today’s higher mortgage rates.
And while factors like current housing prices, rate hikes, and the supply of homes will certainly play a part in your decision, they’re not the most important numbers you’ll need to look at—and in fact, some of your considerations won’t have anything to do with numbers at all.
Along with checking in on your credit score, DTI ratio, and cash reserves for a down payment and any necessary home repairs or upgrades you’ll need to make, you’ll also need to consider whether you’re ready to commit to a home for a while. Given the impact of closing costs (the fees that go to Realtors and lenders, which can run up to 6% of the purchase price) and the tax implications of selling a home shortly after buying (it takes two years to qualify for the Principal Residence Exclusion), most financial experts recommend you buy only if you’re prepared to stay for at least five years or so.
Of course, under certain circumstances, your home may appreciate in value quickly enough to eclipse these guidelines—see 2021 and 2022, which were lucky years for homeowners. But given 2023’s cooling market, that prospect seems less likely.
If you’re ready to start building equity and settle into a home that’s rightfully yours, Quontic can help. Along with being a bank, we’re a mortgage lender—and we offer a wide range of home mortgages to suit every hopeful buyer, from conventional loans, FHA loans, and VA loans to Community Development Loans (CDLs), which are specifically geared toward non-traditional borrowers. If you’re self-employed, a foreign national, or a small business owner, a CDL could be right for you. We can even help you refinance! Contact one of our mortgage specialists today to learn more.