Is now a good time to buy a first primary residence - or wait?

Question

Hi everyone,

My partner and I currently rent and pay ~$1,400 a month. We are in the position to be able to make our first purchase, aiming for the mortgage to be roughly the same as our current rental total.

Does it make sense to buy now, given the current rates/ economic environment? Or should we wait?

Would be helpful to hear some experienced opinions.

Many thanks,Dean

Nate Sanow · Answer

If there is an equity grab to be had, such as a property that sat for a bit and you know is desirable over the next decade or two, yes, 100%

You gotta figure you are paying a mortgage right now. It’s just not yours. Even if you buy something on a 7% interest rate it is cheaper than 100% of your payment not building any equity.

The only people who get hurt when the market goes down are those who position themselves in anyway to HAVE to sell and exit from the property while the market continues to drop.

Buy, hold, wait and see what the market does. If it drops in value a little, hold, wait, don’t hurry to sell. Adversely, If rates go down even a smidge by 2023-2024 you will have to time travel to 2022 and hi five yourself for owning something that now is up in value.

Paul De Luca · Answer

If your monthly PITI is lower than your rent, I say it makes sense to buy. Even if the PITI isn't lower than your rent, your lifestyle factors should be considered and the long term outlook for the housing market. The thought of "I'm going to wait until housing prices or interest rates fall" may come further down the road than you hope (years) and in that timeframe you could have already been building equity.

Marcus Auerbach · Answer

The market is slower because rates have caused sticker shock, which means lower prices and less competition. 10% over asking was a thing a few months ago, even here in Milwaukee. A lot of buyers are on the sidelines right now because of interest rates and concerns about the economy.If rates go down as many experts anticipate for later in 2023 and buyers jump back in to take advantage the market will be crazy again. I would buy now and then refinance later, if and when rates drop. I would even consider a 5 year ARM, make it 10 if you want to be safe.So absolutely you should buy! Rather sooner than later. There is really no good argument to wait when it comes to your primary. You can't time the market and a primary residence is also not something that you buy low and sell high - not the stock market.

100% of your rent is lost every month.

Part of your payment is principal pay down = net worth.

You get tax write offs, among other things your interest paid

If you plan to live there 5+ years it is irrelevant to time the market

Your house, your rules - you can remodel

Supply (14 straight years of underbuilding) and demand (demographic shift) is unchanged

Nicholas L. · Answer

@Dean De Villiers

this is a pretty personal question, so I think it's a tough one to get advice on.  here are some questions back at you...

-what would buying do to your commute(s)?

-do you want to stay in the area you're currently renting in for 3-5-7+ years?  or would you potentially be moving again soon?

-do you have enough savings for a down payment?

-can you househack?

Colleen F. · Answer

@Dean De Villiers the economy is only as good as it is in your house.  Aside from what everyone else has said evaluate your job security and emergency reserves to decide this. In theory you are better off building equity but emergency house repairs will be on you, make sure you plan for that and downturns in your personal situation.

Jared Hottle · Answer

As everyone has said it depends. Are you planning on using it to househack? Or live in it one year and rent out afterwards? If you are just planning on living in it and have no desire to get into investing just know it would still be a liability not an asset so to me that makes renting more appealing in the current rate environment as you are not on the hook for taxes, insurance, maintenance, capital expenditures, etc so even if your payment is the same or just under the real cost will be much higher. Now if you are planning on househacking or moving out and renting after a year that all changes because you will have some rent coming in.

Conner Olsen · Answer

My answer is yes IF you can house hack and reduce the monthly payment, you have a healthy emergency fund, and you plan to hold for 7 years or more. Now is the time to be a little more conservative and hold properties longer.

Dean D. · Answer

Just want to say thanks to all who have commented. There are some fair POVs and a lot of food for thought. Just what I was after. Thanks again!

Eliott Elias · Answer

Great time to buy, the power is in your hands, yes interest rates are high but you are no longer competing with 10 other cash offers. Take the short term hit and refinance when things cool down

Darrick Ervin · Answer

@Dean De Villiers thats a great question. I get everyone is saying a lot of factors play into it. That's true but realistically the bottom line is that you're renting. Assuming you are in a strong financial position, it's always a good time to buy when you're renting. You are paying 100% interest when you rent, basically any loan you can get at a rate less than that you'd be getting more for your money. Anything that can leverage your money in a way that allows you to OWN or build equity rather than just pay to rent is going to be the better financial path.

Also, consider a few things. Rates are up compared to the last few years. As a result lenders are trying to find creative ways to encourage and help borrowers finance. We've seen our lending partners come out with down payment assistance programs that weren't previously available and a very popular one right now is the temporary buy down. With that program let's say my client qualifies for a 6.875%. If you leverage the the buy down then your first year your rate will be a 4.875%, second year a 5.875% and years 3 - 30 a 6.875%. It's not an adjustable rate mortgage. But the industry is expecting we see a rate drop in the next 6 - 24 months. So the buy down allows folks purchasing right now to get a rate that is significantly lower the first two years with the idea that within the next two years rates will fall and you will then be able to refinance at a lower rate. I hope this helps. Feel free to reach out if I can be of further assistance. Best Wishes!

Licensed Mortgage Loan Originator (NMLS #1238298)

Is now a good time to buy a first primary residence - or wait?

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