Should I Buy a House Now or Wait Until 2025? (When Is The Worst Time?)

We'll cover this topic later in the post, but I just couldn't help but bring it up now. See below for some of the best rates that our partner, Credible, has been able to secure with their network of banks. Given where mortgage rates have gone, these actually look pretty fantastic!

Related questions and answers:

• How Much Does It Cost to Build a House?

• How Much Money Do I Need to Buy a House?

• How Long Does It Take to Build a House?

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What about if you've been looking at homes for a while already? What if you have a bunch of money saved up and could make a sizeable down-payment? Does that change the story a bit? Is 2022 a good year to buy a house?

Well, you've got a few things going for you:

• Per the above chart, housing values typically go up, so if you're going to buy and hold, there's not really a bad time to buy a house.

• If you have at least 20% saved up for a down-payment, you'll likely never be under water on your house, even if it does go down in value for a bit.

Sooo...is 2022 a great time to buy a house? Not really. Supply is down, demand is up, and this is prompting premium prices in housing. So if you're looking for a deal on a house, now isn't the time.

Would I go so far as to say that it is a bad time to buy a house in 2022? If you're looking to buy a home because:

• You feel like if you don't now, you'll never be able to afford one

• You want more space

• Your spouse says you both deserve it

• You think it's just something you're supposed to do by the time you hit 30...

...But, you're not really ready for the payments, the maintenance, the insurance costs, and the unforeseen emergencies that come with it...then NO, you should not buy a house.

And yes, 2022 is a terrible time to buy a house! If, however, you're patient, you have the appropriate funds saved, and you want a house because you plan to enjoy it for 10+ years of your life, then who cares what year it is or what it costs compared to 1965. Just do it, make the reasonable payments, and live a lovely stress-free life in your new home.

So why is 2022 such a bad time to buy a house? As you can see by the chart we utilized earlier in this post, ever since 2020, the price of homes have skyrocketed.

Why is this? Why have the prices of homes gone up so much?

According to c|net, there are 6 reasons home prices have continued to jump:

1. Continued supply chain disruptions - ie. Housing materials are hard to come by

2. Low existing home inventory - With uncertainty in the future economy, many people are choosing to stay in their homes and work toward financial stability, rather than upgrading and continuing to live paycheck to paycheck

3. Sellers feel stuck - Since it's so tough to find a place to buy, many would-be sellers just aren't selling.

4. Homeowners are tapping their equity and staying put - With the above issue, many non-sellers are using the equity in their homes to make improvements and improve their quality of life that way.

5. Rising interest rates - This is a big one right now. Interest rates are on the rise. It's prompting new buyers to jump into the market before the interest rates rise higher, and it's keeping existing home buyers from looking because they don't want to sign up for a higher interest rate than they already have.

6. Renting is not getting any cheaper - People are tired of throwing their money away. They're ready to buy. This mentality is leading to an increased demand for housing.

Rising mortgage interest rates in 2022. Now, since the prices of homes is so high, it may just be the worst time to buy a house. If you find yourself in a bidding war, or if you're interested in a house only because it's one that you can actually get a bid in on...don't do it!

The market is crazy and it's making people buy houses that they don't even want! Don't do it! If you can't find the property that you want, just wait. Your opportunity is coming.

That opportunity...the impending housing market crash...it's coming this year right? The housing market might crash in 2022?... Sorry, but that's just wishful thinking. I don't believe the housing market will crash this year (in 2022).

Here's why:

• It's already nearly May, 2022. We're halfway through 2022.

• The economy is still booming.

  • Companies are receiving far more orders than they can fill.

  • There are more job opportunities now than there have ever been.

  • It seems like everyone has excess cash flow right now. People have so much money they don't even know how to spend it!

Will the above change over the course of 6 months? I don't think so. The economy will still likely be red hot into the fall, and maybe even beyond that.

Another reason the housing market likely won't crash in 2022:

• Typically, there is first an economic stumble. Then the housing market softens after that.

Take a look again at the chart below. Aside from 2008 when the housing bubble actually caused the recession, all the other dips in housing values occurred after a recession and stayed flat for a couple years after.

If you're looking for lower home prices, you'll first need a recession. Then you might need another year or two to land the house you actually want.

Will the housing market crash in 2022? Not likely. You'll have to wait till 2023 or 2024 (more to come on this later).

What if you absolutely can't wait? What if you need to buy a house now? What are my best tips on how to buy a house in 2022? In my life, I have purchased investment property and primary residences, and my home purchasing tips are the same for both:

• Always be patient and be willing to walk away if the deal doesn't feel right

• Look for what you want, not what's available (because yes, you can buy a house that isn't for sale!)

• If you want a deal, look for ugly aspects that are easy fixes (ex. big unruly bushes in the front, pink shag carpet, gold doorknobs, etc.)

• Be patient, but be ready. Get pre-approved and have a healthy down-payment saved up. You don't want to miss the next opportunity.

The housing market is still hot. You're either going to have to find a house that's not on the market, or you're going to need to jump on the next listing that meets your criteria.

Either way, you have to know what you want and act quickly when you see it. If you do these things, you're more likely to make a house purchase without overpaying for it.

Is it the worst time to buy a house? Well...maybe not the worst. But it certainly isn't the best time. If you really want to buy your first house in 2022, I suggest you get a good realtor.

Find one that has bought and sold hundreds of houses. They know the process and can help you not only find one, but can give you all the advice on how to put your bid in and close the deal in record time. Don't go about this on your own.

A seasoned realtor will be an invaluable asset to you. Interview them, find the best one, and then listen to their every word.

Like I said earlier in this post, the economic crash in 2008 was a bit unique from many crashes in the years prior because the housing market crash actually caused the economic collapse.

In the early 2000s, banks were too frivolous with their lending policies. There were simply too many people getting loans, and for amounts greater than they could really afford.

Eventually, this caught up with the banks, and the spiral of economic doom began...

• People began defaulting on their loans

• The financial economy suffered

• Employment began to take a hit as companies struggled

• More people then defaulted on their loans

• Which created more economic pressure...which further hurt the housing market.

Like I said...the spiral of doom. So what can we learn from this with our economic environment today?

Right now, the price of housing is high. And, mortgage interest rates are rising higher than we've seen in a long time. But, people still want to buy houses and build houses. So how do they do it? They extend themselves as far as they possibly can financially.

Example of Stretching a Budget for a House Today

Let's say a couple earns $200,000 combined per year (each makes $100k), and they have $100,000 saved for a down payment. How much house can they afford?

According to Nerd wallet, this couple can afford roughly a $787,000 house with payments of $5,300 per month. With a take-home pay (after taxes) of approximately $140,000 per year, this means the couple will have a $5,300 mortgage with a monthly take-home amount of $11,666.

It seems doable, but there's still car payments, food costs, daycare, and plenty of other odds and ends to cover with that income as well. But, this isn't where the conversation ends.

The dream house couldn't be found for $787,000. It turns out that the house this couple wants is actually $900,000. They discover that they can borrow this amount, so they go for it. Now the monthly payments are $6,500 a month. Pretty tight given their income.

And then...let's say the economy softens. One of them loses their job. Their take-home pay is now $75,000 a year, or $6,250 a month...which is less than their house payment. Not to mention all the other bills they have to pay.

Put simply, they're sunk. They'll default on their loan, they'll get foreclosed on, and someone else will buy their house at a discount for $800,000.

You obviously don't want to be the couple that's outlined above. Does this mean you shouldn't buy now? Is it the worst time to buy a house? As I stated earlier, it's not the worst time to buy a house.

I imagine house prices will still go up in the upcoming year or so. If you're ready to buy and you want to live in that house for 10+ years, then go ahead and buy it!

But...there likely is a recession looming. If you're young and you can wait a couple years before buying a house, you might see some discount prices in the future. And it may just be worth the wait.

So now the question is...when will the housing market finally soften?

Like many other financial periodicals and institutions, Fortune predicts that an economic recession is coming at the tail end of 2023.

The rising inflation and interest rates will slow the economic growth and we'll slip into a recession. I certainly don't disagree with that. Not to mention, something might happen with this war in Ukraine that flips the economy on it's head.

That, or we all get scared back inside by the next pandemic...Or who knows what! All I know is, that next thing is on the horizon that will finger-flick us into a recession. No one knows what it is, but it seems to be coming soon. Anyway, I digress.

With this pending recession, will the housing market tank in 2023 as well?

The great consensus...is no. The housing market is hot. It might soften in the future, but it's likely not going backward. Not in 2023 anyway. Things will need to get bad, and be bad for quite a while for housing prices to do a full reversal.

Per a recent survey from Zillow, most people don't expect the housing market to normalize until 2024. At that point, inflation on housing is expected to be back to the 3%-5% levels vs. the 15% appreciation in 2021 and 2022.

So, the housing market will likely be back to normal, but that just means you won't get into a bidding war on every house you look at. Barring any shift in the general economy, the value of houses will not go down. It just won't rise as rapidly as it has been.

Most of the experts don't see a housing crash coming. They believe housing supply will grow and begin to better meet the demand. Therefore, the price increase will begin to slow, but will still continue to rise. I see things a bit differently. I see...

• housing costs continuing to rise in 2022 and 2023

• mortgage rates continuing to creep up

• home buyers getting impatient and begin stretching their budget to get into a home that they really can't afford

• something affecting the economy and the job market will suffer

• people will no longer have the income they were used to and they won't be able to make their high mortgage payments

In other words, people will extend themselves for a house because they see no other way. Then the economy will tank and take the housing market down with it. I see a housing bubble.

CNN Business agrees. It's coming. I believe we'll see a housing market crash in 2024. So is now the worst time to buy a house? It may be if you believe what I'm saying above. If you can wait and it's no big deal to wait, then it might just be worth slowing your role on the next home purchase.