Should I wait to buy a house?

[Johnboy]

I started typing up a detailed explanation, but my question really boils down to this: will the housing market experience a significant pullback in the next 3 years? Any experienced housing market people here have any opinions or insights?

Appreciate any wisdom/experience you can share.

 

[Oregonboy]

Interest rates are about the best they've ever been right now, which increases you're buying power. Not sure what they'll do in the next 3 years but I can't imagine they will go any lower than they are currently.

 

[Marbles]

I have no expertise. I think it will contract. If you want to stay in it for 10 years, it is an ok time to buy. If you want to sell in 5 or less, I would say don't buy.

However, much of the market disagrees with me at the moment and I'm almost a perma-bear, so take what I say with a grain of salt.

 

[eamyrick]

I just did a 15 year refinance at 2.75. My property tax home value went down $1000 in Central Texas. I can’t see prices climbing through the fall but I bet rates won’t be this low. May save 30k on a home price but you will lose 30k or more in the long run with a higher interest rate. You have to decide which one matters more to you.

 

[tdhanses]

Personally I wouldn’t wait if your ready, anything can happen but we have historically low interest and home values will probably increase (depends where you live as not all areas have high home values) with time with a few drops, if you play the drop game you’ll likely never get the home you want.

 

[Okhotnik]

Im in the same boat. Ive purchased property and waiting to build my own home. Ive spoken to a number of local builders and they advised building costs are very high now. So Ill probably wait a few months until things settle down. Ive also spoken to a few local banks regarding construction loans and they advised that they put a temp moratorium on construction loans ( last month) . Also advised can't lock into long term interest rates now like in the past. Rates are very desirable now obviously.


I think it depends where you are purchasing as there will be a lot of migration in the country the next year. Areas in the west and SW are experiencing a big influx of people leaving failed cities and states. Just a guess but I think that housing prices go down in a lot of areas and increase ( at least temporarily in desirable areas) Tough to say if the market will drop like in 2008 through 2012 through all markets. With the increasing work at home movement I think the western and SW states will become more desirable. Another problem now is there is not much inventory on the market in desirable areas so prices have increased Thats all Ive got.

 

[JNDEER]

Not a realtor but am a home owner and follow the housing markets.

I agree with marble. If you are looking to move or sell in 3-5 I would wait. If this is a long term thing the low interest rates make it a no brainer. Run the numbers on total interest charges at current rates and what you would be charged at a point or point and a half more.

 

[Apollo117]

I'm not an expert, but I think the decision is affected greatly by location and your financial situation. If you are looking to buy a house in a major metropolitan area it's probably safer than buying a house in a coal mining town. If you have a stable job and can comfortably afford a down payment and then monthly expenses, then you're in a good situation.

Keep in mind that the advice you get may not apply well to your situation or location.

 

[mlgc20]

The answer will largely be area specific. I would pay a lot of attention to the rental market in the area you are looking to buy. If rents are generally high (relative to house prices) and rentals are hard to find, those are the places I would prefer to buy. Rent tends to be more stable than housing prices and are often a great indicator of the health of the local real estate market.

Interest rates are fantastic right now. There is hardly any room for them to go down any further. Obviously, nobody knows the future of the housing market. But, it's hard to believe you will find better interest rates. As posted above, a good interest rate can save you a ton of money. If your job is relatively stable I would go ahead and buy. Trying to "time" the market is futile. Nobody knows what's going to happen over the next 5 years in the housing market. Things were bad from 2005-2010. But, that is largely an anomaly over the past 60 years.

 

[Johnboy]

Appreciate the responses.

Here are a few more details on my logic... I'm looking at a house today that will probably sell for 360k. It's a decent house, but not 360k-decent (that's the way things are here in SE Wisconsin right now). There is speculation that the market could pull back 30% within 3-4 years. That's 108k value on a 360k house. If I continue splitting apartment rent for $700/month (all in), that's about 25k over 3 years. Take the difference between these two, and I come out over 80k ahead with renting. If I save the difference between rent and mortgage (plus escrow, etc) over that time, I'll have an extra 40k to put down on a cheaper house in 2023-24. So that nets out at 120k ahead (on mortgage) toward the same house (or similar).

Unless I'm missing something obvious (or miscalculating), or the market behaves nothing like this expectation, this choice seems more clear. Of course, this logic ignores the lifestyle benefits of house VS apartment. Just thinking out loud...

 

[Johnboy]

One thing my logic ignores is the inevitable increased interest rate 3 years from now. I can only guess what it would be, but I'm currently approved for 30 year fixed at 2.75%. That's crazy low!

 

[mlgc20]

Do you have any links to sources projecting that kind of decline in SE WI? That would be a huge market correction. My company was evaluating opening a branch in the Racine/Kenosha area. Real estate is one of the things we evaluated and it seemed rock solid. If that's not the case, I would love to see that info. It could be very helpful.

 

[Apollo117]

Appreciate the responses.

Here are a few more details on my logic... I'm looking at a house today that will probably sell for 360k. It's a decent house, but not 360k-decent (that's the way things are here in SE Wisconsin right now). There is speculation that the market could pull back 30% within 3-4 years. That's 108k value on a 360k house. If I continue splitting apartment rent for $700/month (all in), that's about 25k over 3 years. Take the difference between these two, and I come out over 80k ahead with renting. If I save the difference between rent and mortgage (plus escrow, etc) over that time, I'll have an extra 40k to put down on a cheaper house in 2023-24. So that nets out at 120k ahead (on mortgage) toward the same house (or similar).

Unless I'm missing something obvious (or miscalculating), or the market behaves nothing like this expectation, this choice seems more clear. Of course, this logic ignores the lifestyle benefits of house VS apartment. Just thinking out loud...

What's your marital and kid status if you don't mind my asking? If I were a bachelor I would buy a house (or multi-tenant property) in a college town with good recreational opportunities and then rent out the other rooms to cover my mortgage.

Just a thought.

 

[Wrench]

What does the area rely on for income? You should leverage that into your choice. Don't fall into the Sidney, NE type situation.

Election will play a big part too.....

 

[Watrdawg]

I've been in the mortgage business for 28 years now. These are the lowest rates have been since I have been in the business. If you are purchasing for long term then definitely buy. The same if you can get a home below market value. You will have built in equity. Even if the market pulls back a bit values will rebound. After the crash of 2008-09 values starting coming back up quickly and are easily ahead of where they would have been without the crash. Rates are expected to be relatively constant over the next 12 months. Be picky and find the right home. No sense in rushing into a purchase. Yes, construction loans are about impossible to come by right now. However, why take the loan out yourself! Find a good builder, if you want new construction that is, and let him use his construction line of credit to build the house for you. Cost of materials are higher than normal right now but that is because of a lack of supply. Mainly it's a sipping issue. One thing to think of also. 2.75% is a great rate. If you wait 2-3 years, as you stated, who knows what rate will be then. 1-2% increase could decrease your purchasing power $20-$30K easily or more.

 

[JNDEER]

Huge speculation for market to change that much in that short amount of time.

I Think it could be easier to speculate your mortgage rates could be up in the 3.5-5% than a 33% cut in house cost.

Again... not a realtor .. just a normal guy who has followed the house markets locally and a few places west and HI for future purchases.

 

[Johnboy]

Here's one video I watched that speculates the housing situation:

I'm no economist, so I'm trying to weigh out the information from those who are.

Here's an article with some counterpoints:

Most who got COVID-19 mortgage relief feel guilty about it now

 

[JFK]

Your situation mirrors mine a couple years ago in many ways. I live in a pretty high cost of living area in Ca. I’m not rich by any means....work as a firefighter, so very stable but I don’t make tech money. I was renting and saving money for a down, hoping prices would finally come down. They didn’t. I bought a house a little over two years ago that I might not be able to afford if I was buying today. I paid more than I thought it was worth, and needed a ton of work, but had I played the waiting game hoping for the market to come down I likely wouldn’t live in the area any more as it’s become even more expensive.

If you have strong ties to the area (family, work, etc) consider that it may be wise to get in while you can. The sting of overpaying may not be as bad as having to move from a town you love if prices continue to climb. Nobody knows what it’s going to do.

Also, I’d throw out any notion of cost savings of renting vs buying. Buying will pretty much always be more expensive. Even if the rent and mortgage are the same, you move in and will want to do stuff to the house. Remodel a bathroom or kitchen? They aren’t cheap.

 

[Evol]

The wife and I just bought a house, new construction. 3% interest rate. Put only 5% down and our payment is $250 cheaper than what we were paying for rent.

 

[trazerr]

It is highly dependent on area. We bought our house in December of 2018. 5k over what Redfin said it was worth. However, it appraised at 15k more than we paid. Go figure. Now Redfin says its worth almost 50k more than what we paid for it. This house needs/needed a metric ton of work and that 50k doesnt include any updates we have done to it. I wish we would have bought years earlier. We were waiting for the bubble to pop, but it just hasn't happened here. Our realtor says the market is hotter than it has ever been. I just chatted with him last weekend. He does not see it slowing down here any time soon. Again, this is for OR and not WI. If your market is hot like mine then the low interest rates cold be worth it!