Is it a Good Time to Buy a House or Should I Wait?
If you're looking to buy a house, you might be wondering if it's a good time to buy a house or if should you wait. While there are pros and cons to both options, several factors can influence your decision. In this article, we'll explore some of the latest housing trends and data to help you make an informed decision.
20% of Consumers Say It's a Good Time to Buy a House
One of the most significant factors to consider is the state of the housing market. Housing prices have been on the rise year over year, making it more challenging for first-time buyers to enter the market. Additionally, mortgage rates are also on the rise, further increasing the overall cost of buying a house.
According to the Fannie Mae Home Purchase Sentiment Index® (HPSI), the percentage of consumers who say it's a good time to buy a home increased from 17% to 20%, while the percentage who say it's a bad time to buy decreased from 82% to 79%. The net share of those who say it's a good time to buy increased 5 percentage points month over month, indicating that some consumers still see opportunities in the current housing market.
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While this may be an encouraging sign, it's worth noting that four of the HPSI's six components decreased month over month, indicating that consumers are still cautious about the housing market. The Fannie Mae Home Purchase Sentiment Index® (HPSI) is a monthly survey of US consumers conducted by Fannie Mae to gauge their attitudes towards homeownership, renting, the economy, and other related issues.
The HPSI is based on six components: good/bad time to buy a home, good/bad time to sell a home, home price expectations, mortgage rate expectations, job security, and household income. The HPSI decreased by 3.6 points in February 2023 to 58.0, which breaks a streak of three consecutive monthly increases and brings the index closer to its all-time survey low set in October 2022. Year over year, the full index is down 17.3 points, indicating a significant decline in consumer sentiment toward the housing market.
The decrease in the HPSI in February was mainly driven by a substantial decrease in consumers' sense of home-selling conditions, with most respondents who indicated it's a “bad time to sell” citing unfavorable economic conditions and mortgage rates as the primary reasons for that belief. Additionally, the survey indicated an increase in job security concerns, which could play a factor in slowing down the housing market activity.
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On the other hand, the percentage of respondents who say it's a good time to sell a home decreased from 59% to 54%, while the percentage who say it's a bad time to sell increased from 39% to 44%. The net share of those who say it's a good time to sell decreased 10 percentage points month over month, indicating that consumers are less optimistic about selling their homes in the current market.
The HPSI is a useful tool for real estate professionals, investors, and policymakers to understand the sentiment and trends in the housing market. While the decline in the HPSI indicates a cautious outlook toward the housing market, it's important to note that the sentiment can change quickly in response to economic conditions, mortgage rates, and other factors.
In conclusion, while the index decreased in February 2023, indicating a decline in consumer sentiment toward the housing market, some consumers still see opportunities to buy a home in the current market. Real estate professionals, investors, and policymakers should continue to monitor the HPSI and other indicators to understand the trends and dynamics in the housing market. Read the full research report for additional information.
Job Security and Home-Selling Conditions
The HPSI's job security and home-selling condition components are particularly noteworthy. The percentage of consumers who expressed concern about losing their job in the next 12 months increased from 18% to 24%. Additionally, 44% of respondents reported that it's a bad time to sell a home, up from 39% last month. These factors suggest that consumer sentiment about the housing market is subdued.
The Federal Reserve's Role
The Federal Reserve's actions can also impact the housing market. In an effort to combat inflation, the Fed has raised interest rates, which can affect the overall cost of borrowing money for a mortgage. While some investors are betting that the Fed will hold steady at its next meeting, others believe that interest rates will continue to rise.
Finally, inflation and economic uncertainty can also affect the housing market. With consumer prices rising across the board, it's becoming increasingly difficult to save money to buy a house. Additionally, economic uncertainty can make consumers hesitant to make significant financial commitments like buying a house.
Should You Buy a House Now or Wait?
Considering all of these factors, is it a good time to buy a house, or should you wait? The answer depends on your individual circumstances and priorities. Here are some factors to consider when making your decision. Your financial situation is one of the most critical factors to consider when deciding whether to buy a house. If you have a stable income, a healthy credit score, and a solid down payment saved up, now may be a good time to buy a house, especially if you plan to stay in the same location for several years. However, if you have unstable employment, poor credit, or a limited down payment, it may be better to wait until your financial situation improves before buying a house.
Market Conditions
The current market conditions also play a significant role in your decision. If housing prices and mortgage rates are both on the rise, you may want to wait until they stabilize before buying a house. On the other hand, if you find a property that you love and can afford, it may be worth buying now rather than waiting and risking the property becoming too expensive or someone else snatching it up.
Your Long-Term Goals
Finally, your long-term goals should factor into your decision. If you plan to live in the same location for several years and want to build equity in a property, buying a house now may be a wise choice. However, if you're uncertain about your long-term plans or prefer more flexibility, renting may be a better option. Renting allows you to move more easily, which can be advantageous if you're not sure how long you'll stay in a particular area.
Additionally, renting may be less expensive than buying a home in some markets. Ultimately, the decision to rent or buy a home is a personal one that depends on a variety of factors, including your financial situation, lifestyle, and long-term plans. It's important to carefully consider your options and consult with professionals, such as a real estate agent and financial advisor, before making a decision.
Regardless of whether you choose to rent or buy, it's important to remember that a home is a significant investment. It's important to take care of your property and make smart decisions about renovations and upgrades to ensure that you can enjoy your home for years to come.
As of March 14, 2023, the average rate for the benchmark 30-year fixed mortgage is 6.94 percent, down 14 basis points from a week ago (source: Bankrate). A month ago, the average rate on a 30-year fixed mortgage was lower, at 6.72 percent. At the current average rate, you'll pay a combined $661.28 per month in principal and interest for every $100k you borrow. That's a decrease of $9.40 over what you would have paid last week.
The average 15-year fixed mortgage rate is 6.19 percent, down 9 basis points over the last week. Monthly payments on a 15-year fixed mortgage at that rate will cost around $854 per $100,000 borrowed. The larger monthly payment may be harder to fit into your budget than a 30-year mortgage payment, but it has huge advantages: You'll save several thousand dollars in interest and create equity much faster.
Let's compare the figures between now and twelve months ago when the buyers financed their houses with a mortgage. On a $300,000 loan, a 30-year, fixed-rate mortgage at March 16, 2022's rate of 4.16% would have meant a monthly payment of about $1,460 (Principal & interest).
- Loan amount = $300,000
- Total interest paid = $225,640
- Total cost of loan = $525,640
As of March 14, 2023, a 6.94% (30-year) fixed rate brings the monthly payment to $1,983 (Principal & interest). That’s an extra $523 a month or $6,276 more a year and $189,245 more over the lifetime of the loan.
- Loan amount = $300,000
- Total interest paid = $414,885
- Total cost of loan = $714,885
As a borrower, it makes little sense to attempt rate timing in this market. Regardless of current interest rates, our best recommendation is to purchase a home when you are financially ready and can afford it. Remember that you are not forever bound to your mortgage rate. If interest rates drop significantly, homeowners can refinance to save money at a later date. Rising rates make homes more expensive for buyers, and, for prospective borrowers, steeper monthly mortgage payments. It will thereby reduce the demand for home purchases.
The recent report on the Mortgage Credit Availability Index (MCAI) indicates a tightening of lending standards, with the index falling by 3.0 percent to 100.1 in February. The MCAI report, published by the Mortgage Bankers Association (MBA), uses data from ICE Mortgage Technology to analyze mortgage credit availability.
The decrease in the MCAI suggests that it is becoming more challenging for borrowers to secure a mortgage loan. The Conventional MCAI decreased by 4.4 percent, while the Government MCAI decreased by 1.6 percent. The Jumbo MCAI, a component of the Conventional MCAI, decreased by 4.4 percent, and the Conforming MCAI fell by 4.3 percent.
According to Joel Kan, MBA's Vice President, and Deputy Chief Economist, mortgage credit availability has decreased to its lowest level since January 2013, with all loan types seeing declines in availability over the month. The conforming subindex has also decreased by 4.3 percent to its lowest level in the survey, which goes back to 2011.
One of the reasons for this decline in availability is the ongoing trend of shrinking industry capacity, as mortgage rates remain significantly higher than a year ago. In addition, there has also been a reduction in refinance programs offered for low credit score and high loan-to-value (LTV) borrowers, potentially due to the volatile rate environment and a weakening economy.
This tightening of lending standards may make it more challenging for first-time buyers to secure a mortgage, as they often have limited credit history and lower down payments. Therefore, it is essential for first-time buyers to maintain a good credit score, save for a larger down payment, and shop around for mortgage options that fit their financial situation.
Is it a Good Time to Buy a House for First-Time Buyers?
Based on the latest data from the Fannie Mae Home Purchase Sentiment Index® (HPSI), the sentiment among first-time buyers regarding the current housing market is cautious. The HPSI decreased by 3.6 points in February to 58.0, breaking a streak of three consecutive monthly increases and returning the index closer to its all-time survey low set in October 2022. This decline was partly driven by a substantial decrease in consumers’ sense of home-selling conditions, with most respondents who indicated it’s a ‘bad time to sell’ citing unfavorable economic conditions and mortgage rates as the primary reasons for that belief.
Furthermore, homebuying sentiment remains near its all-time low, indicating that potential first-time buyers may also be feeling hesitant about the current housing market. While the net share of those who say home prices will go up increased by 1 percentage point month over month, the percentage of respondents who say home prices will go down decreased from 37% to 35%. The share who think home prices will stay the same increased from 30% to 33%.
Regarding mortgage rates, the percentage of respondents who say mortgage rates will go down in the next 12 months increased from 13% to 15%, while the percentage who expect mortgage rates to go up increased from 52% to 55%. The share who think mortgage rates will stay the same decreased from 33% to 28%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased by 1 percentage point month over month.
For first-time homebuyers, the current housing market may present both advantages and challenges. On one hand, home prices have been rising steadily over the past year, but the rate of increase is slowing down. This may present an opportunity for first-time buyers who were previously priced out of the market to finally get a foot in the door.
However, with mortgage rates beginning to rise again, first-time buyers may face higher monthly payments and more difficulty qualifying for a mortgage. Additionally, with the decrease in consumers' sense of home-selling conditions, it may be more challenging for first-time buyers to find a home that meets their needs and budget.
It's important for first-time buyers to weigh the advantages and challenges of the current housing market and carefully consider their personal financial situation and long-term plans before making a decision. It may be wise to work with a trusted real estate agent and a mortgage lender who can provide guidance and support throughout the homebuying process.
Overall, while the current housing market may not be ideal for all buyers, it may present an opportunity for first-time buyers who are ready to take the plunge into homeownership.
Conclusion: The Best Time To Buy A Home Depends On You
Higher interest rates pose a challenge to existing homeowners looking to buy a new home at the same time as selling their current home. Existing homeowners may benefit from lower interest rates than those offered right now because they already have mortgages. Their monthly expenses could rise dramatically as a result of the purchase of a new property.
In other words, if you don't have a specific date in mind for when you want to buy a new property, you may be better off waiting till it does. Every potential buyer's best time to buy a property is different, and the greatest time to buy a house is not the same for everyone. It’s essential to consider your financial situation and understand how buying will impact your bottom line each month.
For many first-time homebuyers, it doesn't matter if loan rates are too high, if there aren't enough homes available, or if you don't have enough money in the bank. When the time is right to purchase a home, the time is right. First-time buyers can accomplish the American Dream of homeownership without a 20% down payment. The government offers several mortgage schemes with minimal or no down payment, as well as down payment assistance programs.
Sources:
- https://www.fanniemae.com/research-and-insights/surveys-indices/national-housing-survey
- https://www.realtor.com/research/december-2022-data/
- https://www.bankrate.com/mortgages/todays-rates/
- https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
- https://www.bankrate.com/mortgages/rate-trends/
- https://www.mba.org/news-and-research/research-and-economics/single-family-research/mortgage-credit-availability-index-x241340
