Is Now a Good Time To Buy a House?

Low inventories and high prices have caused the housing market to explode. That's great for sellers, but what if you're in the market to buy?

If you’ve been in the market for a house the last couple of years, you’ve witnessed firsthand the skyrocketing prices and fierce competition for limited inventory. What’s going on, and when will things settle down?

“Generally, the health of the economy informs the health of the residential real estate industry,” says Mark Biggins, a broker at Opendoor. The cyclical nature of the economy directly affects things like home price appreciation, Biggins says, which informs consumer demand and ultimately, housing inventory.

“The demand from lack of inventory over the last few years is one factor driving that home price appreciation,” says Michael Gifford, chief executive officer and co-founder of Splitero. Gifford adds that while home prices have flattened over the last few quarters, they’re still up from a year ago.

“Overall, money is top of mind for buyers right now, and will likely continue to be,” says Biggins.

So: Is It a Good Time To Buy a House?

“The ultra-competitive, bidding-war chaos we saw for two years has subsided, so landing a home is easier right now,” Biggins says.

Due to declining demand, winter often brings lower prices for homes and discounts on services related to moving, Biggins says. If you’re looking to save money a winter move may be worth considering, although some cities offer more seasonal variety than others.

“With that said, interest rates are climbing and inflation is at an all-time high, so taking on a mortgage is certainly something to think long and hard about,” adds Biggins.

Will Mortgage Rates Drop in 2023?

“Unfortunately, we can’t say for certain if the rates will drop or rise next year,” Gifford says.

Biggins has a similar perspective: “While we don’t have a crystal ball, we can make observations on what mortgage rates might look like in 2023.” Inflation will definitely play a role. If soaring prices can’t be brought under control, Biggins predicts that the Federal Reserve will raise interest rates again.

So the answer to the question: Likely not.

“Interest rates have a major impact on real estate since changes here can influence a person’s ability to purchase a home,” Biggins adds.

When Will Housing Prices Go Down?

Biggins sees a slight downward trend in housing prices on the horizon. “With interest rates rising and demand slowing, price growth should decelerate,” Biggins says. “Home prices will likely be slightly lower in 2023 than they’ve been the last two years.”

Gifford’s two cents? “It’s hard to definitively say there will be a significant decline in home prices into 2023.”

He notes that home prices have been flat for the last three quarters, according to the Case-Schiller Home Price Index, one of the leading indicators of U.S. residential real estate prices.

Why Is Housing Inventory Still So Low?

Material shortages, labor shortages and homeowners just not wanting to sell are three factors contributing to our low housing inventory.

The National Association of Home Builders (NAHB) reports that shortages of framing lumber, plywood and other building materials are at all-time highs. Gifford adds that global supply chain shortages have slowed down the progress made after the housing crisis of 2008 when many small home builders went out of business.

Biggins says that the construction labor shortage has been a “key contributor” to the slow rate of new builds, and Gifford points to a resistance to sell: “Homeowners are also locked into low-mortgage rates and are simply opting out of selling.”

Are There Programs To Help First-Time Home Buyers?

There are programs to help first-time home buyers. Biggins calls out FHA loans, which are loans backed by the U.S. government through the Federal Housing Administration (FHA).

FHA loans are specifically meant to help buyers who don’t have the standard 20 percent down payment needed for a traditional mortgage loan, Biggins says. FHA loans offer down payments as low as 3.5 percent and are very popular with first-time home buyers.

Are Mortgage Alternatives Available?

Absolutely. In addition to FHA loans, which aren’t limited to first-time home buyers, Biggins points to mortgage buydowns: “Another common tactic right now is to negotiate a seller credit and then use that to buy down the interest rate.” Buying down your interest rate lowers your mortgage payment early in the life of the loan.

Biggins says all-cash offers, which bypass mortgages altogether, make you stand out in a hot market.

Alternative mortgage instruments like adjustable rate mortgages can be helpful but come with pros and cons. Do your research.

How Much House Can I Afford?

“A mortgage calculator can help you figure out how much you can afford in just a few minutes,” Biggins says. Fannie Mae’s financial calculators estimate how much house you can afford, what your payments will be and how much you should save per month for your down payment.

“Buying a house depends on your financial situation, your wants and your needs,” Gifford says. Whether you’re relocating, need more space, or your lifestyle has just outgrown your current home, Gifford advises that you should first evaluate your financial situation to see if buying right now makes sense for you and your family.

Biggins has similar advice: “Evaluating your finances and getting a handle on where you stand is the first step.” Talk to a lender before beginning your search, so you know exactly where you stand.

Ally Childress
Ally Childress is a licensed electrician and freelance writer living in Dallas, Texas.