Should I Buy a House Now or Wait?

Have you watched the news lately, scrolled through TikTok, or looked at X (RIP Twitter) lately? Or maybe spent time around that one friend who’s a self-proclaimed real estate expert? If so, then chances are you’ve heard that mortgage interest rates and home prices are pretty high these days—which is 100% true.

If you’ve been thinking about buying a house or working to save up a down payment, then that news has probably left you with an important question: Should I buy a house now, or wait?

To answer that question—and so you can make the best decision for you and your family—let’s look at whether now is a good time for you to buy, or whether you should punt that decision down the road.

Should I Buy a House Now or Wait?

So, should you buy a house now? Well, it depends. But don’t worry—we’re not just going to leave you hanging with a vague answer! Here’s a breakdown of when you should wait to buy a house, and when to pull the trigger.

When to Wait

You should wait to buy a house if you aren’t financially prepared for homeownership. No matter what the housing market is doing, buying a house is a bad idea if you don’t have your ducks in a row.

Specifically, you should wait on buying a house if . . .

• You have existing debt. Focus on paying off all your consumer debt before you buy a house. Getting rid of student loans, credit card payments and car notes will give you more margin in your budget—and that’s super important as a homeowner.

• You don’t have a full emergency fund. Saving up an emergency fund of 3–6 months of your typical expenses before you buy will be the difference in whether a broken HVAC unit, fridge or washing machine is a catastrophe or merely an inconvenience.

• You haven’t saved a strong down payment. If you’re a first-time home buyer, you need a down payment of at least 5–10%. But if you can swing a 20% down payment, that’s even better. Why? Putting 20% down will keep you from having to pay for private mortgage insurance (PMI), an extra monthly fee that could add hundreds to your house payment.

• You can’t afford the house payment. Don’t buy a house if the monthly payment (including principal, interest, homeowners insurance and HOA fees) on a 15-year fixed-rate mortgage would be more than 25% of your take-home pay. Any more than that, and you run the risk of not having enough money left in your budget each month to put toward other important financial goals—aka, you’ll be house poor.

We know how badly you want to be a homeowner and to start building equity. But if one or more of those statements apply to you, that’s where you should direct your focus for now. Every day, we talk to folks who bought a house before taking those steps and wound up regretting it because they got stuck with a giant, expensive burden.

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When to Buy

If you have checked all those boxes, then you’re ready to hire a real estate agent and get to buying! You may be tempted to wait around for a better interest rate or more affordable home prices, but that’s not a good idea for these four reasons:

• If interest rates continue to drop, then house prices will start going up. Lots of folks haven’t been able to afford a house because of high interest rates, so they’ve been sitting and waiting. As rates keep getting lower, more and more of those people will start buying homes—and sellers will be able to raise their prices because of that increase in demand.

• You can always refinance down the road. If you buy now and interest rates continue dropping over the next year or two, you can still take advantage of the lower rates by refinancing your mortgage. On the other hand, if you wait to buy and home prices go up, you’re stuck with the higher prices. Think of it this way: You date the interest rate, but marry the house.

• Mortgage interest rates may be high right now, but they’ve already begun to drop. That means, if you buy now, you’ll already be getting a better deal than you would have in 2023.

• The Federal Reserve (also known as the Fed) is unpredictable. You can never know exactly what the Fed will decide to do with the federal funds rate, which directly impacts mortgage rates across the country (more on that later).

Overall, you never want to decide whether to buy a house purely based on what the market is doing. If you’re in good shape with your money, there’s no reason to wait.

Will Mortgage Rates Go Down in 2024?

Yes, mortgage rates are expected go down in 2024—and they’ve already started. Average U.S. rates for both 30-year and 15-year fixed-rate mortgages began steadily dropping in November 2023, and that trend continued into 2024.¹ Since then, rates have jumped around, but they’re still decreasing in general.

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Specifically, the typical rate for a 30-year fixed-rate mortgage fell from 7.79% in October 2023 to 7.03% in May 2024. The rate for 15-year mortgages fell from 7.03% to 6.36% during the same timeframe.² Pretty sweet!

Keep this in mind though: Even as mortgage rates continue to go down in 2024, odds are the drop won’t be drastic—it’s not like rates are going to quickly return to the 2–3% range we saw at the end of 2021. The bottom’s not about to fall out here.

For example, the National Association of REALTORS® believes rates will continue going down in 2024, but they’re only predicting a drop of around half a percent (to 6.5% for 30-year mortgages) by the end of the year.³

A lower rate is definitely nice, but that small of a drop would only save you a hundred bucks or so on your monthly payment, if that. It’s a discount, sure, but it’s not worth waiting around for—especially since, like we talked about earlier, you can refinance down the road.

What Is the Federal Reserve?

Earlier, we mentioned the Fed and how it can affect mortgage interest rates across the country. But how exactly does that work?

Well, the Federal Reserve is the U.S. central bank that creates money and sets interest rates. Its main goal is to keep the economy running smoothly by having low unemployment and low inflation.

The Fed is kind of like a mechanic who tinkers around with a car to make it purr like a kitten, and one of its favorite tools is (shocker) interest rates.

Why Does the Fed Raise Interest Rates?

The Fed raises interest rates to encourage people to borrow less, spend less and save more—which should slow down inflation.

Now, the Fed doesn’t tell commercial banks what interest rates to charge on loans, but they do influence the banks’ rates by setting a target for the federal funds rate. The fed funds rate is the interest rate banks charge to each other for overnight loans, and it influences most other interest rates.

So, even though the Federal Reserve doesn’t actually set mortgage interest rates, its decisions can still affect your mortgage. For example, mortgage rates went up in early 2022—even before the Fed started raising rates. That’s because banks saw what was coming and started upping interest rates to protect their profits.

The Bottom Line

No one likes high interest rates, but they’re not the end of the world. This is still a great time to buy a house—you’ll just pay more than you would’ve a few years ago. It’s also a good time to sell a house. And if you already have a fixed-rate mortgage locked in, you’re in good shape too.

While it’s always great to have a lower interest rate on your mortgage, that doesn’t mean you have to wait years to buy or sell a house—or to refinance if your current loan just isn’t working for you. You get to decide when to buy a house based on what’s right for you and your family, not what the Fed is doing.

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