10 Signs You Should Not Buy a Home Right Now

Many people swear by homeownership; some call it a form of “forced savings” while others see it as a way to build generational wealth. Buying a home has long been considered one of the best ways for middle-class people to access social mobility. That was especially true before the creation of the first index fund in 1976. As people have built equity in their homes and passed them on to their heirs, it has allowed families to build generational wealth.

However, despite the various benefits of buying a home, that doesn’t mean it is always a good decision. For instance, existing home prices rose at a record-breaking pace of 17.2% in March 2020 compared to March 2019. With record-breaking prices, homes are less affordable than ever.

This gallery will cover the specific reasons why you shouldn’t buy a home right now despite the buying craze. Instead, waiting until the market stabilizes may be a better choice.

Last updated: May 24, 2021

Many people seem to be in a rush to buy right now, but that could create a number of challenges. For example, you could make unnecessary compromises in terms of what you are looking for in a house. Again, all houses will likely have at least a few qualities you could do without, but perhaps you can find one in a more favorable location or one that has more of the features you want.

In addition, many houses have bidding wars right now. If you put in an offer, there is a good chance it will not be accepted, and you only end up frustrated. While it is not uncommon to not have your offer accepted, there are stories of people putting offers on 15 homes or more and still coming up empty-handed.

As you may know, it is standard practice to make a 20% down-payment on a home purchase. It may be possible to buy with less, such as with an FHA loan that allows you to put 3% down or a conventional loan with 5% down. But these may not work to your advantage, says Andrea Woroch, consumer & money saving expert. “When you put less than 20% down on your home purchase, 2 things happen — 1, you get locked into paying a monthly fee for private mortgage insurance (PMI) which is just a total waste of money) and 2, you may get locked into a higher interest rate and your monthly payment is higher thanks to a bigger interest payment.”

Whether it is due to your dream home unexpectedly hitting the market or it’s simply the higher prices we are seeing right now, there are many reasons you could be tempted to buy more house than you can afford. But that might be the wrong move, says Chuck Meier, SVP, mortgage sales director at Sunrise Banks. “First, you should be sure that a monthly mortgage payment won’t leave you strapped for cash. If you’ll be paying more than 30% of your monthly income on a mortgage, it might not be a good decision to buy. A mortgage you can’t afford will hurt you in the long run.”

If you have never heard of being “house poor” before, it refers to spending so much on your mortgage and other household expenses that you have very little left at the end of the month. As a result, it may be difficult to achieve other financial goals.

This can happen for a variety of reasons, such as living in an area with housing costs–or prices that are higher than usual in the current market. Another potential reason is not accounting for the true cost of homeownership. Whatever the case may be, you don’t want to delay your other goals as a result of buying a home.

For the few who pay for their homes in cash, having a good credit score isn’t a necessity. But for the rest of us, it’s important to build your credit in the years before applying for a mortgage. “That’s because lenders look at your credit score and your credit file to determine your creditworthiness and how likely you are to repay your mortgage loan,” Woroch said. “The better your credit score, the easier it will be to qualify for the best loan terms and lowest interest rate.”

Signing onto a mortgage is the largest debt most consumers will ever have. But if you already have a large amount of debt, adding a mortgage to the mix could complicate things further. That is especially true if you struggle with your existing debt. “A mortgage is typically a 15-30 year commitment,” says Dan Demian, financial advice expert at Albert. “For a lot of us, it’s longer than anything we’ve committed to in the past. If you’ve struggled to get to your car, credit card, or loan payments on time, you may want to reconsider an extensive commitment such as a house until your debt levels are under control.”

Having an adequate emergency fund is extremely important for a number of reasons. If you don’t currently own a home and do not have an emergency fund (or an inadequate one), it may not be the right time to buy. After all, unexpected expenses are expected when you own a home, and you’ll be on the hook to cover them. “After getting the keys to your dream house, you’ll often be surprised with the additional bills that suddenly need your attention,” says Demian. “Whether it’s property taxes, HOA fees, lawn care/maintenance, or house maintenance (like a new roof or furnace), having a stash of cash is vital to afford and maintain a house.”

This might seem like an obvious point, but it is especially fitting right now. It’s unlikely any home will ever be perfect and fit every one of your needs, but you may notice that the selection is especially sparse depending upon where you live (or are looking to live). “There are always cycles and sometimes the answer may be to wait until the right home comes into the market at the right time, says Jess Kennedy, co-founder and COO at Beeline. “This is not to say that you shouldn’t keep looking or keep on bidding on homes.  It’s important to not let the emotions of the house hunting process override good decision making.”

While there are certainly many reasons that existing homeowners decide to buy, such as a growing family, there are also reasons to consider staying put. For example, one caller on a recent episode of WYNC Studios’s “The Takeaway” purchased a home in February of 2020, only to sell the home shortly thereafter. She sold it for $60,000 more than she paid. The problem? That very same housing shortage found her unable to a new home that met her needs.

While she did eventually find something, she had to make offers on 17 homes before one was accepted, and she paid more for the second home than the higher price she was paid for the first one. If you already own a home and don’t have a new one lined up, you may want to wait until the market settles.

Fleeing crowded cities for the exurbs and even the country has been all the rage. Perhaps you are thinking, “Maybe I should relocate, too!” After all, if everyone is doing it, you probably should as well, right? In reality, although it might be the right move for other people, that doesn’t mean it necessarily is for you. If you have long since wanted to escape the city, then it might make sense, but make sure it is the right move for you. After all, buying a home is a big decision, and a long-term one. It should never be a spur-of-the-moment decision.

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