The pandemic put only a temporary damper on the housing market, as the market has rebounded robustly, hotter than ever. The median home price in August 2021 was $356,700, up 14.9% from August 2020, according to the National Association of Realtors. And the inventory of unsold homes dropped 1.5% to 1.29 million from July to August, which is equivalent to a 2.6 months sales pace.
This heat is largely because inventory for sale dropped by 40% since the pandemic started and never quite came back to normal levels, says Bill Samuel, a real estate investor with Blue Ladder Development. “Demand only slowed down for a couple of months during the quarantine period, and then came back to normal,” he said. However, supply hasn’t quite caught up, meaning there are more buyers than sellers, part of what is driving the market right now.
It’s easy to feel the pressure to buy when houses are getting snapped up all around you, but does that mean you should jump or is it better to wait out a hot housing market and see if it calms down? Experts weigh in on the pros and cons of waiting it out.
Don’t Let FOMO Drive You
Just because everyone is buying a house, doesn’t mean you should be too, says Donald Olhausen Jr., owner of We Buy Houses in San Diego. “I have seen many people force bad decisions because they have fear of missing out (FOMO). Forcing a bad deal will not rectify itself because there were no other options or because you felt stuck. Being patient in this market is hard, but overpaying for a faulty property will ultimately lead to more regret.”
There Are Markets Within Markets
There is not one universal housing market, but rather “many smaller micro-markets,” says Michael Shapot, Esq., licensed associate real estate broker. “Some of those submarkets are ‘hot, less hot or more hot’ and they may change week by week, or month by month.”
Elisa Uribe, a realtor with Wells and Bennett Realtors adds that “real estate is hyper local,” so consider the source. “You can withstand any market changes if you don’t have to move in a specific time frame.”
Early 2022 May Be a Better Time To Buy
Marina Vaamonde, the founder of PropertyCashin, says this market may not be as hot as it looks. “The demand for residential real estate is still vastly overshadowing the inventory,” she says. “However, we are beginning to see some figures start to level a little, such as the median listing price for September.”
She recommends waiting until the first quarter of 2022 to buy. “The wider indication is that the number of house sales will decrease sharply in the first half of 2022 compared to this year, and although demand will still be relatively high…there might be some let up for buyers.”
However, Interest Rates Are Very Low
On the other hand, now is the time to take advantage of the super-low interest rates. “There have been very few times in history when we’ve seen 30-year fixed mortgage rates hovering around 3.3% and 15-year mortgage rates slightly above 2.6%,” says David Friedman, CEO of investment property platform Knox Financial.
“The Federal Reserve has also indicated that they plan to continually increase rates over the next four years,” adds Andy Kolodgie, owner of Cash Home Buyers Georgia. “The con of waiting to buy is interest rates are low right now making the monthly cost of owning a home today — even with the increase in prices — similar to 18 months ago.”
No One Can Predict the Next Drop
The fact is, “There is no crystal ball without warnings in the fine print,” says Shapot. “One cannot time the market with certainty.”
Khari Washington, a broker and owner of 1st United Realty & Mortgage, adds, “No one knows if the housing market will drop and when it will drop. Most reports talk about the market slowing in 2023 but not falling. Builders have not built enough housing and interest rates remain low.”
“The right time to buy is when a person is ready,” adds Washington.
Don’t Wait for a Better Price
Waiting can be a gamble, says Jeff Shipwash, CEO of Shipwash Properties LLC. “You could be waiting to purchase with the thought of prices coming down, but…even if home prices do pull back some if rates increase it will all be for nothing. You may be able to afford a $300,000 house at current rates. But if those rates increase by 1% while you wait, that same payment may be on a $250,000 house.”
Rents Are Sky High
If not buying means renting, consider that “the current rental market is on fire with rents skyrocketing and landlord incentives eliminated,” says Shapot. Renting will not be a cheaper option in the long run.
This Market Is Stable
Unlike the unstable market leading up to the economic crash of 2008, this market is stable, says Jennifer Shannon, a broker associate with Keller Williams Realty. “This market run-up hasn’t been driven by investors, flippers, and bad mortgages. It’s been driven by legitimate buyers who are more free to determine where they live than ever.” While demand will start to slow eventually, she says there are no indicators of prices going down anytime soon.
You’re Ready When You’re Ready
“You’re ready to buy a home when you’re ready, not when there’s a frenzy,” says Tabitha Mazzara, director of operations at mortgage lender MBANC. “The frenzy is a seller’s market, so missing out on a frenzy is a good thing for buyers.”
Chase Michels, owner of Compass, The Michels Group, adds, “If a client is fully committed to buying and is in the appropriate financial position to do so, then they should be looking. You may buy at a little lower or higher price at different times of year but that is typically unpredictable in a smaller market.”
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Last updated: Oct. 22, 2021