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Is this the wrong time to buy a house? 5 resources to help you decide

Updated: Jan 4

Updated post: 9/5/23

Original post: 10/21/22


Realtors and home buying advice


Only you and your spouse can decide when is the right or wrong time to buy a home.


Don’t let a realtor convince you that now is the right time to buy a home. A realtor only makes money when people buy and sell homes. I can hear the argument now. “Home prices and rates might be high, but rent is skyrocketing too. You might as well get a return on your investment by buying now.”


For what it’s worth, considering a home as an investment is debatable. I argue that a home is not an investment in the previous post, Choosing where to live with your spouse.


Lenders and home buying advice


Don’t let lenders persuade you to borrow to buy a home now. Lenders only make money when you borrow. I can hear them now “I know the mortgage rates have doubled over the past year, but they’ll come back down, and you can refinance when they do.” And yes, they make money again when you refinance.


Avoid allowing a singular emotional decision to create a problem that compounds each month when you make a mortgage payment, which is easier said than done when you are married.


How you divide up the money management responsibilities in your home can influence the conversation. Whoever knows what is affordable is responsible for running through the numbers with their spouse to make an informed decision together.


The best way to make a decision together is to schedule a Money Date, or as others call it, a budget committee meeting. Here are five Interactives you and your spouse can use to make an informed decision.


1. Average cost of rent


Sure, rent has skyrocketed across the country, but what about where you live now or want to live? The range in cost is significant enough to dive in and look at the averages by area. This calculator also allows you to determine whether the asking price for an apartment is within the market average of that area.


Is this the wrong time to buy a house?


2. Home price and home price growth by location


How much house you can buy depends on several factors, such as the location and timing. Using the Joint Studies for Housing Studies of Harvard University, you can see the home price growth over time by location. You can also see relatively current housing prices based on location using Realtor Magazine Interactive.


Is this the wrong time to buy a house?


3. Mortgage Calculator


I hate to be a Debbie Downer, but this is not pretty. The average fixed rate for a 30 year fixed rate mortgage in the third week of October 2022 was 7.2%, whereas the average 30 year fixed rate mortgage during the 3rd week of October in 2021 was 3.1%.


Monthly payment tunnel vision is the enemy or rational thought. It’s easy to justify paying a bit more when you see how little the monthly cost difference is, those dollars add up. Lenders and real estate agents often anchor the cost of a home in terms of a monthly payment, to make it feel more affordable. Just because you can afford the monthly payment, doesn’t mean you should buy it.


With that said, I realize most of us have a monthly budget we rely on to guide our decisions, so I will share the impact of mortgage rates on monthly payments. Here is the monthly payment cost difference between the two interest rates, using the median price of houses listed on the market in September of 2022. Click on either image to use the mortgage calculator yourself.


Is this the wrong time to buy a house?

Is this the wrong time to buy a house?

 
 

4. Rent vs. Buy Calculator


There are a number of reasons renting can make more sense than buying, which we wrote about earlier, sharing in this article a Rent or Buy Checklist and Pros and Cons of renting and owning a home graphic. Should I Buy or Rent a House. The right decision depends on your circumstances. As it pertains to doing the math, the NY Times Rent vs. Buy calculator is an excellent tool for you to use.


Is this the wrong time to buy a house?

 

Your financial life in a spreadsheet, automatically updated daily. Build your budget, now.

 

5. Amortization calculator


The amortization paperwork you review when signing a mortgage helps you understand the full cost of the loan. It is a line by line accounting for the principal and interest due each month for the life of the loan. Before building the monthly mortgage payment into your budget, run the cost of the loan and the mortgage rate through this amortization calculator to understand the cost of the loan over time.


I used the amortization calculator, which you can also find on our free resources page, to see the total cost difference of the two mortgage examples already shared.


Is this the wrong time to buy a house?

Is this the wrong time to buy a house?

As you can see from the images above, you will pay $309,798 more for borrowing the same amount of money in October of 2022, than you would have borrowed in October of 2021.

You can see for yourself how the mortgage rate difference in loans you are considering now impacts the overall cost of your mortgage by using this interactive of the amortization schedule.


Final Thoughts


Play the Devil’s Advocate with your spouse before moving forward with a decision. Here are a few example prompts to consider for back and forth discussion:

​Why to buy a home now

​Why to continue to rent

​The lender is telling us that rates will go back down and we can refinance.

​How does the lender know this? Rates are still lower on average than they have been over the past 50 years, so housing prices should come down.

​If rates continue to rise and we don’t buy now, we won’t be able to buy in the future.

​That is not necessarily true, there are peaks and valleys in the price of a home.

​We might not be able to afford to rent in the future. Rent has outpaced inflation for a long time

​We can afford to rent now, and it’s easier to get out of a lease than to try to sell a home during a recession.

How happy will a new home make you and your spouse? Keep in mind that you're more likely to regret buying a home than missing out on an experience.


One final step before moving forward with buying a home. Review the CFPB Buying a house: Tools and resources for homebuyers page. It is full of trustworthy and unbiased information you can use to make a more informed decision.


 

Learn More


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Citations


Rosenzweig, Emily, and Thomas Gilovich. “Buyer's remorse or missed opportunity? Differential regrets for material and experiential purchases.” Journal of personality and social psychology vol. 102,2 (2012): 215-23. doi:10.1037/a0024999

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