Is it the right time to invest in a house or should I hold off until prices drop?

Considering a Family in the Future: Should You Rent or Buy?

Hey Kristin, My partner and I are the proud owners of a cozy one-bedroom condo, but we are thinking about expanding our family in the next year. The question on our minds is whether we should sell our condo and rent a larger two-bedroom apartment, or take the plunge and purchase a house. With the current high prices and interest rates in the housing market, we're feeling a bit unsure about what to do. What would you suggest? Cheers, Brandon

Hey Brandon, Making the decision to buy a home right now can feel like navigating through rough waters. The combination of soaring home prices and increasing mortgage rates can make the process seem daunting. The dilemma you're facing is a common one: should you wait it out, or make a move before mortgage rates climb even higher? While I don't possess a magical crystal ball that can predict the future, I can share some insights that might help you make a more informed decision.

While it's uncertain what the housing market will do in the future, one thing is clear: it's unlikely to experience a crash similar to the one we saw over a decade ago. Household financial stability is stronger now, reducing the likelihood of mass foreclosures due to mortgage payment issues. Additionally, the vast majority of homeowners have fixed interest rates, meaning their mortgage payments won't fluctuate even as interest rates rise, reducing the risk of selling or foreclosure.

Although home prices have been on the rise, experts predict a potential 5% to 10% decline in some regional housing markets in the coming year. However, there's also the looming factor of the Federal Reserve's efforts to combat inflation by increasing interest rates. Consequently, mortgage loans could become more expensive in the future.

Considering these factors, it's essential to determine if a potential drop in home prices would offset the increased interest costs. Consulting with a realtor and mortgage lender can provide valuable insights into neighborhood trends and help you make an informed decision. While waiting might seem like a viable option, it's important to stay flexible given the uncertain economic climate. A preapproval for a mortgage can give you a clearer picture of your borrowing capacity and interest rates, enabling a quick decision when the right opportunity arises.

Ultimately, the choice between renting and buying depends on your individual circumstances and market conditions. By staying informed and remaining flexible, you can navigate the housing market with greater confidence. Best of luck in your decision-making process!

-Kristin

If you have financial questions, Kristin is here to offer guidance. Submit your query anonymously, and it may be featured in an upcoming column. For more insightful content like this, subscribe to The Balance's newsletter for daily financial tips and analyses delivered directly to your inbox every morning!