With mortgage rates hovering around 7%, some prospective buyers may be wondering whether they should put a down payment on a property before rates soar higher, or wait for the housing market to cool further.
As a continuation of our “What to Do in a Bear Market” series, Yahoo Finance asked several home experts whether buyers should buy now or wait.
Should buyers wait to buy a property if the Federal Reserve keeps raising interest rates and mortgages go up?
“If you can still afford what you want to buy, even after sky-high mortgage rates, you have a lot more bargaining power now than you did six months ago,” according to Greg McBride, CFA, chief financial analyst at Bank Rate.
When to buy depends on people’s individual situations, said Marc Geredes, director of operations at Sundaean online real estate market.
“People need a place to live and right now it is very competitive to rent, as rental prices have been rising. In the long run, residential real estate has always been a good long-term investment,” she added.
Experts say that while interest rates are high, they are expected to drop at some point and homeowners can refinance if they have enough equity in their homes.
Where do you think prices will go next year? If they go down, how much are you estimating?
“Based on the experts we consulted with, we believe prices will return to pre-2020 pandemic levels nationally. It varies from city to city, from metro to metro,” Geredes said.
However, much will depend on supply, especially in the single-family housing sector, which has experienced greater shortages than multi-family housing.
“Until we get a lot more supply in these markets, I don’t think we’re going to see a drastic drop in home prices,” said Michael Gifford, CEO of The spliterohe told Yahoo Finance.
Many homeowners are locked in at ultra-low rates after refinancing or buying during the pandemic.
“That’s what we’re seeing with a lot of the homeowners we help. They have a three or three and a half percent mortgage,” Gifford said.
“Right now, if you are going to sell, there are few things to buy in the market. Rents are still very expensive. So sellers have little to no motivation unless they have a major life event to sell their property, they are locked in,” he added.
McBride at Bankrate expects prices to remain “flatter” given tighter supply in some markets.
“You have millennials in their prime years to buy a house. There is a sustainable level of demand and in a market that is not oversupplied, that helps keep a cap on any drop in house prices,” McBride said.
What about real estate investors? Should they buy now?
“If you are a real estate investor, you want to see the rental income of the property, the cost of maintaining the property, and the level of inventory in the neighborhood you are buying,” Aaron DruckerMilo’s senior director, to Yahoo Finance.
“Interest rates are higher today than they were six months ago. However, if an adjustable-rate mortgage is an option, or if you have crypto wealth that you can use as collateral, the economics may work in your favor,” he added.
When is it safe to buy a house?
“Generally speaking, you want to see real estate inventory trends in your local neighborhood stay flat or decline for months in a row. Markets with rapidly growing inventory can affect home prices. However, a smart buyer or investor can offset rising interest rates by negotiating a lower purchase price with a seller,” Drucker said.
While some areas have seen a change in house pricesother regions have not moved much.
“We don’t know when property values will stabilize. Everything is market by market. Some markets will struggle and others may not move much,” added Sundae’s Geredes.
Ines is a market reporter who covers stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre