Beyond the headlines: Is it really a bad time to buy a house?

Paul Centopani
Paul Centopani
The Mortgage Reports Editor
November 8, 2022 - 4 min read

Is buying a house as bad as it seems right now?

From fierce bidding wars and surging home prices, to elevated inflation and soaring mortgage rates — home buyers have faced an uphill battle for the last two years.

On the surface, today’s home buying conditions still appear daunting. But they are also creating helpful dynamics for borrowers. Declining affordability greatly reduced competition and made sellers more willing to negotiate, giving buyers some leverage.

Three-quarters of house hunters think it’s a bad time to buy despite these improvements. But experts tend to disagree. Here’s why industry pros still recommend buying in today’s market.

How are home buyers feeling?

Since 2020, borrowers have been put through the ringer. Interest rates plummeted, sending the housing market into a frenzy and property values skyward. Now, mortgage rates have reached 20-year highs, lessening demand and home price growth.

All those factors made it an expensive time to buy a home. Because of this, buyer sentiment keeps dropping. In September, only 19% of surveyed borrowers thought it was a good time to buy, according to Fannie Mae. That share fell for seven consecutive months and compares to 28% in Sept. 2021 and 54% in Sept. 2020.

“As long as supply is limited and affordability pressures continue to constrain potential homebuyers via elevated home prices and mortgage rates, we expect home sales will remain sluggish,” said Doug Duncan, SVP and chief economist at Fannie Mae.

The decline can be attributed to interest rate expectations and unfavorable economic conditions like the year’s historically high inflation. A 64% share of those surveyed think mortgage rates will increase in the next 12 months, compared to 51% and 38% the two prior years, respectively.

Why experts still think it’s a good time to buy a home

In reality, the current housing market could be the opposite of what you think. While conditions may be tough for buyers, those forging ahead are finding less competition and more amenable sellers. Plus, rising interest rates have lowered borrower demand and, in turn, slowed home price growth.

“There’s [much] less competition from other homebuyers and investors today than there was just a few months ago, home prices have declined slightly over the last quarter, and home sellers are probably more willing to negotiate terms.”

–Rick Sharga, EVP of market intelligence at Attom Data Solutions

We asked four housing industry experts for their opinions on the current market. While buyer difficulties certainly abound, things are rosier than most borrowers believe. Here’s what they had to say:

Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors

“Although mortgage rates have substantially increased from a year ago, it’s still a good time to buy a home. While many buyers have been forced out of the market due to low affordability, there are fewer offers per home. This means that sellers may be more willing to negotiate.

Furthermore, data shows that sellers are also more willing to reduce prices. Among recently sold properties that were on the market for more than a month, sellers had to drop prices by 12% on average.

Finally, due to lengthening days on the market, there are more homes available for sale... For example, there are about 80,000 more listings that buyers earning $100,000 can afford to buy now compared to January when rates were near 3%.”

Selma Hepp, deputy chief economist at CoreLogic

“Convincing retraction in home buyer demand may be helpful for potential home buyers who faced strong competition earlier this year. As a result, buyers may have stronger negotiating power when making offers.”

Odeta Kushi, deputy chief economist at First American

“While mortgage rates have increased significantly compared with one year ago, the housing market is also much less competitive for potential buyers. For those with stable incomes and strong credit that have found a home that fits both their lifestyle needs and their budget, buying a home may be attractive and financially prudent.

But, for those potential home buyers who are priced out of their desired home in today’s market, it might pay to wait. Sitting on the sidelines may allow a potential buyer to continue to pay down their debt, build up their credit, and save for the down payment and closing costs.”

“For those potential home buyers who are priced out of their desired home in today’s market, it might pay to wait.”

–Odeta Kushi, deputy chief economist at First American

Rick Sharga, EVP of market intelligence at Attom Data Solutions

“It’s a difficult time to buy a home today, especially for first-time buyers. The inventory of homes for sale remains historically low, so there’s not a lot to choose from, and rising interest rates have made affordability a real challenge for a lot of prospective buyers.

That said, there’s also much less competition from other homebuyers and investors today than there was just a few months ago, home prices have declined slightly over the last quarter, and home sellers are probably more willing to negotiate terms. So it’s not a bad time to buy for people who find a home they like — and can comfortably afford.”

Should you buy now or wait?

So should you try to purchase a house now or wait? According to the experts, as long as you can afford to, it’s never a bad time to buy a home.

While this year’s surge in mortgage rates could feel disheartening, you can always refinance when rates hit a down cycle. The sooner you lock in a mortgage and buy a home, the sooner you start building equity.

If you’re still unsure whether to pursue homeownership or sit on the sidelines, talk to a local lender today. They can help determine when to buy and what loan type would be best for you.