16 Reasons Right Now Could Be the Worst Time Ever to Buy a House

Has the housing affordability crisis made you skittish about buying a home? Are you trying harder than ever to keep more money in your bank account? You’re not alone, especially if you’re a first-time homebuyer.

After watching home prices blow up like a pandemic-inflated balloon in 2021 and 2022, homebuyers are understandably worried about whether it still makes sense to pursue homeownership. 

While the era of double-digit home price inflation seems to be coming to a close, economic headwinds are still driving many would-be homebuyers away from the market. Here are a few factors that make it a difficult time to buy a home.

According to the National Association of Realtors, mortgage costs as a percentage of the homebuyer’s total income have been rising since 2020 (14.7% in 2020 vs. 27% in 2023) and the composite affordability index has been decreasing. 

In short, with the median home price at $431,000, houses are too expensive right now for a lot of people to afford. You may be better off keeping money in your bank account and not overpaying for a house. 

While there are a few more houses for sale now than there were in 2021 or 2022, housing inventory remains historically low. With few homes on the market, prices remain high due to scarcity.

High mortgage rates are keeping many would-be homebuyers out of the market. High rates substantially raise the monthly payments for borrowers. 

To illustrate this, the principal and interest payment on a $320,000 mortgage goes up by $600 per month when the interest rate jumps from 4% to 7%. Many 30-year rates are above that now. 

Most people don’t have that much wiggle room in their budgets.

Tax assessors have finally had a chance to update their property value assessments, increasing property taxes to correspond with higher property values. 

This means the monthly tax burden of owning a home has increased and might not be worth it right now.

We’ve been holding our collective breath for months waiting to see if a recession will happen. 

Economic growth is projected to pick up in 2024 or 2025, but economists seem to be giving mixed reviews on what lies ahead. This may give homebuyers pause, urging them to wait for more certainty.

Like most other things, homeowners insurance has steadily increased. According to information by Quadrant Information Services, insurance premiums are up about 3% since last year. 

What’s worse, some companies are excluding natural disaster coverage in certain geographic regions, leaving many homes vulnerable.

Inflation has eroded the purchasing power of Americans in the last few years. While prices have stopped rising at such astronomical rates, they haven’t gone down much. 

With everything from milk to gas to furniture increasing in cost, this leaves little room in the American budget to deal with the increased cost of owning a home.

A forecast by Metlife Investment Management predicts that institutional real estate investors may control 40% of the housing market by 2030. 

The families looking for housing on Main Street are facing increasing competition from Wall Street investors looking to bolster their portfolios.

This is troublesome because real estate investment trusts (REITs) and other investment firms have deeper pockets than most consumers and can buy homes for cash.

Inflation wouldn’t be such a big deal if wages were keeping up with the rising prices. Unfortunately, this hasn’t been the case. At its peak, price inflation had risen 9.1% whereas wages had risen 6.7%.

Wage growth managed to outpace inflation in the second half of 2023, but it remains to be seen if it can make up for the ground it lost earlier in the year.

Over 305,000 people were laid off in 2023 — and that’s mostly just in the tech sector. While the volume of layoffs has slowed since the beginning of the year, they haven’t stopped. 

If you fear that your job is on the chopping block or it’s in a sector with a lot of job losses, you may want to hold off on buying a house until your job is more secure.

Maybe you want to sell your home to downsize or upgrade, but if you’ve got a 3% interest rate on your current mortgage that you locked in a few years ago, changing to one with a 7%+ interest rate is a tough pill to swallow. 

This may deter you from buying a home when you would in a different economic environment.

Americans made a great job saving money during the pandemic (thanks, Economic Impact Payments), but they’ve been saving considerably less since then. 

Savings rates have been hovering around 3% or 4% for the last two years, much less than in previous years.

This low savings rate suggests that many families struggle to save enough money for a down payment.

Consumer debt in American households has continued to rise over the last decade. In fact, credit card debt hit an all-time high in 2023. 

If you find yourself with car notes, student loans, medical bills, credit cards, and other debt balances, now might not be the right time to take on a mortgage.

Many states and the federal government have upcoming legislation that, if passed, could ease the housing inventory and affordability problems we’ve seen in recent years.

For example, the federal YIMBY (Yes, In My BackYard) Act could change zoning laws to allow for more affordable housing options, such as duplexes, manufactured homes, and more densely placed single-family homes. 

This would give homebuyers more affordable homes to buy in the coming years.

In general, home prices have risen sharply from pre-pandemic levels, but certain areas that saw bloated home values during COVID are now coming back down to earth. 

Once-hot markets like Washington, D.C., Utah, and Idaho have seen 4%-5% declines over the last year.

If you’re looking to buy on the West Coast or in the Intermountain West and you believe these prices haven’t hit bottom yet, it may be worth waiting to jump into the housing market.

Maybe you’re one of the lucky few who can afford the high prices and high interest rates of the current housing market. But even if you find a house that meets your budget, you may not get very much house for your money.

If the houses you can afford are in poor locations, too small, or in need of expensive repairs that would make it hard to get ahead financially, it may be worth sidelining your home purchase until you’ve saved more or housing conditions improve.

Buying a home is a personal decision that should be guided not only by national trends like higher interest rates but also by your financial situation and goals. 

Even if national economic indicators are bleak, if you find the right deal that fits within your budget, now could be a great time for you to own a home and start building wealth.

Despite the high prices and expensive mortgages, economists are not forecasting another housing crash like we experienced in 2008.