Should I just rent and buy a house in a few years?

To lead off here, rents have remained high while home prices have fallen off pretty significantly since June / July highs. This is due to rent lease terms, continued demand, and misguided consumer sentiment regarding buying currently.

At the core you are asking something that is truly unknowable. 

Anyone that would have that answer would make billions of dollars each and every year. If you need an example of how unknowable the future real estate market is, builders, who are in the business of building homes for the real estate market get it wrong all the time.

So with the future market unknowable, what can you know?

Well, easiest is to start with payments. 

Sure, home prices are currently experiencing downward pressure, but Rent is essentially lighting money on fire in the sense that you will never get that money back. Rent is likely to be $1500 – $5000 each month and those rates have held stead with relatively steady with a rising supply of rentals so the question is: will home prices drop $40,000 – $60,000 in a year? 

Because if you rent for a few years, you will 100% be spending $36,000 to or significantly more on rent in that time period that you will never recover.

Again no one can know what the next 12 months will bring, but price drops are typically very slow. We have had a few acute drop over the last couple years, but I can tell you buyer demand is still very much present and I personally feel the market is going to start to find it’s level soon.  And in most cases, those extremely brief price drops were wiped out in a few months when buyer demand returned.

The increase in interest rate does have a sizable effect, but some perspective is in order. The 2%-3% interest rates of 2020 – 2021 are the outlier.  And we are quite likely not ever to see those again.  

If you look at the 20 year history of interest rates, you will see they have bounced between 4%-6%, which we are currently on the higher end of.

There’s one additional key here… Nothing happens in a vacuum. 

Or to put it another way, will always be some market force always acting against you. Currently it’s interest rates. 2021-early 2022 it was having to compete against 20-50 other other offers and having to go $20,000 – $60,000 above asking to be the winning offer. Before that it was steadily rising prices for a decade. 2006 – 2011 it was extraordinarily difficult to impossible to get a mortgage (thus why prices slid).

Currently interest rates are higher, but there are more homes to choose from (2-4 times as many in some areas) and sellers are actually negotiable and starting to be willing to grant concessions and closing costs. So net effect is not as bad as things look at first glance.

There will never be a slam dunk no brainer great time to buy a home. There will always be a potential downside, and there will always be a “what if” because there is no way to know what the situation will look like 1 – 3 years.  

However what does become clear is that owning a home, when we look at the long term scenarios, 15-30 years down the road, is hands down the best choice and does become about as certain as it can be.

Generally speaking, if you look at history, if you are planning on staying put for more than a year or two buying typically makes the most financial sense.to