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

First off 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 something that is unknowable. And anyone that would know 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’s business is building homes for the real estate market, get it wrong all the time.

So with the future market unknowable, what can be done?

Well, easiest is to start with payments. Sure, home prices are currently in downward pressure, but Rent is essentially lighting money on fire in the sense that you will never get that money back. Rents are going to be $3000 – $5000 for anything comparable to a 500kish house and those rates have held stead with rising supply of rentals so the question is, will home prices drop $40,000 – $60,000 in a year? Again no one can know what the next 12 months will bring, but price drops are typically very slow. We have had an acute drop since June / July top of market, 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.

The increase in interest rate does have a sizable effect, but some perspective is in order. 2%-3% interest rates of 2020 – 2021 are the outlier, not the 4%-7% we have had the last 6 months. If you look at the 20 year history of interest rates, you will see they have bounced between 4%-6%.

It’s also.. and this is absolutely key… It’s also true that nothing happens in a vacuum. Or to put it another way, there will be some 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 go $20,000 – $60,000 above asking to be the winning offer. Before that it was rising prices for a decade. 2006 – 2011 it was extraordinarily difficult to obtain a mortgage (thus why prices slid).

Currently interest rates are high, but there are WAY more homes to choose from (2-4 times as many compared to 6 months ago) 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. In the times where the majority consider it to be nearly so, demand and competition increases to the point where prices climb rapidly.

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