They say we shouldn’t time the market. It’s a stupid game. And if anyone really succeeded in this field, they would become rich.
This type of advice usually applies to the stock market, but it can apply to almost anything else as well.
It is very difficult to predict what will happen at any given time. It is even more difficult to predict what will happen in a short period of time.
In other words, don’t stress yourself out, don’t try to time it, it won’t go as expected.
The same goes for buying a home. But unlike investing, there are many factors to consider besides price.
Now that prices are lower, you no longer need to beat the rush?
It’s funny how the media jumps on certain narratives, exploits them, exhausts them, and then moves on to the next one.
All this while forgetting (and ignoring) the previous step in the process. For lack of a better word, Old news.
That piece of old news was the argument that it made sense to jump into buying a home while mortgage and housing prices were high, before the herd followed.
Simply put, there will be less competition if you buy when no one else is doing so, and you can get a home before others inevitably come along and raise the price.
Despite paying a high price and getting an equally high mortgage rate, there was the promise of a lower rate in the near future thanks to refinancing at a lower rate and term.
There was also a cute phrase floating around that said, “Marry the house, date the price.”
In other words, book the property now, but finance it with a loan that you only plan to hold for a year or two before prices get much cheaper.
Which brings me to a new piece of advice making the rounds in housing news circles: you might have to wait a little longer.
“You may not want to buy a house yet.”
The advice to buy a house in a crowd is now gone. It may have made sense at the time.
When mortgage rates nearly tripled from levels below 3% to around 8%, demand fell sharply.
Aside from turning away a lot of potential buyers, this has simply made buying a home unaffordable for most people.
If you still have the means to make this move, it could mean less (or no) competition and possibly an acceptable offer below the asking price.
But this mindset was still based on market timing. Were you buying a house because you wanted to, or just to avoid the “crowd”?
Will this desire to get off the ground come true? Or will you just catch a falling knife and have to pay a high mortgage rate in the process?
Well, now that we have the benefit of hindsight, we know that mortgage rates have not fallen as quickly, nor have they fallen as much as expected.
Yes, prices have fallen, but not as much as many had expected so far. At the same time, home prices have continued to rise, at least nationally.
Some parts of the country have seen prices fall from all-time highs as supply increases.
But perhaps most importantly, there was no rush, no huge spike in demand, As shown in the chart aboveWhen mortgage rates started to fall, they haven’t yet.
In fact, the Mortgage Bankers Association (MBA) He pointed out Mortgage rates have fallen for four straight weeks, but purchase orders haven’t risen much.
“Prospective home buyers are remaining patient now that prices have fallen and inventory for sale is starting to pick up,” said Joel Kahn, vice president of the British Business Confederation and deputy chief economist.
Huh? They were told to buy quickly when prices were high and now they don’t buy when prices are down about 1% from last year? Instead they are told to wait?
How did we not see this coming?
in the past, It seems pretty clear that once mortgage rates start to fall with any conviction, potential home buyers will wait until better rates..
It’s a predictable human psyche. If you think something is going to get cheaper, why would you rush to buy it now?
Would you book a flight ticket or hotel room today if you expected the price to drop next week or next month?
Why not wait until things actually get better? Well, that was the advice given last year, that you have to beat the herd.
Hurry and buy a home before the home buying boom returns. But not many people seem to be listening to this advice anymore. Or if they ever did.
This could point to larger issues in the housing market. On the one hand, affordability remains very constrained, with prices and rates still very high.
There is also the idea that the housing market is not as strong as previously thought, especially if we are about to enter another recession.
While the current economic situation is much better than the one in the early 2000s, the broader economy is still capable of wreaking havoc.
If unemployment continues to rise, it won’t be a problem if mortgage rates fall even further.
You may end up in a situation where you have fewer qualified buyers, offsetting the benefit of a cheaper mortgage payment.
This is something that many people do not understand or expect.
As I have said many times, home prices and mortgage rates are not negatively correlated. The relationship between the two is not clear-cut. One does not rise while the other falls.
Remember that weak economic data tends to cause mortgage rates to fall as bonds become a safe haven for investors and demand for them increases. Bond prices rise and their yields (interest rates) fall.
So it’s entirely possible (and logical) that mortgage rates and house prices will fall together, even though lowering payments would seem to increase demand.
It’s not about mortgage rates anymore.
Ultimately, the housing market story is no longer about mortgage rates. It was a year ago, but it’s not today. And that’s what makes these narratives so hard to address.
Just when you think you have it figured out, things change completely, often in an unexpected way.
Just look at the pandemic. We thought the housing market had peaked in 2019 or earlier. Then Covid came along and home prices went up another 50%.
Who would have predicted that this would happen? Who predicted that mortgage rates would rise to 8% in less than two years?
So stop buying strategies that try to time the market, because you will eventually be disappointed.
If you want to buy a home, buy a home that you love, want/need, and can qualify for now and in the future.
Don’t rush into buying a house at a certain time because an article says it’s a good idea.
Keep reading10 Reasons to Buy a Home Other Than Investment
Prior to creating this site, I worked as an account manager for a wholesale mortgage lender in Los Angeles. My experience working in the early 2000s inspired me to start writing about mortgages 18 years ago to help potential (and current) home buyers better navigate the home loan process. Follow me on Twitter for the latest news.
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