Updated April 2022
We get this question a lot, and our answer is always, “it depends.” First things first…
Yes, home prices are at historic highs.
More specifically, values today are about 3-4 years ahead of where they should be. Because of this rapid rise, many people would caution you to tread carefully. And we suggest the same. However, that does not mean that it is a bad time for you to buy. That entirely depends on your current situation in life.
Short Term vs Long Term
If you aim to live in your new home for a longer amount of time (at least 5-7+ years), then we don’t necessarily believe it’s a bad time to buy... Even after the crash of 2008, most values recovered within 5-7 years. So your time horizon is a crucial factor in this decision.
On the other side of the coin, if buying now could be a short term move, or if you are looking for an investment/flip, then you need to be very financially comfortable in order to absorb any potential downturns or cash flow interruptions.
Financial Outlook
In terms of your mortgage, with interest rates still near historic lows (even after the latest rate hike) locking into a fixed 30-year mortgage certainly isn’t a poor financial decision.
All of that being said, there is still a lot of economic uncertainty, so analyzing your budget and ensuring you have a healthy emergency fund is still, and always should be, very important.
Could there be a downturn in the future? Sure.
Do we know when or how severe it could be? Nope.
It could be next year or 10 years from now. No one truly knows and this is why the majority investors stay away from trying to time the market. And while your home is certainly an investment, it is also much more than that. So if now is the time in life where you feel that you need a home, then it’s not insane to consider buying right now.
Ultimately…
These are fairly basic answers to rather complicated questions. There’s a lot more nuance based on your individual circumstances. Therefore, if you’re considering buying, please reach out to us first. We’d love to help analyze your situation in order for you to make the best financial decision possible.
