Should You Buy a House Now Before Rates and Prices Go Up?

by Kevin on March 21, 2011

Whether you’re looking to buy your first home or you recently sold your house you might be pondering buying a new house in the near future. Rates are at historic lows, and the housing market has taken a pounding over the last few years. Depending on what area of the country you live in home prices could be anywhere from 10% to almost 50% below what you would have paid a few years ago.

You might be feeling a bit of pressure to hop back into the housing market before it is too late. With the Federal Reserve pumping billions of dollars into the economy the likelihood of inflation – and thus higher mortgage rates – is fairly good. When exactly those higher rates will hit remains to be seen.

On top of that with the huge drop in home prices you have to wonder if prices are going to stay down forever. You have to ask yourself what the odds of continual price drops in your market really is. Is the market as down as it will ever be? In your area which is more likely: higher prices or lower prices? For many the answer is higher prices because the market seems to have bottomed out.

These two thoughts – potentially higher mortgage financing rates and slowly increasing home prices – can provide a sense of urgency to hop right back into the housing market before it is “too late”. That’s a completely natural emotion to be feeling, but it can lead you to a place that might end up being a financial disaster. What if you don’t have the funds to buy a new place? (You might get some creative financing – a bad move!) What if you aren’t sure you’ll be living in that city in 3 years? (You’ll end up losing your shirt in realtor and moving costs.)

Reasons to Buy a Home

If you were to make a list of reasons to buy a potential house I guarantee you “we’re afraid we might miss out” shouldn’t make the cut. (In fact one might argue this is a core reason we just experienced a housing boom and bust!)

No, the reasons to buy a home are much different and require a lot of thinking into the future. Buying a home is a huge undertaking. We are talking about spending hundreds of thousands of dollars, right? You shouldn’t take that decision lightly or rushed.

If your head is in the right place you might consider buying a home because…

  • you have been saving up for a large down payment for a long time
  • you have researched various areas in your city and know how much you can afford
  • you know what sort of payment you can afford at the current financing rates
  • you know (as well as anyone really can) that you will be living in the same city for at least 10 years
  • you aren’t counting on home price appreciation to make your rich
  • you have been thinking about and discussing the possibility of purchasing a home for a long time – you aren’t rushing into a decision

If the above is true then sure, go ahead, get back out there and buy a house. But do it for the right reasons. Don’t do it because you feel rushed or like you’re missing out on the next best thing. Rushed decisions will always end up coming back and biting you in the end.


Determined March 21, 2011 at 10:28 am

Great post! We are thinking about buying a house and I am soaking up as much information as I can!

Edward March 21, 2011 at 8:45 pm

I like the part that states don’t count on home appreciation.
While I didn’t think it would make me a ton of money I was not completely expecting to lose money on the whole deal either..

Nathalie Belanger November 23, 2015 at 9:59 pm

Thank you for sharing. It’s very interesting. Hope to hear more from you.

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