Should you wait to see if house prices fall before you buy?

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If you’ve been waiting for home prices to drop before you buy, you may be waiting a long time, experts say.

While it may be tempting to time the market, it doesn’t look like home prices are going to decline any time soon. Prices may increase at a slower rate than record 20% increase we witnessed at some points last year. But Dr Jessica LautzVice President of Demographic and Behavioral Information at the National Association of Realtorspredicts that home prices will rise at a slower pace of 5.1% in 2022.

When it comes to buying a home, trying to time the market is risky, especially as experts predict costs will continue to rise. Many real estate experts agree that by prioritizing your personal finances, you can buy a home when the time is right for you, rather than waiting for a market downturn.

This is what you need to know.

Will house prices fall in the short term?

The pandemic-era real estate market has seen price hikes and fierce bidding wars due to supply chain disruption, low housing supply and increased buyer demand. Although real estate experts expect this level of competition to decrease somewhat, they do not predict that home prices will drop any time soon.

“Our prediction is that home prices will not actually fall,” says Lautz. “We expect home prices to moderate in 2022, but we continue to see home price growth.”

Lack of inventory is one of the reasons behind rising home values, says danielle halechief economist of, who agrees that prices are not going down any time soon. “The reason we wait [home prices] slowing down, but not slowing down, is because we still have so few houses available for sale,” says Hale. “In an inventory shortage, the way the market balances that is by pushing prices higher.”

In fact, Hale says that data from shows that we have 5.8 million homes less than we need, a shortage that would take a minimum of five years to overcome. Given this lack of inventory, house prices seem unlikely to decline this year.

Timing the Market: Waiting for Home Prices to Drop

Instead of trying to time the market, consider basing your home buying decision on your personal timeline.

“My advice when housing is scarce is that if you think you’re financially and emotionally ready to commit to staying in one place for a long time, then that’s when it makes sense to buy a home,” says Hale. “And if you’re ready and start shopping, you should shop when you find a home that works for you, meets your needs and fits your budget.”

He also advises prospective homebuyers to think long term, especially if they will be committing to a 30 year mortgage.

“Your best bet is to think very long term,” says Hale. “Do you want to think about [at least] the next five to seven years, but not necessarily on very short-term fluctuations.”

pro tip

Instead of trying to time the market, consider buying a home when the time is right for your personal finances. By saving for a down payment and shopping around for the best rates, you can move quickly when you find the right home.

Interest Rate Timing: Waiting for Mortgage Rates to Drop

Waiting mortgage rates going down probably won’t do you any favors either. Hale expects mortgage rates to rise in 2022, though global uncertainty, such as the conflict in Ukraine, may cause them to drop unexpectedly.

“Any time you have a period of uncertainty, people are constantly adjusting and readjusting expectations,” says Hale. “That can lead to ups and downs in mortgage rates and make it really hard to know what’s going to happen.”

If mortgage rates fall, he warns that this decline can be a double-edged sword.

“Mortgage rates may fall if the economic outlook looks worse, but that increases the chances that the job market isn’t as good or your income isn’t as good,” says Hale. “So it’s kind of a short-term benefit: You may be able to lock in a lower interest rate, but in the context of this broader economic uncertainty, I don’t know if that’s necessarily a good thing for homebuyers.”

So what can you do in the face of this interest rate volatility?

“I would say at this exact moment stay in close contact with your mortgage broker,” advises Lautz. “They will work to get you the best rate.”

How to find the best financing

While you may be feeling discouraged by rising real estate costs, there are ways to help yourself save.

1. Test Rate Your Budget

First, Hale recommends “adjusting the rate” of your budget by estimating How much house can you afford? with a range of possible mortgage rates.

“You can do this in affordability calculators,” she says. “Test a couple of different mortgage rates so you can get to know very specifically what a change in mortgage rates means for your monthly costs for any particular home.”

2. Get your financial house in order

Lautz also recommends getting your finances in order so you’re ready to make an offer if the right house comes along.

“I would suggest making…your debt-to-income ratio the best it can be. [and] your credit score as high as you can go,” says Lautz. “Make sure you have money in reserves, as well as your Deposit and closing costs.”

3. Save for your down payment

Paying a down payment can be challenging, so Lautz recommends saving where you can.

“Maybe that means a tax refund or a bonus,” she says. “Storing those extra gifts from relatives can be helpful. Today’s homebuyers essentially need to diversify where they find their down payment, because home prices have gone up.”

Lautz also suggests looking to see if you qualify for homebuyer assistance programs.

“I would also say, and I especially encourage first-time homebuyers to do this, is to check and your local community because programs may be available [to help with] low pay.”

4. Get informed so you can move quickly

Lautz adds that first-time homebuyers need to do their homework on terms like appraisal gap and contingency so they’re ready to move quickly.

“Educate yourself so that if you fall in love with that first house and are ready to make an offer, you can quickly make an informed decision,” says Lautz. “You want to make sure you stand out against other competitive offers, because the typical house gets three or four offers today.”

5. Find the best rate

Finally, it is a good idea compare prices with multiple mortgage lenders to find the most affordable financing. You will not only have a pre approval letter Give your offer a competitive edge, but getting prequalified can give you an idea of ​​your rates without hurting your credit score. When it’s time to buy, keep your mortgage applications to a 45-day window to protect your score.

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