In 2021, a lot of home buyers in the U.S. were frustrated by the hyper-competitive nature of the real estate market. Fast-rising prices and limited inventory have certainly made things challenging. As a result, many buyers are now wondering the same thing:
Should I buy a house now, in 2021, or wait until 2022?
There are some possible pros and cons on both sides of the equation. But much of it is speculative in nature. We don’t know for sure what the real estate market will be like in 2022, versus now. But we can make an educated guess based on current trends.
At a glance: If you buy a house now, in 2021, you might avoid higher housing costs down the road. But you’ll probably have more competition to deal with as well. If you wait until 2022 to buy a home, you might have an easier time finding a property but could encounter higher costs.
Back in June, Zillow’s senior economist Jeff Tucker told CNBC: “This is a really challenging time to be a buyer. The market is as hot as we’ve ever seen it before. If they can watch and wait for the next several months, time is on their side.”
That’s some good advice. Here are some other points to consider.
Should You Buy a House Now or Wait Until 2022?
There might be some significant advantages to waiting until 2022 to buy a home. On the other hand, an argument could be made for buying a house now — instead of waiting until next year. Here are some important factors to consider in both scenarios.
Buying a Home Now, in 2021
You could enjoy some significant benefits when buying a home now, in 2021.
For one thing, mortgage rates are still hovering at historically low levels. When this article was published, in August 2021, the average rate for a 30-year fixed mortgage loan was around 2.77%. That’s incredibly low from a historical standpoint.
However, as we wrote in a recent article, mortgage rates are expected to rise gradually through the end of this year and into next. So if you wait until 2022 to buy a house, you might end up with a higher interest rate on your home loan.
Buying a home now instead of waiting could also help you avoid price hikes down the road. Based on current real estate market conditions, it seems likely that home prices in the U.S. will continue to rise.
In fact, all of the housing market forecasts we’ve encountered predict a continued rise in home values into 2022. If those predictions turn out to be accurate, you might literally pay a price for waiting until 2022 to buy a house.
Buying a home now instead of next year could also give you a head start on equity building. We just talked about the fact that house prices in the U.S. continue to rise. If you buy a house now instead of in 2022, you’ll start enjoying the benefit of equity growth sooner rather than later.
Waiting Until 2022
And now for the counter-argument. Waiting until 2022 to buy a house has some potential pros and cons as well.
On the upside, you might not encounter as much competition from other home buyers next year compared to right now. In 2021, the real estate market has been highly competitive due to short supply and strong demand.
But we are currently seeing signs of a cooling trend in many U.S. cities. Higher home prices and other factors have caused some buyers to back out of the market altogether, thereby reducing demand.
As a result of these trends, you might have a less stressful house-hunting experience if you wait until 2022 to buy a house. The market could be a bit less frenzied next year.
Inventory is another important factor to consider. Housing market inventory in the United States has been low for quite some time now. The coronavirus pandemic actually made the situation worse by increasing home sales nationwide.
As of summer 2021, inventory remains tight in most U.S. cities. So we probably shouldn’t expect to see a buyer’s market scenario anytime soon.
But the supply situation is starting to change. Several reports published over the past couple of months have shown an increase in the number of new property listings coming onto the market. If this continues going forward, home buyers who wait until 2022 to buy a house might have an easier time finding a suitable property.
Related: More houses for sale in 2022?
And now for the potential downside. As mentioned earlier, mortgage rates are expected to rise gradually as we shift into 2022. Home prices could continue climbing as well. So those buyers who wait until next year to make a purchase could face higher costs.
Making an Informed Decision
The biggest challenge when deciding whether to buy a house now or wait until 2022 is that we don’t really know what the market will be like next year. Now with certainty, anyway.
If we knew for sure what home prices, mortgage rates and inventory conditions would be like next year — it would be an easier question to answer!
As a home buyer, the best you can do is research current conditions and forecasts for your local housing market. This will help you make a more informed decision.
It’s also important to consider your budget, and how it relates to home prices in your area. If you’re already stretching your budget for a purchase, waiting until 2022 might not be the best idea. So there are some personal considerations to make here as well, in addition to the market-related actors above.
Disclaimer: This article mentions forecasts and predictions issued by third parties not associated with the publisher. Such forward-looking views are the equivalent of an educated guess. No one can predict future real estate market conditions with complete certainty.