Should I buy or should I rent now? 

To irreverently paraphrase the Clash: Should I buy or should I rent now? One doubts the late Joe Strummer spent too much time pondering the financial merits of home ownership given his love of squalid ‘flats’, but he did eventually get his country house. Maybe he should have done it sooner? Here are a few things Joe never thought about.

You'll Be Waiting a While for a Lower Mortgage Rate

Should you wait to buy a home until mortgage rates fall? That only makes sense if they fall significantly and rates are pegged to the 10 Year Treasury Bills (Google it: it’s true. Promise!). 7% is not historically that high and our deficit is not about to be put in a box and made disappear by David Copperfield. This is not financial advice, but common sense. Low, low rates are probably not coming back for a long time.

Today’s Price Is Tomorrow’s Bargain

It’s no secret that home prices have climbed in recent years, and over the long term they tend to keep trending upward. If you wait for rates to drop, you may face a higher purchase price a year from now, which can cancel out (or even outweigh) the savings from a lower rate.

Every Year You Wait, Your Equity Doesn’t Start

Maybe you plan to wait a few years, assuming the perfect home at the perfect price will eventually drop into your lap. If only it worked that way. Every year you wait is a year of potential appreciation you don’t capture, and that appreciation applies to the full value of the home, not just your down payment

Building Your Landlord’s Wealth Instead of Your Own

Rent doesn’t build long-term wealth the way homeownership does. Each mortgage payment gradually turns into equity, a growing ownership stake, rather than money paid out to a landlord. A fixed-rate mortgage also keeps your principal and interest payment steady while rents and other living expenses climb. 

Want to see what a monthly payment could look like? Try the Mortgage Calculator feauture on my website.

Put Today’s Rates in Perspective

Rates certainly feel high compared to the pandemic years, but those years were the exception, not the rule. I recently wrote about this in The 3% Mortgage: About as likely as seeing $2.50 eggs. Extraordinary circumstances pushed rates to all-time lows in early 2021, and over the past several decades rates have averaged closer to 7% to 8%. Also keep in mind that if rates fall after you buy, you may have the option to refinance, but you can’t go back and lower the price you paid.

Rates and home prices are also notoriously hard to predict (unless you have a psychic on speed dial with a solid track record, in which case, please send me their number).

The Bottom Line

There are plenty of valid reasons to wait, like building your credit score or saving for a larger down payment. But try not to let current prices or rates alone keep you on the sidelines. Home prices generally trend upward because supply is constrained, so if you’re waiting for them to drop, you could be waiting a long time, and it could end up costing you. 

But whatever you do, spend less than you earn, and put the difference each month into a solid asset.