Home Buying: How to Know What is Right for You

by | Nov 18, 2022 | Buying Home | 0 comments

Balancing real estate; balancing buying house

When it comes to buying or selling houses in 2022, we’ve heard it all. 2023 is just around the corner. Currently, the minds of many in the real estate market are changing… along with the autumn leaves. Where does that leave you? Before purchasing or hesitating, let’s look at the variables and assess their relative weight.

2022: The Year of the Reeling Real Estate Market

In early 2022, the focus was fierce. “It’s a buyer’s market with a 30-year mortgage rate under 3.5%!” By mid-2022, the tone was tamer. “Buyers, beware!”

In late 2022, you’re asking what is there to be wary of… and why… tell me if it’s okay to buy!

Answering “yes” or “no” would be ideal, right? Unfortunately, one-word advice isn’t very helpful in this situation. Fortunately, the guidance offered herein weighs the content and context you need for you to make the home-buying decision:

  • Highlight financial factors impacting property procurement.
  • Hone in on what’s a seller’s market and a housing inventory.
  • Consider the concepts—home price and mortgage rate—of a home purchase.
  • Top it off with terrific tips for home-buying now.
should I buy now or wait

Finances Impact the Housing Market

Should you buy a house now or wait? This is a big decision and the largest expenditure most people make. It is the place in which you will spend most of your time. It has to meet current and future needs.

When considering a transaction of this magnitude, it is wise to study the external financial factors involved. Two of these factors are market fluctuations and interest rates.

Understanding these factors is the first part of answering the “to buy or not to buy” question.

Factor One: The Fluctuation in Financial Markets

Geopolitical instability, disease, and the expense of borrowing are factors that have caused fluctuations in the financial markets since they came into existence (Dutch East India Company, we’re looking at you.) We worried about the crisis in Eastern Europe, the tenacity of COVID-19, and the rumors of interest rate hikes.

These worries affected the stability of financial markets. Thus, potential property purchasers paused in response to the concerns.

Factor Two: The Rising Rate

The U.S. housing market pays very close attention to the U.S. Federal Reserve (“the Fed”) and whether it chooses to raise interest rates. Why does that matter to a prospective home buyer?

Let’s understand what is meant when we say “the Fed is raising interest rates.” It means that the Fed is increasing the federal funds rate; “rates” is a misnomer. The federal funds rate is the target interest rate.

The target interest rate is the rate at which commercial banks can borrow and lend their excess reserves to each other overnight (Chen, 2022). If the target interest rate increases for the banks, the banks raise the interest rates on the loans they offer to their customers.

A mortgage is one type of loan that banks offer. If a commercial bank is raising its interest rates on all its loans, mortgages are affected. It becomes more expensive for a prospective home buyer to acquire a mortgage. Thus, one may not opt for a mortgage, as it eats a larger chunk of one’s budget.

Factor Three: The Rise’s Ripple Effect

Loans with higher interest rates are less attractive to borrowers. Thus, more borrowers choose not to purchase homes. Commensurately, sellers’ houses stay on the market for longer periods of time. Over time, this shift may cause sellers to lower prices in order to sell their properties more quickly.

A lower price for a house has no effect on the loan’s interest rate, but it reduces the overall cost to procure real estate. As sellers see buyers willing to purchase price-reduced properties, more sellers are incented to lower their home prices. That may motivate additional buyers to reconsider the cost of ownership.

Consider Key Concepts of the Housing Market

Now that we’ve established a few basic financial factors that affect home purchasers, let’s continue to study.

Buying in a Seller’s Market

A seller’s market arises when demand exceeds supply (Burris, 2022). You don’t need to be Janet Yellen (serving as U.S. Secretary of the Treasury) to understand this economic scenario. There are more people who want to buy houses than there are houses for sale.

Not surprisingly, in a seller’s market, it is more advantageous to be the seller. Sellers can list houses at higher prices and be reticent to make repairs or improvements to the house.

What if you’re a buyer in a seller’s market?

  • Have your personal finances in good order; seek mortgage pre-approval and obtain relevant documents.
  • Be flexible about your requirements (e.g., the porch rails don’t have to be re-painted and the carpets don’t need to be replaced.)
  • Cooperate with contractual clauses (e.g., abide by the seller’s suggested closing date without quibbling.)
  • Put as much cash as possible toward the down payment. Sellers prefer to get their money now instead of later (and loans always carry the risk of default).

Understanding Housing Inventory

Housing inventory is the number of active listings and the number of properties under the agreement on the last day of the month. Tracking the housing inventory from month to month is one way to assess the health of home sales.

Welcome to Crab’s Cove, Maryland!

As of March 31, 2022, there are 27 houses listed for purchase and 15 houses that are under the agreement (i.e., a sales agreement exists for each of the 15 properties.) The housing inventory is 12.

As of June 30, 2022, there are 36 houses listed for purchase and 10 houses that are under agreement. The housing inventory is 26.

Assume you chose not to purchase on April 1, 2022 (when the housing inventory was 12 as of the last day of the previous month). Instead, you waited until July 1, 2022 (when the housing inventory was 26 as of the last day of the previous month).

There are more properties available on July 1, 2022, than there were available on April 1, 2022. This is good news if you’re a potential buyer. Okay, but why, you’re asking?

For a buyer, there were 14 (26 – 12 = 14) additional properties from which to choose as of July 1, 2022. To a buyer, more properties available equates to having more options.

For a seller, in March, there were 11 properties competing with your property. In June, there were 25 properties competing with your property! To a seller, more properties available equates to a greater level of competition.

Contemplate the Cornerstones of a Home Purchase

There are two major cornerstones that form the foundation of a home purchase. The first is the price of the home. The second is the cost of the loan. The cost of the loan is the percentage of interest one pays to obtain a mortgage.

In the Past: Home Pricing Patterns and Mortgage Movements

It seems that trends in real estate change almost as quickly as fashion fads. Let’s look back at the trends of 2021, to understand how they affected home prices in 2022

Question: What 1959 film title would have been a suitable adjective for the real estate market of 2021?

Answer: Some Like It Hot

While this Q&A isn’t Jeopardy! material, it’s worth noting that properties were listed and sold at the speed of light. What created this kind of movement in the real estate market?

  • Interest rates and mortgage rates were low.
  • People spent more time indoors during the height of the COVID-19 pandemic and the relative value of “a place to call home” increased.
  • COVID-19 caused stagnation across multiple industries, including the building industry. As the lockdowns and sheltering in place waned, the demand for new construction grew.

In the Present: Home Pricing Patterns and Mortgage Movements

When the housing economy swings wildly in one direction, you can count on it swinging in the opposite direction at some point. As of the fourth quarter of 2022, we are seeing that scenario unfold.

Home sales have slowed. Take note of some of the reasons.

The U.S. Consumer Price Index (CPI) is a marker for inflation, which the Fed (and the rest of the population) wants to keep under control. Lowering inflation is ideal in order to keep the U.S. economy stable.

In order to slow inflation, the Fed raised the federal funds rate. You’ll recall this causes commercial banks to increase their interest rates, which are inclusive of mortgage rates. As mortgage rates climb, so do the monthly costs associated with home ownership.

The fourth quarter of any given year usually means a decline in home sales. Most public school districts have classes underway by October and many families don’t want to disrupt their routine by moving to a new home. Also, holidays crowd into the last three months of the year, so relocation isn’t at the top of anyone’s list.

An indirect result of fewer homes being sold is that real estate stock values may drop. While this doesn’t have a direct impact on home sales, it can weaken the overall industry. As with any type of investment whose growth is slowing or stagnating, investors may reallocate their funds to other types of stocks.

Top Ten Tips if You’re Buying Now

You’ve done your due diligence and rocked your research. You made the decision and you’re going to buy a house now.

Check out these tips and corresponding in-real-life (IRL) scenarios. We’ll follow Pablo and Inez as they progress toward property ownership.

  • Ensure you are on firm financial footing.

What you should have is steady employment and enough money to cover your expenses for three months.

Pablo has worked as a billing manager for a construction company for three years. Inez is working part-time at a notary’s office while attending law school. Pablo and Inez jettisoned an expensive wedding and instead put their savings in an account that could cover their expenses for five months.

  • Pause for pre-qualification.

A potential borrower provides basic financial information (e.g., income, assets, and debts) to a bank. If the lender issues a pre-qualification letter, that means they would consider loaning a certain amount.

Pablo and Inez provide evidence of their income, the credit cards they have, and an inventory of their debts (e.g., school loans). The bank collects the information and then performs a credit check on the couple. Then, the lender gives them a pre-qualification letter.

  • Pause again for pre-approval.

Pre-approval is a deeper dive into the information obtained in the pre-qualification.

During their second appointment at their bank, Pablo and Inez provide paper copies of their income tax statements (W2s), copies of their paychecks, and several months of bank statements.

  • Use credit with restraint.

Don’t open a string of store credit cards or apply for a personal loan. Lenders want to see that you are a reliable candidate to repay the loan, per its terms and payment schedule. If Shakespeare was a realtor, he might say something like this, “A borrower with many lenders a bank does not like to see.” 

Inez doesn’t like using public transportation late in the evenings when classes are done. She wants an economy car. Financing a car (and adding to their debt) would be viewed as a negative by a lender. Inez would rather walk to the bus stop from her home (that she owns!), so she doesn’t buy a car.

  • Learn about loans.

The Department of Housing and Urban Development has developed and backed a variety of loan types. Individuals with moderate or lower credit scores can benefit from FHA loans. Those who want to live in rural or suburban areas can qualify for USDA loans.

Pablo and Inez don’t own a vehicle; they rely on public transportation and walking. Living in a suburban or rural area makes no sense to them. Pablo served in the U.S. Marine Corps and is researching the criteria for U.S. Veteran loans.

  • Dig deep to fund the down payment.

It’s best to put as much money into a down payment as possible, especially now with mortgage rates starting to climb. The more cash you can contribute upfront, the less of a loan you will take. A smaller loan means less money that is to be paid in the future.

Pablo’s and Inez’s credit report looks better without a car loan. Allowing them to avoid having a monthly car payment, that is, cash in the bank, or forgo holiday gifts for each other. They get creative when hosting the holiday meal by inviting guests to bring their favorite holiday dish.

  • Go with a pro.

The fluid landscape of 2022 real estate does not lend itself to do-it-yourself. A realtor is a fount of information and experience. Realtors know the tricks of the trade whether it’s a hot seller’s market or a burgeoning buyer’s market. They have a small arsenal of home repair experts on speed dial.

The foreman that works with Pablo at the construction company flips homes. He snagged a drooping duplex at a sheriff’s sale and turned it into a Pygmalion-like tale. “You have to pay the realtor to help you buy something. Google ‘how to buy a house?’ and save yourself some cash,” is his advice. Pablo passes.

  • Prepare to pivot.

The average interest rate for a 30-year mortgage hovered around 3% in 2021. Currently, interest rates are around 7.5%. Potential buyers should consider the affordability of the anticipated monthly mortgage payment based on today’s rates. That may mean looking at less costly homes.

Inez wanted a standalone home built in the last 15 years. However, when they started looking at homes in late 2020, mortgage rates were much lower. She and Pablo are focusing on ownership, even if the home they own is older or lacking in the latest and greatest appliances.

  • Be budget conscious.

After checking and double-checking that you can make the monthly mortgage payment, compile a list of all costs involved in buying a house. Ask your realtor to review it with you.

Pablo and Inez enumerated fees for inspections, closing costs, legal paperwork, printing, document delivery, escrow, and titling.

  • Flex with freedom.

You’ve committed to becoming a property owner, but to whom was this commitment made?—Yourself. Thus, as the variables (e.g., employer downsizing, personal health, an expanding or contracting family, inflation, gas prices) change, don’t be afraid to change with them.


Recall the saying about giving a person a fish and feeding them for a day, whereas by teaching them how to fish, they’ll be able to eat (at least a solely pescatarian diet) for a lifetime? Consider this post a short fishing lesson, with additional lessons at your fingertips.

*If you are interested in keeping up with my blogs.  Please join my Newsletter or my Facebook group.  If you are on the fence about buying a house, pick up a copy of my book, Essential Advice for Buying Your First Home and Navigating Through the Mortgage Loan Process.  It’s available on Amazon in print, kindle, or audiobook format.


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