Here’s Why People are Saying It Will Never Be a Good Time to Buy a House in 2023 and Beyond

Why is the phrase “It will never be a good time to buy a house” trending in 2023 around places from Georgia to California? It’s well known that the housing market in 2023 is facing unprecedented challenges, with soaring mortgage rates, high home prices, low inventory, and economic uncertainty.

These factors have led many potential buyers to conclude that there will never be a good time to buy a house even in 2023, and beyond. Is this sentiment justified, or is there still hope for homeownership in the near future? There are a few reasons why people aren’t every optimistic about the trajectory of the housing market.

Mortgage Rates at 20-Year High

One of the main reasons why buying a house in 2023 seems like a bad idea is the sharp increase in mortgage rates. According to Freddie Mac, the average 30-year fixed rate loan reached 7.79% at the end of October, the highest level since 2000. This means that a typical buyer’s purchasing power has been reduced by 14%, according to Black Knight, a mortgage data company.

Mortgage rates have risen dramatically since the Federal Reserve began raising the federal funds rate in March 2022, in an effort to curb inflation and stabilize the economy. The Fed has hiked the rate 11 times since then, bringing it to a range of 5.25% to 5.5%, the highest in 22 years. The Fed projects one more rate increase by the end of 2023, bringing the terminal rate to 5.6%.

Higher mortgage rates make monthly payments more expensive and reduce the amount of loan a buyer can qualify for. For example, a $300,000 loan at 3.5% interest would have a monthly payment of $1,347, while the same loan at 7.5% interest would have a monthly payment of $2,098, a difference of $751. This means that a buyer who could afford a $300,000 loan at 3.5% interest would only be able to afford a $214,000 loan at 7.5% interest, a drop of 29%.

Home Prices Remain Elevated

Another reason why buying a house in 2023 seems like a bad idea is the high level of home prices. Home prices have soared during the pandemic, as demand from buyers outstripped supply from sellers. According to the National Association of Realtors (NAR), the median existing-home price in September 2023 was $367,900, up 9.6% from a year ago. This is the 115th straight month of year-over-year price gains.

Home prices have been driven up by several factors, such as low inventory, limited new construction, strong buyer demand, low mortgage rates (until recently), and pandemic-related preferences for more space and amenities. The supply of existing homes for sale in September 2023 was 1.27 million units, down 13% from a year ago and equivalent to 2.4 months of inventory at the current sales pace. A balanced market would have about six months of inventory.

While home prices have moderated slightly in recent months, as sales have slowed down and inventory has increased, they are still near record highs and unaffordable for many buyers. According to the NAR, the median existing-home price in September 2023 was 4.8 times the median household income, well above the historical average of 3.2 times. This means that a typical household would need to spend nearly half of its income on housing, leaving little room for other expenses and savings.

Economic Uncertainty and Consumer Sentiment

A third reason why the phrase “it will never be a good time to buy a house” is viral in 2023 is the economic uncertainty and consumer sentiment. The economy is facing several headwinds, such as inflation, supply chain disruptions, labor shortages, and the potential for a government shutdown. These factors have dampened consumer confidence and spending, which are key drivers of economic growth.

According to the Fannie Mae Home Purchase Sentiment Index (HPSI), consumer sentiment regarding the housing market remained largely flat in October 2023, with an overall score of 64.9, up 0.4 points from September 2023 and up 8.2 points from October 2022.

However, a record-high 85% of consumers indicated that it is currently a “bad time” to buy a home, citing high home prices and elevated mortgage rates as the main reasons. Only 15% of consumers said it is a good time to buy a home, a record low.

Consumer sentiment also reflects concerns about job security and household income, despite a strong labor market and increased wages. According to the HPSI, 21% of consumers expressed concern about losing their job in the next 12 months, down from 23% in September 2023, but still above the pre-pandemic level of 13% in February 2020.

Moreover, 20% of consumers reported that their household income is significantly higher than it was 12 months ago, up from 18% in September 2023, but still below the pre-pandemic level of 24% in February 2020.

Is is Set in Stone That It Will Never Be a Good Time to Buy a House in 2023, and Beyond?

Given the bleak outlook for the housing market in 2023, is there any hope for home buyers who want to achieve their dream of homeownership? The answer is not clear-cut, as there are pros and cons to both buying and waiting.

Ultimately, the decision to buy or wait depends on your personal and financial situation, as well as your goals and preferences. There is no one-size-fits-all answer, as different buyers may have different motivations and constraints.

Doing your research and analysis, along with comparing the costs and benefits of buying versus renting in your desired location, and using online calculators and tools can help you make an informed decision.

Consider the current and future trends in the housing market, the economy, and your income and expenses. Consult with a professional, such as a real estate agent, a mortgage lender, or a financial planner, who can provide you with expert advice and guidance.

Being patient and persistent and not rushing into buying a house is usually a wise decision, as it is a major financial and emotional commitment. Taking your time and weighing your options carefully is a must.

While it may seem like it will never be a good time to buy a house in 2023, don’t give up on your homeownership dream. The market conditions may change in your favor. Keep saving, improving your credit, and looking for opportunities, as you may find a good deal or a better time to buy.