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  • Writer's pictureKira Witherwax

Is it Worth the Wait?

Updated: Nov 22, 2022

I’m sure you’ve heard people speculating about the housing market. Current renters have been wondering if (and maybe assuming) it makes sense to hold off for a bit; and, of course, everyone’s got an opinion. The challenge is that you can’t look at this problem by itself. Or at least most people can’t. If you are one of the few people lucky enough to live with your parents rent free, then you are lucky. Although, I suppose that depends how much you like your parents.

The reality is that most adults have a cost associated to their housing. Have you ever heard the phrase “no decision is still a decision”? If you choose to not buy, that is still a decision. You are choosing to rent. Which also costs money. Either is a decision.

I’m not saying everyone should buy a house. It’s not for everyone and the time isn’t right for everyone. But that has more to do with you than the housing market. If you are comparing your monthly rent payment to a potential monthly mortgage payment you are not comparing apples to apples. That is not the way to assess this challenge, because those are two different things (even if the dollar amount is the same).

The first step is to decide if now is a good time to buy a house based on Your life circumstances. Do you expect to be in the area for the next 5-7 years? Are you ok with being responsible for your own space and the maintenance that comes with that?

For the most of us, that don’t live for free, it’s the choice between 2 options. Because if you don’t buy a house, then you are choosing to pay rent. This is not tickets to a concert; this is not optional for you. It’s similar to “am I choosing to eat out this week or buy groceries?” You still have to eat. It’s the same with housing. The cost is there either way.

For example, let’s say Sally wants to wait until prices go down. She could buy a $200,000 house now, but feels that prices are inflated and in 5 years, that same house will only cost her $175,000. I don’t think prices will drop, but I certainly don’t have a crystal ball so let’s say Sally is right. You’re thinking, “Yes Kira, 25 grand is a lot of money; I’m with Sally.” I agree that is a lot of money. But Sally doesn’t live for free so that’s only half of her dilemma.

Sally’s rent is $1,000/month now. But it goes up 5% each year. Over the next 5 years she will pay a total of $66,307 in rent.

So assuming Sally is Right; the BEST case scenario for Sally is she spent $66,307 to save $25,000.

If Sally had bought the house at $200,000 she would have made mortgage payments for those 5 years instead of rent payments; the difference is she would have been paying towards something she gets to keep (and could sell if needed).

Mortgage payments and rent payments are not the same. (More like comparing apples to bananas).

What if Sally is wrong? What if the market stabilized and prices stayed the same, not even went up (which is also highly possible) just stayed the same. That house 5 years in the future still costs $200,000. Now she spent $66,307 to save $0.

I am not trying to convince you to buy a house.

I’m just trying to show you that it’s important to look at all the factors involved. Of course, this is a simplistic hypothetical of a complex situation. But, at some of our highest interest rate times as a country, the housing market did not go down. I’m sure you can find relatives that had mortgage interest rates in the double digits. Prices are determined by buyers and sellers, Supply and Demand. And in those times of high demand (like now) rentals are also in high demand.

The lesson here is not “buy the house”. The lesson here is “don’t listen to Larry at the grocery store when he tells you the market is going to crash and you should wait in order to save money.” Unless Larry is an accountant or financial planner, you should not be getting your financial advice from him. It’s important, especially in a changing market, to get professional advice before making any kind of financial decision. And remember no decision, is a decision.

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