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Is Now A Good Time To Buy A House – 2022?

2022 has every indication of being one of the worst times in years to buy a house, with its skyrocketing interest rates, high prices, low unemployment, and low inventory of homes.

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But is that really true?

Let’s look at this question a bit more accurately and less emotionally.

Is 2022 A Good Time To Buy A House?

Though it may not be a good time for everyone, it actually is a great time for many people to buy. Here are some of the major reasons:

1.       High mortgage interest rates

Wait, how are high interest rates a good thing when buying a home?

It’s because high interest rates reduce the demand for homes. Because many people are unable or unwilling to pay those rates many people are deciding to sit this one out and wait to buy until the interest rates go back down.

And when demand for homes goes down, that has a positive effect for many buyers because…

2.       Home prices are dropping

It’s simple economics – lower demand means reduced prices. And that’s good for buyers, especially given the extraordinary pricing of 2021 when home sellers were pricing high, and still getting multiple offers above their asking price within hours of listing their home on the market.

In short, reduced demand due to high interest rates is causing house prices to return to more normal, reasonable levels. Homes are now being sold for closer to what they’re worth, rather than what is required to get one.

Another factor that’s playing into this decrease is the smaller numbers of people buying homes as investment opportunities (they don’t want to pay high interest rates on their loans either,) which also contributes to reduced demand and competition to get offers approved.

Now, there are exceptions, due to market-specific conditions in your local market, but as a rule, you can expect to see more normal pricing situations as interest rates continue to rise.

Let’s look at the numbers to illustrate what I mean.

Let’s imagine that you were buying a home in a hot housing market as we saw in 2021. The seller knows it’s a hot market, so they ask for more than it would normally sell at. Then, because the only way you could get a home in that market was to be there right as the house went on the market, make an offer within hours, for more than they were asking, that home that might have normally sold for $300,000 would sell for $350,000.

Just to simplify the math, let’s just assume that you, as a buyer got a 5% 30-year fixed mortgage for that full $350,000. Your house payment, without taxes and PMI, would be $1,871.08 per month.

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Now let’s take that same house a year later. Demand is way down because interest rates are higher, so the seller offers it at a lower price. And, since there isn’t a line of 20 people standing outside ready to instantly offer more than the asking price, that same house goes for the $300,000 it’s actually worth.

But now, you have to pay a 6% interest rate, instead of a 5% rate. But remember, now your loan is for $300,000 instead of $350,000. What’s your monthly payment now at that “I can’t afford to buy a house because the interest rates are too high” rate?

$1,849.36. It’s $21.72 less per month than it was at a 5% rate!

And, since I know you’re thinking this – what would it cost if you had to pay 7%? $1,984.33, only $113.25 more per month than you would have paid for a mortgage that was 2 points lower last year.

So, it’s not that bad. (And remember, you’ll probably be refinancing that loan back down to a lower interest rate soon, see below.)

3.       Mortgage lenders are more willing to work with you

In the housing boom marketplace of 2021, mortgage lenders struggled to complete the applications submitted to them each month. So, if a potential borrower was a borderline case, the immediate answer was for them to take the easy way out and just deny the loan.

That has changed in 2022 – mortgage lenders are laying off staff and struggling to meet their goals. That causes them to work a bit harder to find ways to say yes and approve your loan.

Of course, there are certain conditions they simply cannot bend. But they may be able to find a different kind of loan, a different set of conditions, or a guaranteed loan option they can steer you into that may enable you to get into a mortgage and the home you want!

Or maybe, they deny you, and you find a different lender who is willing to work with you to get into a home. CTA here

Buying a Home In 2022 – What Strategies Should You Use?

If you decide to buck the trend and buy in today’s market, here are several tips that will make it more likely that you’ll be able to get into a home.

1.       Recognize that you’ll probably be refinancing soon

Yes, interest rates are high right now, but most experts believe this is a temporary situation, and they will fall over the next several years. So yes, you may pay a higher interest rate (and, as a result, have higher house payments) for a while, then there is a good possibility you will be able to refinance that loan into a lower interest rate within the next 2-5 years.

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And remember, even though you’ll probably pay a higher interest rate now than a year ago, you will probably buy the house for less (see the math above,) so your loan will be lower than it would have been, so at least some of that difference will balance out.

2.       Be willing to look at ARM loans

Many of us have come to consider a 30-year fixed-rate loan as the only option, given that it was one of the best options available for many years. But low mortgage demand has driven down interest rates for totally acceptable, but less well-known mortgages, like adjustable-rate mortgages (ARMs), where you pay a fixed rate for a certain period, then the interest rate adjusts to market rates on a regular schedule after that.

While that may seem risky, remember that the option of refinancing also applies to ARMs. And remember that ARMs probably have a significantly lower interest rate than a fixed-rate mortgage right now. Get more information on adjustable-rate mortgages here.

3.       Flexibility is key

The more flexible you can be in the options you consider, the higher the likelihood of being able to get a great deal. While I realize that some of these options won’t be acceptable, if you can be flexible in some of the following areas you’ll be more likely to achieve your home-owning goals:

  •  Be willing to look in different locations 

The same home in a different physical location can be priced differently. If you’re now working from home most of the time instead of commuting, you may be able to look in cheaper communities farther away from your previous office. And, if you’re able to relocate to other states/cities, that difference could be millions!

  • Make offers on several different homes. 

Whenever you fall in love with a specific property, your number of options decreases dramatically.

  • Look at different types of loans 

Like ARM loans or government-guaranteed FHA, VA, or USDA loans.

  • Consider buying a house that has income capabilities 

Think about buying a duplex or triplex, living in part. and renting out the rest. Those not only give you income opportunities that can reduce your housing costs, but also can move you from being rejected for a loan to being granted that loan.

  • Consider a fixer-upper 

Yes, they require more work, but if you have the skills and/or the cash to repair and improve, you can get much more home for the same price.

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  • Consider waiting for the off-season to buy

Spring and summer are traditionally the hottest times in the housing market, and houses that are listed in fall and winter tend to sell for lower prices. The challenge in 2022 is that interest rates are likely to increase further by that time, though, so you should consider that.

Frequently Asked Questions

Will housing prices go down in 2022?

Yes, they probably will. Because interest rates are going up fewer people are able and willing to buy, so by the end of the year, housing prices will probably drop on average. Of course, every market is different, so this may not apply in your particular situation.

Is this the worst time to buy a house?

You may not have been born yet, but there have been way worse times to buy a house. Consider October 1981, when interest rates peaked at 18.45%. That same 7% $300,000 mortgage we showed you the math on above, for which you would be paying $1,984.33 a month, would have cost you $4,561.43 per month back then. Nope, this is far from the worst time to buy a house!

What is the best month to buy a house?

Most real estate experts say August or September because the market starts cooling off from the summer highs, but there are still lots of houses to choose from. But you may also want to consider waiting until late fall or winter when, because there are few buyers in the market, sellers may be more concerned, therefore more willing to negotiate. 

But this must also be balanced with the high probability of interest rates increasing further by that time. 

Conclusion And Action Steps

If you’re thinking about buying a house, this may be a great time to look! Because demand is down, prices are too, and you may be able to get a great deal without paying much more than you would have at the peak of the market. Plus, lenders are more likely to work with you. This could be a perfect chance to get into a home!

Have Questions About Buying in 2022 Or Other Mortgage Issues?

We can help! You can Ask Your Question here and we will connect you with a Mortgage Expert in your area that can help, or you can find a Mortgage Expert Near You below this article.

About the Author

Scott Schang

A 20+ year veteran of the Mortgage and Real Estate industry, I am passionate about educating and empowering consumers. I have been writing about consumer protection issues and making sense of complicated real estate and mortgage topics on this website since 2007

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