Should You Buy a Home Now or Wait? What 23 Years of Housing Data Says

If you're thinking about buying a home in Rhode Island, there's a good chance you've asked yourself the same question many buyers are asking right now:

Should I buy now or wait for mortgage rates to come down?

Waiting can feel like the safer choice.

If rates fall, your mortgage payment could become more affordable. You may be able to qualify for more house. And holding off for another year or two gives you additional time to save.

But there's one problem.

The housing market doesn't stand still while you're waiting.

Home prices can change. Inventory can change. Competition can change. Your rent can increase. And mortgage rates may or may not move in the direction you're expecting.

A recent study looked at 23 years of housing data to see what actually happened when buyers purchased a home versus waiting two years.

The results may surprise you.

What 23 Years of Housing Data Says About Buying vs. Waiting

The study looked at every year from 2000 through 2022 and compared two hypothetical buyers.

One purchased a home.

The other waited two years before buying.

The analysis considered factors including average home prices, a 15% down payment, average 30-year mortgage rates, and additional savings accumulated by the buyer who waited.

Across the country, buying sooner produced the better financial outcome in 61% of the scenarios studied.

Here in Rhode Island, that number was even higher.

Buying sooner came out ahead in 70% of the Rhode Island comparisons.

But that doesn't mean buyers should rush out and purchase a home simply because history favored buying more often than waiting.

There were also periods when waiting clearly produced the better outcome.

The bigger takeaway is that waiting isn't automatically the safer financial decision.

Why Waiting for Lower Mortgage Rates Isn't That Simple

Mortgage rates matter.

A lower interest rate can significantly reduce the amount of interest you pay and potentially lower your monthly principal-and-interest payment.

But your mortgage rate is only one part of the equation.

Imagine waiting two years because you're hoping rates will fall.

During those two years, the type of home you're interested in could become more expensive.

Your rent could increase.

More buyers could enter the market.

Inventory could shrink.

Or rates could remain higher for longer than expected.

The opposite can happen too. Prices could decline, rates could fall, or your financial position could improve enough that waiting becomes the better decision.

That's what makes timing the housing market so difficult.

You're not waiting for one number to change.

You're waiting in a market where everything is changing at the same time.

Lower Mortgage Rates Don't Always Mean a Better Deal

The historical data provides a good example.

In 2013, the average mortgage rate was approximately 3.98%.

Two years later, it had fallen slightly to around 3.85%.

You might assume that waiting for the lower rate would have produced the better financial outcome.

But according to the study, buying in the earlier year came out ahead in 84% of those scenarios.

Why?

Because mortgage rates weren't the only thing changing.

If home prices increase while you're waiting, you may end up using that lower mortgage rate to finance a more expensive home.

That's why buyers shouldn't evaluate affordability based on the interest rate alone.

The more useful question is:

What does the total monthly payment look like?

There Were Also Times When Waiting Was Better

The data doesn't say buying immediately always wins.

Far from it.

From 2007 through 2010, waiting produced the better result in the study each year.

That period overlapped with the Great Financial Crisis and a major housing market correction.

Another example came between 2018 and 2020.

Mortgage rates fell substantially during that period, from roughly 4.5% to around 3.1%, while home prices had not yet experienced the dramatic increases that followed.

For someone comparing those specific years, waiting could have been extremely beneficial.

Looking backward, those opportunities seem obvious.

But they weren't necessarily obvious at the time.

A buyer in 2018 couldn't have known that a global pandemic was coming or that mortgage rates would eventually fall to historic lows.

That's the challenge with trying to perfectly time real estate.

It's much easier to identify the best time to buy after it has already happened.

Start With Your Monthly Payment Instead

Rather than trying to predict exactly where mortgage rates will be next year, start with something you have more control over:

Your budget.

Determine the total monthly housing payment you're comfortable carrying.

Then work backward to see what type of property fits within that number.

That calculation should consider more than principal and interest.

Depending on the property, you'll also need to account for:

• Property taxes

• Homeowners insurance

• Condo or HOA fees

• Maintenance

• Repairs

• Your down payment

• Cash reserves after closing

A great mortgage rate attached to a payment you can't comfortably afford still isn't a good deal.

And a higher rate doesn't automatically make a home a bad purchase if the overall numbers comfortably fit your financial situation.

Remember That the Purchase Price Matters Too

Mortgage rates can change after you purchase a home.

The amount you paid for the property cannot.

That's an important distinction when deciding whether to buy or wait.

If you purchase a home today and mortgage rates fall significantly in the future, you may eventually have an opportunity to refinance.

Refinancing isn't guaranteed, and it isn't free.

You still need to qualify, there can be closing costs, and the savings need to justify the expense.

No one should purchase a home today assuming they'll definitely refinance later.

But refinancing can potentially change the financing attached to a property you've already purchased.

The original purchase price is different.

If you wait for a lower mortgage rate and home prices rise during that period, you can't go back and purchase the property at its old price.

That's another reason buyers should look at the entire financial picture instead of making a decision based solely on today's mortgage rate.

Buying and Renting Work Differently Over Time

The buy-versus-wait conversation also needs to consider what happens while you're waiting.

If you're currently renting, your housing expense isn't necessarily fixed.

Your rent may stay the same when your lease renews.

It may also increase.

With a traditional fixed-rate mortgage, the principal-and-interest portion of your payment generally remains level throughout the loan.

That doesn't mean the total cost of homeownership stays the same.

Property taxes can rise.

Insurance can become more expensive.

Homes require repairs and maintenance.

Condo and HOA fees can increase.

But locking in a fixed-rate mortgage can give homeowners more predictability over one major part of their housing expense.

Homeownership can also provide the opportunity to build equity as mortgage principal is paid down and, if the property appreciates over time, its value increases.

Appreciation isn't guaranteed, and home prices don't move upward in a straight line.

But it's an important difference between renting a home and owning one.

Waiting Has Risks Too

Most buyers understand the risks of purchasing a home.

What if prices decline after you buy?

What if the property needs an expensive repair?

What if mortgage rates fall immediately after you close?

Those are legitimate concerns.

But waiting also carries uncertainty.

What if mortgage rates don't fall?

What if they fall but home prices rise?

What if lower rates bring more buyers back into the market and competition increases?

What if rent continues climbing while you're waiting?

Or what if the type of home you can comfortably afford today is outside your budget two years from now?

None of those outcomes are guaranteed.

But neither is the future market you're waiting for.

When Should You Wait to Buy a Home?

There are plenty of good reasons to wait.

If your income isn't stable, buying may not make sense yet.

If purchasing a home would use nearly all of your savings, you may be better off building a larger financial cushion first.

If you're carrying debt you want to pay down, improving your financial position may be the better priority.

And if the total monthly payment doesn't comfortably fit your budget, don't force the purchase simply because you're afraid of missing out.

Waiting can be a smart strategy when you're using that time productively.

You can:

• Build your savings

• Pay down debt

• Improve your credit

• Increase your emergency reserves

• Research neighborhoods

• Determine what type of property fits your goals

There's a big difference between waiting until you're financially prepared and simply waiting for the market to become perfect.

What Rhode Island Buyers Should Focus on

The Rhode Island numbers from the study are worth paying attention to.

Buying sooner produced the better financial outcome in 70% of the state's historical comparisons.

That does not predict what will happen over the next two years.

It doesn't mean every Rhode Island buyer should purchase a home today.

And it certainly doesn't mean buying real estate is risk-free.

What it does show is that waiting doesn't automatically put you in a stronger position.

Instead of asking:

“Will mortgage rates be lower next year?”

Consider asking:

“Am I financially ready to buy a home now?”

Can you comfortably afford the total payment?

Will you still have savings after closing?

Do you have adequate reserves for repairs and unexpected expenses?

Does the property fit your needs?

Do you expect to own it long enough to handle potential short-term changes in the market?

And most importantly, does the purchase still make sense even if mortgage rates don't fall or home prices don't immediately rise?

Those questions are much more useful than trying to perfectly predict the future.

Should You Buy Now or Wait?

Twenty-three years of housing data doesn't give us a universal answer.

It doesn't say always buy now.

And it doesn't say always wait.

Instead, it shows how difficult it is to perfectly time the housing market.

If you're not financially ready, waiting can absolutely be the right decision.

Use that time to save, strengthen your credit, reduce debt, and put yourself in a better position to purchase later.

But if you're financially prepared, the monthly payment works, you have adequate savings, and you've found a property that fits your long-term plans, don't automatically assume waiting for a lower mortgage rate will leave you better off.

At Slocum Home Team powered by eXp Realty, we can help you compare both options.

If you're debating whether to buy a home now or wait, comment or message us the word “WAIT.”

We'll help you look at what buying today could mean, what waiting might look like, and how both scenarios fit your actual budget and goals.

Because you don't need to perfectly predict what the Rhode Island housing market will do next.

You need a homebuying strategy that still makes sense if your prediction is wrong.