Should I buy my first house with interest rates so high?
Toward the end of last summer, as interest rates continued their climb, I had a friend who reached out to ask my perspective on the timing of purchasing his first home.
“Am I dumb for buying a house right now? Is there a housing market collapse coming as soon as I buy? Should I wait for interest rates to drop again before I make a decision like this?”
These are questions we all seem to ask without much certainty. Whether we’ve bought a home recently or not, the housing market is always news.
It was around the same time he asked these questions, a popular article appeared, stating the massive wealth divide between those who had purchased houses before 2022 and those who would purchase them after.
It was almost as if to say “If you hadn’t bought a house yet… It's too late.” You've lost. You get nothing! Good day Sir!
While I don't disagree with the arguments within the article, I have to push against its conclusion. I believe:
The interest rate on the mortgage of your first home is not going to be the determining factor of your long-term financial success. It will be a culmination of decisions you make throughout your lifetime.
If you have the opportunity to have a lower interest rate, is that advantageous? Absolutely!
If you can be content in a less expensive home, will that help your financial circumstances? Nearly always.
But the focus of successful financial individuals, over time, is on things that they can control, not on fretting about that which is outside their influence.
Several factors come into play in determining whether it is wise to purchase a home or not, and I certainly am not seeking to answer all of those questions today, but a house is more than solely a financial investment. It is a place to call your own. To put down roots. Establish family memories. The list goes on.
The reality is most of us won't only have one mortgage in our lifetimes anyway. Either due to buying a different home or simply refinancing, there isn't much permanence to a decision like this. The housing market will have its ebbs and flows through the years, history has proven this fact. Very rarely are individuals capable of knowing when and where it will do so. Even those who anticipate it rarely do so with precision.
To return to my friend from last summer, my concluding thoughts were this:
If you are in a position where you’re ready to put down some roots and have access to a property that won't leave you with a monthly payment that stretches your budget, you’re probably going to be ok.
We can’t always anticipate or know the certainty of market movements, but the more you focus on financial circumstances you can control, and make wise decisions, the better the likelihood that you will do well. You’re welcome to wait for better timing but don't be surprised if you end up waiting a long time.
