With mortgage rates hovering around 7%, some would-be buyers may wonder if they should put a down payment on a property before rates skyrocket higher — or wait for the housing market to cool further.
In continuation of our series "What to do in a bear market," Yahoo Finance asked several housing experts if buyers should purchase now or hold off.
Should buyers wait to buy a property if the Fed keeps rising interest rates and mortgages go higher?
“If you are still able to afford what you're looking to buy, even after the soaring mortgage rates, you have a lot more bargaining power now than you did six months ago,” according to Greg McBride, CFA, chief financial analyst for Bankrate.
The time to buy depends on people's individual situations, said Marc Geredes, COO of Sundae, an online real estate marketplace.
“People need a place to live and it is very competitive to rent right now, as rental prices have been going up. Over the long term, residential real estate has always been a good long term investment,” he added.
Experts say even though interest rates are high, at some point they are expected to go lower and homeowners may be able to refinance if they have enough equity in their homes.
Where do you see prices going next year? If they go down, how much are you estimating?
“According to the experts we consult with, we think prices are going to go back to pre-pandemic 2020 levels on a national level. It will vary city to city, metro to metro,” said Geredes.
Much will depend on supply though, especially in the single family home sector which has seen more of a shortage than multi-family.
“Until we have a lot more supply hitting these markets, I don't think we're gonna see a drastic decline in home prices,” Michael Gifford, the CEO the Splitero, told Yahoo Finance.
Many home owners are locked in to ultra low rates after refinancing or buying during the pandemic.
“That's what we are seeing with a lot of the homeowners that we help. They have a three or three and a half percent mortgage,” said Gifford.
“Right now, if you're going to sell, there's few things to buy on the market. Rents are still very expensive. So sellers have little to no motivation unless they have some major life event to actually sell their property, they are locked in,” he added.
McBride at Bankrate expects prices to stay “more flat,” given the tight supply in some markets.
“You've got millennials in their prime home-buying years. There is a sustainable level of demand and in a market that is not oversupplied — that helps keep a limit on any downside in home prices,” said McBride
What about for real estate investors? Should they be buying now?
“If you're a real estate investor, you want to look at the rental income of the property, the carrying cost of the property, and the inventory level in the neighborhood you are buying,” Aaron Drucker, senior director at Milo, told Yahoo Finance.
“Interest rates are higher today than six months ago. However, if an adjustable rate mortgage is an option, or you have crypto wealth you can use as collateral, the economics can work in your favor,” he added.
At what point is it safe to purchase a home?
“Generally speaking, you want to see real estate inventory trends in your local neighborhood remain flat or decline for consecutive months. Markets with rapidly rising inventory can impact home prices. However, a savvy buyer or investor can offset the increase in interest rates by negotiating a lower purchase price from a seller,” said Drucker.
While some areas have seen a shift in home prices, other regions haven't budged much.
“We don't know when property values will stabilize. It's all on a market by market basis. Some markets will struggle and some may not move much at all,” added Geredes of Sundae.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre