Market Update October 18, 2023

Buying a home now may be a smarter long-term move!

Some home buyers think we’re in a housing bubble and home prices will soon drop significantly, giving them a golden opportunity to snatch up a home. But what if we told you the housing market is stronger than you may think and that waiting might not be your best option financially?


Buying a home now could be a more prosperous long-term financial move, allowing you to build equity in your dream home. This way, you could generate your own wealth and increase your net worth through real estate. Let’s dive into why buying now may be smarter in the long run.

What is a housing bubble?

First, let’s talk about what a housing bubble even is. Housing bubbles happen when the demand for homes drops lower than the available supply. When there is a larger supply than demand, home prices tend to decrease rapidly.

The last time there was a housing bubble was in 2008, which was caused by a large number of under-qualified home loan holders who defaulted on their mortgages. When they defaulted, their homes were repossessed, and it flooded the housing market with a large supply of homes. This meant there was a lot more supply than demand.

Why there isn’t a housing bubble today

The difference between today’s situation and the one in 2008 is that there is a shortage of homes right now, not a surplus. This limited inventory for home buyers is expected to continue into 2024. Demand is also expected to be high in 2024, which would increase home prices even more. Some experts are even predicting a 7% increase in home values for 2024. This increase could mean paying more for your dream home if you choose to wait to buy.

Unlike in 2008, legislation on lending requirements makes it very unlikely that a large group of people will default on their home loans. The 2010 Qualified Mortgage laws laid the foundation for the best housing credit profiles recorded in U.S. history. This means that it’s unlikely that supply will skyrocket past demand.

Setting yourself up for long-term financial success

Some people believe renting is the better option right now, but this may only be cheaper in the short term, whereas home ownership is beneficial in the long run financially.

Rent is expected to continue to increase

Renting costs will likely increase each year and eventually outgrow the cost of a mortgage. (Oh my!) Rent has increased 5.5% in the last year alone, and this trend is likely to continue long term. The average rent prices have increased by 8.85% per year since 1980.

But, if you decide to buy your own home now, you will avoid these yearly increases. When you have a fixed mortgage, your principal and interest payments are locked in and won’t increase. This can allow for more certainty regarding expenses and can lead to more effective financial planning. Plus, buyers can refinance if rates drop, which will likely leave their mortgage payment equal to or less than the cost of renting.*

*By refinancing your existing loan, your total finance charges may be higher over the life of the loan.

Have your payments benefit you, not your landlord

When you pay rent, all of that money disappears to the landlord, but when you have a home and pay your mortgage payment, you increase your own home equity and can potentially even save on taxes.**

**Should not be construed as legal or financial advice. Please consult a tax professional/financial advisor.

Because every mortgage payment goes toward building equity, that portion of your payment goes toward increasing your net worth. Depending on your situation, the interest you pay could save you a significant amount of money on your yearly taxes. According to Turbotax, “when you repay a mortgage loan, you can typically deduct the interest portion of your payments if the loan meets IRS mortgage requirements.” (And who doesn’t love saving money?)

Plus, because of the gradual increase in equity and home values, choosing to buy a home now helps you work toward building a stronger financial future. On average, ⅔ of a homeowner’s net worth comes from home equity. AND the wealth of a homeowner is 40 times greater than those who rent.

Are you ready to set yourself up for success?

If you’re ready to see how buying now might be smarter financially in the long run, reach out to a Movement loan officer to get started!