Should I buy a house now or wait for a better deal?

2022-11-26T08:00:00.0000000Z

2022-11-26T08:00:00.0000000Z

Stuff NZ Newspapers

https://fairfaxmedia.pressreader.com/article/281659669049163

Conversations

For those of us looking to buy a home during the past few years, it’s been a whirlwind of emotions to say the least. With the Real Estate Institute’s house price index falling 12.4% from the peak, it’s the largest drop in 30 years – many buyers are starting to wonder if they should be taking advantage of these market sales. New Zealand has technically dodged a recession for now, but with raging living costs, fears of layoffs and many homeowners beginning to fall into negative equity, it’s not usual to feel like we’re in the midst of one. So is it a good time to buy? With Auckland house prices down 12.7% year-on-year and Wellington down 17.2%, it may feel like you’re possibly walking into a bargain when you visit open homes these days. During the global financial crisis (GFC) in 2008, we saw demand for buying homes slowed down and thus the values of homes were dragged down as well. House prices dropped 15.3% between April 2007 and April 2011, with new housing construction falling and residential housing consents dropping by 56%. The biggest drop in prices was in the first few months, followed by 22 months of marginal declines. The elephant in the room: interest rates The main concern buyers are facing is not whether they should buy a home right now, but whether they can afford to buy a home right now. Interest rates are usually lower during recessions, encouraging debt. However, we are in a period with interest rates at high levels – to the point where some homebuyers are being approved for mortgages but pulling out of deals because their monthly mortgage is no longer justifiable. This is further solidified by the concern that rates are likely to continue to rise well into the next year. While no-one has a crystal ball, economists predict we’ll only start seeing interest rates decline late next year or early 2024. Other factors to consider during economic turmoil are whether you will have job security while you pay off your mortgage, or whether you need to sell your home to buy your next one, with houses staying on the market longer at 44 days – 10 days longer than in October last year. So should you buy? This is anyone’s guess. Experts predicted the housing market would collapse in 2020, and many buyers waited for a better deal, only to be priced out within months as prices surged for the next two years. It’s all about understanding what you need, and what happens if you wait. As Warren Buffett says, be greedy when others are fearful, and fearful when others are greedy.

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