The American Dream of homeownership has always been a cornerstone of this great nation, but in today’s economy, that dream is slipping further out of reach for many hardworking Americans. With home prices reaching all-time highs and other costs on the rise, many experts are advising potential buyers to hold off on purchasing a home until 2025. Here’s why waiting might be the smarter move.
According to the National Association of Realtors, the median sales price of existing homes hit a staggering $419,300 in May 2024. That’s nearly a 6% increase from last year alone. Meanwhile, Zillow reports that the average U.S. home value has climbed to $362,481, a 3.3% rise over the same period. Whether you’re looking at medians or averages, one thing is crystal clear: housing affordability has become a real problem in America.
It’s not just sky-high home prices that are squeezing prospective buyers. Interest rates, insurance premiums, and property taxes have all been steadily increasing, making the overall cost of homeownership daunting. For those hoping to buy a home in the near future, the experts suggest waiting until 2025 could be the best financial decision.
Interest Rates Could Drop Even Further
Interest rates are one of the most significant factors influencing housing affordability, and there’s some hope on the horizon. As of August 15, 2024, the average interest rate on a 30-year fixed-rate mortgage stands at 6.49%. While this is the lowest rate we’ve seen in over a year, it’s still high compared to the pre-pandemic era. The good news? Freddie Mac predicts that rates may continue to trend downward as inflation eases.
If this trend holds, waiting a few more months could save you thousands of dollars in interest payments over the life of your mortgage. Moreover, lower interest rates might prompt current homeowners who’ve been reluctant to sell due to high financing costs to finally put their homes on the market. This increase in inventory could create more opportunities for buyers and help to level out prices.
More Homes Could Hit the Market
Speaking of inventory, the housing market’s supply-and-demand dynamics are another critical factor driving today’s record-high prices. Right now, demand far outstrips supply, but that could change soon. According to Andrew Fortune, a realtor and owner of Great Colorado Homes, housing inventory is expected to rise throughout 2024, leading to a potential price decline in 2025.
“As more homes hit the market and outpace buyer demand, sellers will be forced to lower their asking prices,” Fortune explains. “We’re already seeing signs of this in Colorado Springs and Denver.” Fortune predicts that the number of homes for sale could jump by as much as 20% to 50% next year, which would give buyers more choices and greater negotiating power. In other words, 2025 might just be a buyer’s market if you’re willing to wait it out.
More Time to Save for a Larger Down Payment
Waiting until 2025 could also give you the valuable time you need to build up your savings. The bigger your down payment, the better your financial position will be when you finally decide to purchase. By saving up for a 20% down payment, you can avoid the extra cost of private mortgage insurance (PMI), which can add hundreds of dollars to your monthly payment.
It’s essential to have your finances in top shape before making such a significant investment. If you’re not ready to buy right now, use the extra time to pay down debt, boost your credit score, and bulk up your savings. Financial stability is crucial, especially in an unpredictable market.
Build an Emergency Fund for Peace of Mind
Personal finance expert Dave Ramsey and many other advisors strongly recommend having a fully funded emergency fund before you take the plunge into homeownership. A good rule of thumb is to have three to six months’ worth of living expenses saved up in case of unexpected events like job loss or emergency repairs. This cushion can be a lifesaver and prevent financial strain down the road.
An emergency fund will also help you handle the inevitable costs that come with owning a home. From higher-than-expected utility bills to unexpected maintenance issues, having a financial buffer can make homeownership less stressful. By waiting until 2025, you could give yourself the time needed to build this essential safety net.
The Bottom Line
In today’s unpredictable economic climate, buying a home is a decision that should not be rushed. While it may be tempting to jump into the market now, the current environment suggests that patience could pay off. With potential drops in interest rates, increased inventory, and more time to save for a substantial down payment, waiting until 2025 might be the smartest financial move you can make.
The American Dream isn’t going anywhere, but rushing into a purchase before you’re financially ready could turn that dream into a nightmare. For now, the best advice is to stay vigilant, keep saving, and be ready to strike when the time is right.
