Next up, we have a question from John. He says, "My wife and I are outgrowing our current home with two kids and want to upgrade. We can afford to wait a little longer and are considering waiting to see if interest rates come down quickly or home prices drop more. But I know some are saying that right now is not the best time to buy a house, so should we buy right now, or what should we think about as we try to decide? It's a very tough decision that a lot of people are trying to make right now."
First, John, let me say that I feel for you because that's hard. This is a hard place. There are some folks out there saying that real estate values will not go down, so if you're going to get in the house, you need to get into a house as quickly as you can. You should buy right now, and this is the best opportunity. Maybe those people are right, but maybe they're not. I think that when it comes to making huge life decisions like buying a home, which is the single largest financial decision that most people will ever make, you don't want to make that decision based on what some other person who doesn't know you is flippantly suggesting.
If you have two kids and you're outgrowing your house and you need a bigger house, you need to be somewhere else. That's more of a lifestyle decision than a financial decision. I don't want you to rush into something and buy more than you can afford. There are some rules that you need to stay inside the boundaries of, but even if you're not making the housing decision at the absolute perfect time in the absolute perfect market at the absolute best interest rate, it's still something you're doing for your family. You have to have a house to be with your family and raise your family. That's more of a life decision than a financial decision. If you're thinking about it on a long enough timeline, it won't really matter if you buy at the height of the market or at high interest rates. I wouldn't let those extenuating outside circumstances necessarily influence me on something like this.
I agree, but I also have one slight point of disagreement. I think that everybody who's watching this financial content is a financial mutant. You like to take an uncertain situation and try to figure out if there's an edge where you can go do a little bit more research and be rewarded for that hard work. Here are the first two things that hit me: timing matters if you know you're going to be somewhere else. If you go to
moneyguy.com, you'll see the three things that go into making a house decision: can you live in this house for seven to ten years? What is your down payment situation? Is this monthly payment going to pull on your portfolio or your gross income less than 25%? All those things kind of play into your decision. But if you can check all those boxes, you move on and start looking at interest rates.
I think a lot of people are scared because they see interest rates are over 6%. They're even over 7%, depending on how you structure the loan. But here's the good news: you will be able to refinance at some point, even if it's coming is not perfect on interest rates. If rates do in the future come down significantly enough that you can refinance, that kind of helps you out. Somewhere, there's a cost; there are some friction expenses with that, but it does, at least, give you a way to lean back into whether you're going to be in this house for seven to ten years and whether it benefits your family situation.
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