LPT: Be careful about waiting on prices to crash

Submitted by xlem1 t3_10nkp8b in LifeProTips

The logic seems like you should wait if you think there will be a crash, but here are some things you should consider.

  1. In most cases, you will never know when or if a market will crash
  2. Prices rarely fall as far as far as you think they will. Mostly due to inflation
  3. There can be a cost to waiting and benefits to owning sooner

Look at housing prices post 2008, yes they dropped, but...it wasn't really by that much, to the prices they were at in 2004, if you were renting from say 2006 waiting for the crash, you would have to pay rent for over 2 year which would cost about the same amount of money as buying an over priced house

You don't know the future. You could easily be screwing yourself as much as you are saving. If there is no cost to waiting, then wait, but if there is.... just buy. Things like renting, the cost of maintenance on an older car, or the opportunity cost of just having what you want now might be worth it.

TL;DR make sure you're weighing all the cost/benefits of waiting before gambling on a crash to happen

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spazzyone t1_j69fc72 wrote

Home prices are climbing, but I'm hoping the interest rates will come down some before I'm ready to buy. 4.7% doesn't sound like much, but for a 30 year mortgage you end up paying about double the principal during the course of the loan due to interest. I'm shooting for a high down payment since my rent is low rn, but it's a bitch if you have high rent and HCOL. Shortening the loan term would help some with interest, but it isn't an option for everyone when the principal (and therefore mortgage payments) are so high.

Interest is brutal and the housing market is a mess.

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xlem1 OP t1_j69zaol wrote

That's a fair enough reason to wait, as they are a little more predictable. Though it also depends on you ability to refinance. You can get away with a a slightly higher rate now, knowing interest rate will fall and you'll be able to refinance at a better time. Again it all depends.

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spazzyone t1_j6a5jvj wrote

Refinancing is an interesting option that I don't know much about. Have you refinanced? I was concerned about fees cancelling out some of the gains if I did it at the wrong time

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xlem1 OP t1_j6akpqb wrote

I have for my car, and it was pretty straightforward, I have not had to on a house. It can be expensive, but then again, you would have to do the calculations some people it's worth, others not so much.

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keepthetips t1_j698p1p wrote

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speculatrix t1_j6a3guo wrote

When prices have been falling, you might find there is a better choice of property to compare, and can pick and choose more easily, and more time to consider.

When prices have been rising and people are panic buying, you can't take the time to consider carefully and there may be little choice at any one time, and might get rushed into a suboptimal choice.

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xlem1 OP t1_j6ajpnl wrote

Sure, buying a house when prices are low is just objectively better, but waiting for the perfect time to buy a house could have you waiting for years. Perfect is the enemy of good as the saying goes

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Bongos-Not-Bombs t1_j6adh0u wrote

Home prices are being driven by big, systemic things that have only accelerated since COVID. I don't think things are going to climb upwards indefinitely, but the income inequities found in a massive pool of remote workers that is only getting bigger is something that wasn't as prevalent in 2008.

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xlem1 OP t1_j6aiveo wrote

I'm not saying that this isn't happening. What I am saying is you could end up waiting forever for it to stop, and even if it does, you have no way of predicting if prices will actually fall substantially.

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darkspd96 t1_j6bdcu1 wrote

Bought a house JUST before they started raising rates, I'm in a 4 bedroom at 2.8%!! House has gone up 10% in value since I bought it Nov 2021

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