The massive mistake homebuyers may be tempted to make right now: Is that you too?

Pamela Grunstein is still thinking about the couple who assumed the expensive and weird housing market of 2022 was going to settle down, so they put their house hunting on hold to wait.
Grunstein, a real estate agent with the Francie Melina team in New York's Westchester County, met the couple when their local market was rife with bidding wars, often offering six figures above the asking price. Although they were eager to find a home for their two young children, they also worried that market conditions were so disrupted that they would end up paying too much.
"They felt that everything was too expensive and that they were chasing the market up," says Grunstein.
In the end, the couple decided to stop looking for a house. Instead, they found a place to rent, although its small size and dated layout made it less than ideal for their growing family.
"They thought it would be temporary - 'we'll sit and wait for the market to go down,'" Grunstein recalls. "'Then we will return and find our home'"
But the market did not fall. On the contrary, prices in the area are now 25% higher than when the couple stopped their house hunting under the assumption that home values ​​would eventually change direction. They watched the prices keep going up, and then, feeling desperate and against their better judgment, bought the house they were renting.
"It was not a happy ending for them," says Grunstein.

Why trying to time the housing market is a terrible idea

In the volatile housing market of recent years, many home buyers may be tempted to "time the market", where they try to purchase the right property when prices are falling and not at their peak, so that they don't pay too much for a house.
Real estate agents across the country describe situations like the one Grünstein observed, where buyers decide to wait because they assume prices (or mortgage rates) can only go down from where they are.
The results, however, are rarely in their favor.
On the flip side, agents also relay stories of homebuyers doing the opposite, where they rush to buy a less-than-ideal home because they assume prices (or mortgage rates) will continue to rise.
Julie Chang, an agent at Pacific Sotheby's International Realty in San Diego, calls it "FOMO buying."
Experts warn against both.
"It's not a good idea to try to time the market," says Danielle Hale, chief economist for Realtor.com®. "No one has a perfect view of the future. Whether you think rates or prices are going up or down, the world may not turn out the way you expect it to. We all have to make decisions with this uncertainty."

Why fear of overpayment can paralyze home buyers

To be sure, market conditions always shape the decisions of apartment buyers to a certain extent. Prices have risen over the past few years, and recently mortgage interest rates have also risen. At some point, this meant that some buyers simply couldn't swing the necessary monthly payment, and were no longer eligible for a home loan.
Buyers who have crossed the threshold of what they can afford have good reason to pull the plug on their property search. However, homebuyers who are clearly on solid financial footing but are simply worried they might pay too much in a hot market are in a different camp—and may very well regret letting their need for a real estate deal hold them back.
Many buyers are stuck in limbo, "waiting but looking," as Chang describes one of her current clients. The man, a young professional, knows that prices have moderated a bit from their peak in mid-2022, and he is betting that they may cool off a bit more.
It doesn't help that higher rates almost put him out of the market, but Chang says what's really driving his decision is that he doesn't want to buy a home during a downturn because prices are plummeting.
For anyone who fears such a scenario, Hale suggests it won't be as bad as you fear.
"We know from surveys that overpaying is one of the biggest fears that home buyers have," Hale says. "It's easy to imagine that this fear is especially pronounced when housing prices continue to hover near the peak."
And while housing prices are expected to soften slightly this year, stubbornly high mortgage interest rates may keep the cost of housing high regardless. Homebuyers shouldn't expect to find deals in 2023, and the sooner they get it, the better.
"A moderation in the growth of housing prices will not be enough for the housing market to be a bonanza for buyers," Hale noted in her housing forecast for 2023. "If home buyers and sellers have unrealistic expectations, they may find themselves at a standstill in the coming year. The housing market of 2023 could become a 'nobody's market', neither friendly to buyers nor to sellers."

So when is the right time to buy a house?

In today's hunter-gatherer culture, the urge to hold out for a deal is understandable. However, while this "buy low, sell high" approach might work great with stocks or luxury goods like a flat screen TV, it doesn't translate well to real estate transactions. Why? Since a house is something that is usually bought or sold based on day-to-day reality - is it located close to your work? Is it big enough for your family? – Not where the market is right now.
So instead of obsessing about the market, try to keep your eye on the real prize, which is your personal life situation.
As Hale explains, “Are you ready to commit to being in one place for five to seven years? If the house fits your needs, falls within your budget, and is one you can live with in the medium term, that's the best way to set yourself up for success."
James Deakins, who runs a real estate brokerage called The Homebuyer's Advocate in the Columbus, Ohio area, helped his daughter and her husband focus on what's important when buying their first home in December. At first, Dickins admits, the market weighed on their minds.
"I said, listen, if you wait, chances are the prices are going up," says Deakins. "They thought, 'We have to do it now.'"
However, instead of giving in to "buying FOMO" and taking any old house, they waited until they found the right house, one they could afford that met their needs.
"She wasn't satisfied," says Deakins. That's the key, he thinks: it was the house, not concerns about the market or the price, that sealed the deal.