If you’re certain that buying a house is a goal within the next couple years, then stop wasting time and make that goal happen as soon as possible, otherwise, all you’re accomplishing is chasing the market up. In this chase, you’re ensuring that you’ll be paying more money for the same house at a later date. You’ll also be losing any equity you could have been building during that “waiting” period. Chasing the market up will work out great for your future seller who gets to sell you the exact same house for significantly more money just because a few more months have passed. You could have been the one enjoying your house and benefiting from the appreciation.
If you’re not in a position to buy, e.g., you still have 6 months left on your lease, you’re not financially ready or you’re not sure if you’re going to have a job in a year, then you have no choice but to wait, however, if you’re financially ready and have nothing holding you back, then you should definitely make your move.
People often say that they want to continue to save in order to put more money down, which is great in theory. Most of the time, however, when we look at the numbers, that strategy has a major flaw. The big question you have to ask is how much more money can you save and over what period of time. Some people think that if they keep saving an extra $1,000 or $2,000 a month, they’ll eventually have a larger down payment to put toward their house. The idea is that the more they put down the lower the monthly payment. That strategy could work in a declining market, however, in a market that’s appreciating (even at a modest rate), chances are your ability to save on a monthly basis is going to be far exceeded by the market’s appreciation.
Even if you’re saving an additional $2,000 per month or $24,000 over a year, if the market goes up 5%, you’re going to be way behind. Let’s say you’re looking at buying a house for $700,000. If the market appreciates 5% over a year, then that 5% increase would cost you $35,000. While your savings account might have more money in it, you’re now paying $35,000 more for the same house, which completely negates the year of hard work and saving, and you’re now even farther behind because the $24,000 you saved is still $11,000 less than the new price. In addition, you were probably also paying to rent your existing home, so any money spent there was not being paid toward your own equity. And, to top it all off, had you bought the house at the $700,000 price at the beginning of the year, you would now own a house that’s worth $35,000 more than what you paid for it.
Unless you have the ability to save at a pace that is faster than the market appreciation, you should never wait. And, even if you can save at a faster pace, if you know you’re going to buy, why would you wait to pay more for the same house at a later date?