Housing is really expensive.

I realize this isn’t breaking news. But the magnitude of what’s happened is worth appreciating.

Consider a hypothetical $500,000 home purchased in 2020.

With 20% down, a 2.88% mortgage, $10,000 in property taxes and $1,500 in homeowners insurance, the monthly carrying cost was roughly $2,620.

Home prices in the Middle Atlantic have since increased approximately 43%. That same house might cost around $715,000 today.

Put 20% down again and finance the rest at today’s roughly 7.3% mortgage rate and (even if we pretend taxes and insurance haven’t increased) the monthly carrying cost approaches $4,900.

Same house. 86% higher monthly cost.

The price of the house went up at the same time the price of borrowing money to buy it went up.

Brutal. And yet prices haven’t collapsed.

Part of the reason is supply.

Ezra Klein and Derek Thompson explore the topic of housing supply in their book, Abundance: many high-demand communities have spent decades making it increasingly difficult to build new housing.

I actually have this debate at my own dinner table.

My mom is the longest-serving councilperson in our small New Jersey town and is currently running for mayor. When it comes to new development, she worries about congestion, parking, and preserving the quaint character that attracted people to Keyport in the first place.

I get it.

But as a millennial, I’m witnessing my peers paying astronomical rents for remarkably little housing. I may or may not periodically accuse her of NIMBYism 😉.

She might use a different word.

Either way, the tension is pretty simple:

Many of us agree that we need more affordable housing. We just don’t necessarily want anyone to build more of it near us.

Meanwhile, millions of existing homeowners have another reason not to move:

they don’t want to give up their cheap mortgages.

Add it all together and the housing market is unusually stuck. Existing-home sales have been running near historically low levels despite a growing U.S. population.

Which inevitably leads to the question:

Is this a bad time to buy a house?

Personally, I think that’s the wrong question.

Because you aren’t buying the housing market.

You’re buying a house.

And whether you should buy one depends a lot more on which of the following people you are.

The First-Time Buyer

You don’t have a 3% mortgage to give up.

Unfortunately, you also don’t have years of accumulated home equity helping you buy the next house.

So you wait.

Maybe rates will come down.

Maybe.

Maybe home prices will fall.

Also possible.

Maybe both happen.

Sure.

But now we’re making market predictions.

And if mortgage rates fall substantially, you’re unlikely to be the only buyer who notices. Lower borrowing costs can bring more buyers into the market and support prices.

There is no rule requiring these variables to move conveniently for you.

Which is why I’d rather start with what we actually know.

Can you afford the house today?

Not assuming a future refinance or the home appreciating 5% per year.

At today’s price and today’s mortgage rate.

Can you make the down payment without gutting your emergency reserves or compromising the rest of your financial plan?

Can you comfortably afford the mortgage, taxes, insurance, maintenance and everything else that comes with owning a home?

And then our big one:

Do you reasonably expect to live there for at least the next five to seven years?

Buying and selling a house is expensive. The longer you own it, the more time you have to amortize those transaction costs and the less important it becomes whether your house is temporarily worth 5% less next year.

The Move-Up Buyer

This might be the most interesting housing problem today.

You bought your starter home years ago.

It’s appreciated substantially.

Awesome!

Except the larger home you planned to buy someday appreciated too.

And your existing house might be financed at 3%.

The next one might be financed above 7%.

You benefited enormously from rising home prices, only to find that the next rung of the housing ladder moved higher too.

That’s a predicament and it creates a powerful incentive to stay put.

“We’ll move when rates get back to 5%.”

Maybe that’s next year. Maybe it’s five years from now. Maybe rates fall to 5% and the house you want costs another $150,000.

Nobody knows.

Which is why the move-up decision needs to become about something bigger than mortgage rates.

What are you actually buying?

Another bedroom?

A better school district?

A yard?

A shorter commute?

Space for your parents?

A neighborhood where your kids can ride their bikes to their friends’ houses?

Maybe it’s simply the home where you picture spending the next fifteen years raising your family.

Those things have intangible value, which is part of what makes a primary residence an unusual asset.

It can build wealth over time, but I don’t necessarily agree with viewing it as an investment.

It’s primarily a personal-use asset, a place to live your life.

Not all of the value you receive from your home will show up on your balance sheet.

The Empty Nester

Then we get the opposite problem.

The kids are gone.

You’re walking around a 4,500-square-foot house wondering why you still have four bedrooms nobody sleeps in.

The financial-planning answer can seem obvious: downsize.

Except sometimes it isn’t.

Maybe your current house is paid off. Maybe it carries a tiny mortgage at an extraordinarily low rate. Maybe the smaller house or condo you actually want costs substantially more than you expected.

Add property taxes, HOA fees, moving expenses, transaction costs and potentially taxes on the sale, and suddenly “downsizing” isn’t synonymous with “saving money.”

More importantly:

What are you actually optimizing for?

Less maintenance?

Walkability?

Living closer to your children and grandchildren?

More freedom to travel?

A first-floor primary bedroom?

A community that makes aging in place easier?

Or maybe you simply love the house you’ve lived in for 30 years and have absolutely no interest in leaving it. That’s okay too.

Personal finance should help you make the life decision not make the life decision for you.

Hindsight 20/20

There’s a behavioral-finance problem underneath all of this.

Of course you should have bought a house in 2019.

Of course you should have refinanced at 2.75%.

Those decisions seem obvious because we know what happened next.

We don’t have that luxury today.

Five years from now, maybe we’ll wonder why anyone bought a house in 2026.

Or maybe we’ll wonder why anyone waited.

Trying to perfectly time a home purchase is particularly difficult because you’re effectively forecasting two markets at once:

1. The price of the house.
2. The price of the money you’re borrowing to buy it.

I’d rather build a financial plan that doesn’t require getting either prediction right.

So when clients ask whether now is the right time to buy, I’d focus on five questions:

1. Can I afford the down payment without compromising the rest of my financial plan?
2. Can I comfortably afford this house at today’s price and today’s interest rate?
3. Does the plan still work if I can’t refinance and the house doesn’t appreciate for several years?
4. Am I reasonably confident I’ll live here for at least the next 5-7 years?
5. *MOST IMPORTANT* Does this home make sense for the life you’re building?

If the answers are yes, you don’t need a housing-market forecast.

If the answers are no, a prediction that mortgage rates are about to fall probably shouldn’t change your mind.

The goal isn’t to buy a house at the perfect time.

It’s to buy the right house, at a price you can afford, at a time when it makes sense for your life. With enough time, the short-term housing market matters a whole lot less.