Can buyers time the market? Study says buying now is the best bet 

Many homebuyers struggle with the same question about timing: Is it better to buy now, even if market conditions aren't ideal, or wait in the hope that mortgage rates or other factors will improve? 

Agents often advise clients that if they must buy quickly or if they simply feel ready, it's not worth taking a chance to see if rates will fall or if more inventory will become available down the line.

A new study from AD Mortgage supports the theory that, in most cases, it's more beneficial financially for buyers to take immediate action than to hold out for a more buyer-friendly market.

A better financial decision: The mortgage lender assessed historical data from 2000 through 2022 across all 50 states and from Washington, D.C., to determine whether there were any financial benefits to delaying a home purchase by two years. 

In 61% of buyer scenarios analyzed, buying a home immediately yielded a better outcome in terms of total purchase and financing costs, the study found. The financial benefits were even greater in some areas, with buying immediately serving as an advantage in 74% of scenarios analyzed in California and Florida — data that likely reflects the sharp home price growth that has occurred in those states since the turn of the century.

Several variables factored into the study's calculations, including: the average home price as calculated by the Zillow Home Value Index; an assumed 15% down payment; a monthly mortgage payment based on the average annual 30-year fixed-rate mortgage; the median household income; and additional savings that could have been accrued during a two-year waiting period.

Waiting for lower rates doesn't always pay off: Although many buyers who opt to delay a home purchase do so thinking they can save more while waiting for mortgage rates to drop, lower rates alone don't always equate to a better deal due to home price fluctuations and other market shifts.

Even during separate two-year periods when rates did fall, the study found that a significant portion of immediate buyers came out ahead. For example, in 84% of state scenarios comparing buyers who purchased right away in 2013 and those who waited until 2015, the 2013 buyers were better off — even though rates dropped from 3.98% to 3.85% during that two-year period.

"Rather than focusing only on predicting future market changes, buyers may benefit from evaluating whether their current financial position allows them to comfortably enter the market," the study said.

The broader economic situation still factors in: Although AD Mortgage's analysis found that buying immediately was overall a better bet, there were periods of economic strain when waiting was the better option.

For example, while buying quickly was better financially than waiting in at least 94% of buyer scenarios from 2003 to 2005, delaying a home purchase was more advantageous in 100% of buyer scenarios a short time later as the country was grappling with the financial crisis from 2007 to 2010.

"These results show that the advantage of buying now or waiting changed significantly across different periods," the study states.