Why waiting for a housing crash might cost you money?

If you’ve been waiting for the housing market to crash, you’re not alone.

According to a 2024 Lending Tree survey, more than a third (36%) of Americans strongly want the housing market to collapse. Furthermore, 29% of renters say the housing bust is the only way they will finally be able to afford a home.

With home prices at historic levels, it’s not surprising that some people are hoping the market will collapse. But according to experts, waiting for house prices to fall could end up incurring huge costs in the long run.

The cost of sitting on the sidelines while prices rise

The logic of buying after a crash is that you will ultimately get a lower price for your home. But what if this collapse never happened? You’ll still end up paying higher rates in the future.

“I’ve seen a lot of people lose money by sitting on their hands waiting for that crash that never comes,” said Evan Harlow, a realtor with Maui Elite Property. “As a matter of fact, if you sit on the fence, it just costs you.”

Realtor.com predicts that home prices will rise by 3.7%, meaning a home worth $400,000 today could cost $414,800 in 2026.

Historically, home prices have risen about 4% year over year. However, recent years have reinforced this trend, with home price values ​​doubling in just one decade (from 2014 to 2024) – and this despite massive macroeconomic shocks such as the Covid-19 pandemic.

Additionally, for every month you pay rent instead of your mortgage, you lose potential home equity.

Let’s say you bought a house 20 years ago for $150,000. If your home has doubled in value over the past two decades, you will still have gained $150,000 in value through appreciation alone, on top of what you gained through your mortgage payments. Plus, you only have a decade to make your mortgage payments, and they will likely total less than $1,500 per month. This is cheap compared to most rental markets.

“As prices and rents rise, buyers are losing years of equity growth,” said Marlon Belmas, director of sales and marketing for Future Generation Homes, a Miami-based real estate investment firm. “Home equity lines of credit (HELOCs) can also be leveraged for other opportunities. The long-term wealth impact is significant.”

How rising interest rates affect your future purchasing power

This rise in prices has been coupled with higher interest rates, meaning homebuyers have less purchasing power. Jules Garcia, an agent at New York-based luxury real estate agency Coldwell Banker Warburg, warns that a 1% increase in interest rates could reduce a buyer’s budget by up to 10% in some high-cost markets.

Does this mean you shouldn’t buy while interest rates are still high? Not exactly. Instead, experts suggest that you buy with the intention of refinancing when rates eventually decline.

“When combined with the continued annual appreciation of homes in high-demand areas, buyers are often faced with the harsh reality that the longer they wait, the more likely they are to achieve their goal,” Garcia said. “You can’t control the prices, but you can control when you buy. Insure your home now, refinance later, and skip the Black Friday spectacle that will come when interest rates drop,” he said. “You’ll never be able to go back in time and pay today’s price to buy tomorrow’s home once the market heats up again.”

Opportunity cost: What your down payment could earn

One of the main arguments for trying to time the market is that your down payment can make money in the stock market while you wait for prices and/or interest rates to fall, offsetting losses you may incur from rising home prices and losing equity. While this argument makes sense in theory, it is much more difficult to implement in practice.

If you put $80,000 into a high-yield savings account, you’ll have more money in the bank than if you just spent it on a down payment. But there are other costs to consider – for example, are house prices rising? Will $80,000 buy the same house next year?

““In hot markets, appreciation alone can wipe out years of disciplined saving in 12 months,” said Nathan Richardson, founder of property investment firm CashForHome. “That down payment should fit you into property equity rather than just a bank account.”

Why timing the market rarely works for regular homebuyers

Ultimately, experts agree that the best time to buy your home is when you can afford it. Don’t try to time the market.

“The housing market is not like the stock market. You can’t just click ‘buy’ when the dip happens,” Richardson said. Things like finding the right home and securing financing take time, he says.

“We expect everyday buyers to win [timing] “Perfection is a fantasy,” he said. “For the average homebuyer, time on market always trumps timing the market.”

“In real estate, the best time to buy was five years ago,” Richardson said. “The second best time is when you can afford it and it meets your needs. The market rarely waits for anyone.”

Bottom line

Rarely in history has housing been so unaffordable. For many Americans, homeownership is no longer an option: they simply cannot afford a home in the current market.

But for those lucky enough, home ownership is an option worth careful consideration. For many cautious buyers, it may seem tempting to wait for the market to collapse and prices to fall. However, experts warn that the longer you wait, the more you’ll end up paying in the long run.