If you feel like housing is fucking expensive right now, it’s because it is. 

As of May 2024, U.S. home prices were up 4.8% YoY. And while asking rent was up just .8% YoY, the median is still 20% up compared to pre-pandemic. 

So what can you do about it? Is home ownership another failing American dream?

We recently interviewed Redfin’s Chief Economist, Daryl Fairweather, to get expert insights into why the market has gotten this hot and what you should know whether you’re considering buying a house or not.

Side note: this is based on the U.S. market, but a lot of these housing trends are global, and the advice below on knowing when to buy applies to everyone.

First: Why is housing so expensive?!?!?

There’s a fundamental lack of supply, and it’s even more extreme in most cities (sigh, Seattle). 

Looking at this more deeply, there was a massive shift starting with the pandemic. Everyone expected the economy to come to a stop, and to prevent that, money was pumped into the economy in the form of near-zero interest rates and economic relief. 

This made buying a home comparatively cheap. But the people who bought during the pandemic were generally well off with many buying second homes or investment properties. 

With all of this demand, prices shot up since there wasn’t a corresponding influx in supply. Now, interest rates have gone up while prices have stayed fairly high, leaving us in the situation we see today.

Should You Wait Until the Market Cools?

While it’s impossible to know what will happen, it’s unlikely that you’ll be able to wait out this fundamental lack of supply. 

There are some ways to improve the situation–like allowing for ADUs (additional dwelling units) on single-family lots–but most solutions are long-term. Many of these solutions require changes to local laws or other regulations, which at the very least make them more difficult to enact, even if people support them. 

I often talk about how you can’t time the stock market, and the same applies to the housing market. The best time to buy is when you truly want to buy and can afford it, regardless of market conditions. 

What do you need to consider if you want to buy a house?

• You don’t need to own a home to be financially successful. I’ve rented for years despite being able to buy a house, and I love it. Renting doesn’t make me any less successful or a “real” adult! 
• Be realistic about what you can afford. I don’t mean just estimating mortgage payments (although you should!), but also think about how other life changes might impact your budget. Mortgages are hard to change–how do you feel about this fixed cost in the case of job loss or a change in your relationship? Buying less than your max budget can be a godsend later.
• Make sure you want to be somewhere for the next 5 years. This is how long it generally takes to make buying a house “worth it” and not lose money. Even if your home value goes up immediately, you have to consider capital gain taxes in some states.
• Support policies that increase supply. If you think buying a home is too expensive, you might want to look for ways you can support increasing supply on a local level. Housing development policies show up on your ballot and while the change won’t impact you immediately, it can help for the future.

What if buying a house feels a long way off–or impossible?

• You’re not a failure for not buying a house. Buying a house is no longer a rite of passage. Don’t compare yourself to others or give in to family pressure if buying a house doesn’t make sense for your budget or lifestyle. 
• Ask yourself: do you just want something else more? Clearly, buying a house is just plain too expensive for a lot of people. But it’s also possible that this isn’t a priority for you right now. Rather travel every chance you get or eat as much of the best food possible? (hi, me.) Don’t feel bad for not being able to do everything.  
• Look at your finances more broadly. It’s easy to say “I could never buy” than to figure out what it would take to buy a house and commit to that goal. Again, I’m not trying to sell you on buying a house. But I am reminding you that you can make big financial goals happen.
  • How much do houses you like cost?
  • How much could you put toward a down payment?
  • How long would it take you to save a full down payment?

Making the Right Choice For You

Whether you want to buy or are a lifelong renter, housing is wildly expensive right now. This affects your money no matter what.
For a lot of people, buying a house is one of their big money goals. I love that for you–IF you want a house. I don’t encourage everyone to invest in real estate (in fact, buying a house was almost my biggest money mistake!), and if you want to buy a home, then the first step is figuring out what it will take to get there.