There's never been a worse time to buy a house. Should you do it anyway?

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• Mortgage rates and home prices have spiked over the past couple of years, making homebuying more expensive than ever.
• But because so many buyers have dropped out of the market, those who remain could get a better deal.
• Home shoppers who buy now will likely have the opportunity to refinance into a lower rate in the next year or two.

Americans are extremely pessimistic about buying a home at the moment.

Only 21% believe now is a good time to buy a house, according to Gallup's most recent Economy and Personal Finance poll. This is the lowest reading since Gallup first started asking this question in 1978.

High mortgage rates coupled with high home prices have made buying a house significantly more expensive than it's been in previous years. But a few unique advantages that come with this type of tricky market could help you get your foot in the door of homeownership.

Why it's such a difficult time to buy a house

Mortgage rates have risen from the historic lows of the pandemic and are now more than four percentage points higher than they were when they bottomed out in 2021, according to Freddie Mac. The last time mortgage rates were this high was in 2002.

And although home prices fell a bit late last year, they're still relatively high, and they appear to be heading back up. This has created a double whammy of low affordability for hopeful buyers.  

Consider someone buying a home in 2019, when the median sales price was $327,100, according to the US Census Bureau and the Department of Housing and Urban Development — and the average 30-year mortgage rate ended the year at 3.74%, according to Freddie Mac. 

A 10% down payment on that home would cost $32,710, and the monthly payment on the mortgage would be $1,362.

As of Q2 2023, the median home sales price in the US was $416,100, and the average rate was 6.71% at the end of June. With these numbers, a 10% down payment would equal $41,610 and the average mortgage payment would be $2,419 — over $1,000 more expensive than the monthly payment on the home purchased in 2019.

5 advantages of buying a house when mortgage rates are high

There's no perfect time to buy a house. Even though conditions are tricky right now, many Americans continue to buy, either out of necessity or because the time is right for them personally. And many are finding that there are some silver linings to the current housing market. 

1. Less competition

High mortgage rates and high home prices have pushed many would-be home shoppers out of the market, which means you're less likely to encounter bidding wars that drive up prices.

"Not so long ago, open houses were seeing double-digit turnouts, and you were being forced to make very quick decisions; in many cases, at over asking in order to secure a property, and it was not unusual for people to experience buyers' regret," says Sarah Alvarez, vice president of mortgage banking at William Raveis Mortgage.

In recent years, fierce competition meant most buyers could expect to have to offer over asking price just to have their offers considered. Now that things have cooled off, you may have an easier time getting your offer accepted.

2. Home values generally go up over time

The sooner you buy a home, the sooner you'll start benefitting from rising home values.

Though there are occasional dips in the market, home values tend to rise as time goes buy. This means that homes are only going to get more expensive; by buying now, you get your foot in the door and get to watch your wealth grow as your home's value increases over the years.

One caveat: You'll typically only benefit from increases in your home's value if you plan to stay in it long term. It usually takes a few years before you're able to break even when selling your home, and it could take even longer if something causes home prices to stall or fall temporarily.

But if you plan to stay put for at least the next five to 10 years, buying could be worth it.

3. You'll beat the rush to buy when rates drop

Though homebuying competition might not get as cutthroat as it was during the COVID-era housing boom, it's likely that things will heat up quite a bit as soon as mortgage rates fall.

When the market is hot, it's not uncommon for buyers to have to make multiple or even dozens of offers before one is accepted. And to remain competitive, they often have to bring more money to the table or make significant compromises to get into a home they like.

By buying now, you'll avoid all that extra competition — and as a homeowner, you may benefit from the resulting higher home values.

4. High rates keep home prices from rising too quickly

"When rates are high, there are fewer buyers and the affordability factor diminishes, and prices tend to decline," says Melissa Cohn, regional vice president at William Raveis Mortgage.

Home prices are down 0.46% year over year, according to the S&P CoreLogic Case-Shiller Home Price Index. Though they've been inching back up over the past few months, they're still below where they peaked in June 2022.

But mortgage rates are expected to drop throughout the next couple of years. As soon as they do, the market is likely to flood with homebuyers who have been patiently waiting for lower rates. This will push home prices up rapidly. 

In other words, you're likely to get the best deal in terms of price if you buy right now.

"It is better to pay more on your mortgage for a short period of time and get a better price for the home that you are seeking to buy," Cohn says. "If you can save thousands of dollars on the price in exchange for paying a few hundred dollars more a month for a year or two, you are way ahead of the game financially."

5. Refinancing down the road can lower your monthly payment

"The name of the game these days is keeping monthly payments down, knowing that you will have the opportunity to do a refinance when rates come down," says Alvarez.

Even if you take on a high rate now, you may be able to refinance into a lower rate in the coming years.

According to the Mortgage Bankers Association's latest forecast, mortgage rates could drop below 5% by the end of 2024. Those who buy now could have the opportunity to lower their monthly mortgage payments by hundreds of dollars in the next year or two.

When you do refinance, be sure to shop around for the best mortgage refinance lenders and get multiple rate quotes. This will ensure you're getting the best deal and lowering your monthly payment as much as possible.

How to decide if you should buy when rates are high

There are real challenges to buying a home in the current environment, and for many, it's just not possible.

"At the end of the day, the answer to this question is always personal — when I speak with clients, I typically look at the file holistically and try to give the advice I would want to receive myself," says Alvarez. "It never makes sense for someone to put themselves in a precarious situation financially and risk ending up in a home they cannot afford."

But if you feel ready and you're willing to make some compromises — such as buying a smaller home or forgoing certain features, like extra bathrooms or an attached garage — it's possible to take advantage of this challenging market.