Explaining The “Life Goes On” Home-Buying Cycle

Why the heck are home prices not going down more with mortgage rates so high? In many parts of the country, home prices are actually going up! The answer to this conundrum is partly due to the “life goes on” home-buying cycle.

Many folks put their lives on hold for one-to-three years during the pandemic. In the beginning, some might have viewed buying a new home as too risky given all the unknown variables. Therefore, many folks just keep renting or living in their existing homes.

Due to the pandemic, plenty of folks also delayed the following:

  • going to college
  • getting a graduate degree
  • moving for a new job
  • starting a business
  • proposing to a significant other
  • having children
  • having more children
  • retiring

However, guess what? Life goes on! We can't put our lives on hold forever because we all eventually die. What a waste to never live your dreams and desires.

Can't Wait Any Longer Until Mortgage Rates Decline

After mortgage rates surged higher in 2022, the demand for homes tanked. 2H 2022 was one of the slowest home buying seasons on record and 1Q2023 wasn't too much better.

Mortgage rates have declined from its peak of around 7.25%, but they remain stubbornly high given the spread between mortgage rates and Treasury bond yields remain higher-than-normal.

Further, the Federal Reserve has indicated it may want to increase rates for the 11th and 12th time over the next six months, despite already raising by ten times.

Good things come to those who wait. However, it is increasingly becoming clear that people are getting tired of putting their lives on hold to get a lower mortgage rate. There is growing pent-up demand. By the time mortgage rates do come down, demand will probably surge.

Life goes on home buying real estate market

Date The Rate, Marry The Home

The saying, “date the rate, marry the home” means that your mortgage rate is temporary, but your home is everlasting. You can always refinance your mortgage, but you can never change the purchase price of your home. If you miss out on your dream home, you might never be able to buy it again.

Given the logic, the argument is to not to let a high mortgage rate deter you from buying your target home once it is found.

In general, I agree with the saying given mortgage rates have been in a downward trend since the 1980s. Chances are high that any interest rate hikes and inflationary spikes are temporary – lasting no longer than two-or-three years.

Given you can take out a lower-rate ARM that has a fixed-rate introductory period of 5, 7, and 10 years, there are ways to save on mortgage expense. I've been a proponent of ARMs since I first started buying property in 2003. Over $500,000 in mortgage interest expense has been saved as a result.


Worth Being Cynical As Well

However, “date the rate, marry the home” is also a saying used by Realtors to get buyers to transact. To the Realtor cynics, it's always a good time to buy or sell a home! Therefore, be careful getting too easily influenced by words without running the numbers.

Mortgage rates will most likely decline in the next 12-24 months given inflation is heading back down. If you can afford a temporarily higher mortgage payment, then buying a new home may be a good idea. See the historical U.S. CPI chart below.

U.S. inflation CPI since the peak of 9.1% in June 2022

A Constant Race Against Time

At 46, I refuse to waste time or wait for good things to happen anymore. If you listen to my podcast episode on debating with my wife about upgrading homes (Apple), you can hear how I'm itching to take advantage of opportunity.

I want to create the life that I want, not just let it happen. Here are some examples of taking action because time won't wait for us.

Your Career – Life Goes On

Creating a better life is why I left Goldman in 2001 instead of letting them not invite me back for a third year. I had overheard my third-year analyst offer was in a precarious situation. If I didn't leave for Credit Suisse, I may not have gotten another opportunity to relocate to San Francisco.

Wanting a better life is also why I decided to take matters into my own hands and negotiated a severance in 2012. Plenty of colleagues got let go during the seven rounds of layoffs during the global financial crisis.

I didn't want to wait around to get bageled and then let go. That would have been depressing. Instead, I wanted to create a life of freedom and adventure sooner.

Your Net Worth – Life Goes On

To build above-average wealth we must be intentional with our spending, saving, investing, and tracking. We can't just wing it to millionaire status. Nobody is just going to just give us money. We have to work hard for it and take advantage of opportunities.

I knew my days in banking were limited. Not only was I burning out I was also slowly burning some bridges. As a result, I got to writing on Financial Samurai on the side as a potential way out.

Today, Financial Samurai is an asset that generates online income to help build our net worth once we fake retired. I had delayed starting this site since 2006, when I first came up with the idea post MBA. But no longer was I willing to wait for the right time to start once the global financial crisis hit. Life goes on!

Percentage of mortgage holders at different interest rates

Starting A Family – Life Goes On

Human biology doesn't wait for us to find the right partner before having kids. Instead, it becomes harder for women to have children after the age of 35. After age 40, it becomes almost impossible to have children naturally.

As a result, if you know you want to have kids, you may want to freeze your eggs. You may also want to spend more time on the dating circuit because you might one day regret choosing money over love.

Your body will begin to stop cooperating as you pursue your career because life goes on. Once your body is over the edge, there's no going back.

Upgrading Homes – Life Goes On

Currently, I have the opportunity to upgrade homes at a more reasonable price from 2022. The listing agent said the seller is coming back from overseas and will live in it for two years if nobody buys the home. Their daughter will be attending a new school.

In other words, life goes on for the seller whether they sell or not because high school is mandatory. For my family, I have to decide whether to buy the home now and enjoy it or wait for two years with no guarantees the home will be available to purchase then.

If home prices in two years are significantly higher, I will kick myself because this home may no longer be affordable. Maybe the AI boom creates massive fortunes for those living in the Bay Area. Big tech is already up huge year to date. There is a window of opportunity to buy a home in 2023.

Or maybe home inventory will finally rise once mortgage rates decline, thereby suppressing home price growth. The thing is, I've found the inventory I want so the current situation is a win! Ah, the trickiness of measuring the impact of supply and demand on home prices.

Home inventory in America record low in May 2023

Survey Of Why People Are Buying Homes Today When Mortgage Rates Are High

Take a look at this Zonda survey asking why people are buying homes today when mortgage rates are high. Zonda is a real estate analytics and data company.

why are buyers purchasing homes today when mortgage rates are so high

58% said they are buying due to lack of resale supply. Sounds like a nonsensical reason to buy.

But look at all the other reasons why people are buying homes: relocating, having children, retirement/downsizing, sick of paying rent, marriage, FOMO, divorce, opportunistic, and death.

In other words, people are buying homes today because life goes on!

Remain Disciplined When Buying A Home

Even though life goes on, you don't want to irresponsibly buy a home you cannot comfortably afford. It would be counterproductive to buy your dream home only to feel stressed about the payments.

My 30/30/3 home buying guide and my net worth home buying guide are good references to follow. They will hlep prevent your emotions from getting the best of your logical mind.

I've re-read both posts and concede that it would be better if we boost our net worth by another ten percent before buying a new home. Two years seems like a conservative amount of time to reach this goal.

However, it's just hard to wait another two years for mortgage rates to decline further. If we do wait, that would cut off 17.3% of the time we have left with our children at home. And by then, real estate demand might go gangbusters again.

Reader Questions And Answers

Are you surprised by the strength of home prices despite a surge in mortgage rates? Do you agree a big reason why home prices continue to go up is due to a “life goes on” mentality where people are tired of waiting for mortgage rates to come down? What are some other reasons why home prices are continuing to increase?

If you're looking to buy physical property, you want to hedge by owning real estate online to ride the price changes. Check out Fundrise. Fundrise primarily invests in residential real estate in the Sunbelt, where valuations are cheaper and rental yields are higher. The real estate firm currently manages over $3.5 billion with over 400,000 investors.


For more nuanced personal finance content, join 60,000+ others and sign up for the free Financial Samurai newsletter and posts via e-mail. Financial Samurai is one of the largest independently-owned personal finance sites that started in 2009. 

About The Author

15 thoughts on “Explaining The “Life Goes On” Home-Buying Cycle”

  1. Part life goes on and part lack of inventory. Put the two together and it creates a resilient market despite the high interest rates. Interest rates appear to be the only thing holding back the explosion. I think this speaks to builder confidence and recent new construction numbers despite all the uncertainty. I wonder if Feds will attempt to keep rates high for this reason alone. Not the cost of milk or vehicles. Just get the feeling that anytime is a good time to buy with so many people waiting in the wings (flush with equity), just waiting to upgrade. Really get the sense that real estate will continue to see growth from here. All it takes is a rate reduction and lookout.

  2. We feel like we make pretty good money in the DC metro area (~$400K+, plus a $100K severance package this year), max out our 401Ks (and the “back door” IRAs at YE), save $1200 monthly for our kids’ 529s, and consistently invest another $3500 monthly in investment accounts. Our primary residence has nearly doubled in value since we bought it 10 years ago. We also refinanced in 2021 to a 2.75% 30 year loan. Payments are a very affordable (for us) at $2800/month (including taxes). But, it just doesn’t feel like we’ll ever be able to get ahead to upgrade our home (we live in a 2500 sq ft 1950s rambler). Now, the “upgrade” homes in our neighborhood are all $2MM! With interest rates right now, we just can’t make the math work to keep our cash flow reasonable. We decided to do a renovation since we just felt priced out of everything in our area (including updating the layout, new finishes, and an expansion to include a master suite and open kitchen). If we feel like this, how on earth is the “average” person coping? But, like you said, it’s hard to put our lives on hold forever!

    1. We have a very similar monthly income and investment profile in the same region. The only difference is I kept trying to be content in smaller homes (they were nicely updated, in incredible locations, but small). But I kept wanting more space and less risk (there was considerable flooding risk in the area). So we upgraded twice and now the third home is probably good enough. It’s one of those $2mm homes, but we went under contract for $1.6 in 2021 for a move in date one year later (new build/tear down infill). Got the 2.75% 30 year loan and had a large down payment due to increasing equity from previous sales. Still the home requires a much bigger monthly than yours. The upside is it’s all done and very nice and well built and dry! We would have been outside of Sam’s 30-30-3-5 rule if we had waited with rates this high.

      I used to worry about paying off the mortgage, but honestly at 2.75% I can safely invest to beat that number and basically live rent subsidized. Just got to build a big enough nut these next 8-12 years. Here’s to hoping we pull it off on the early side of that range.

      Good luck on your renos. There’s more than one way to get what you want/need with housing.

      1. Nice to hear your perspective, Justin! 100% agree that being content in a smaller home is truly a game changer and a focus of mine, too. You’re right that there’s more than one way to get what you want/need with housing. And, we’re optimistic this area is going to continue to become more valuable over time (or at the very least, maintain its value, with the growth of tech companies in the area and the stability of the government in DC).

    2. $400K + $100K severance is sweet! So does that mean if the laid off person goes back to work, your household income grows past $400K?

      A $2 million home on a $400K household income is the limit, especially at these rates. But rates will come back down.

      Perhaps coming up with the $400K down payment is the bigger challenge, unless you sell your existing home. But hard to let go of the 2.75% rate.

      But it doesn’t sound like the wise move to upgrade homes before we find a new job if not yet already. Unless you’re saying $400K is your household income with two jobs.

      1. ~$400K is the income with both jobs and I was lucky to have secured equivalent employment once eligible (thus being able to save 100% of the severance). It didn’t feel great at the time to get laid off, but everything worked out OK (more than OK, since we came out ahead!).

        You’re right that rates will likely come back down, so we may still consider upgrading if that makes sense and rent out our existing place in a few years (there’s a strong rental market in our neighborhood).

        Yes, the 2.75% rate is just too good to pass up! But, we (mostly me, ha!) want to make some long-awaited upgrades in the meantime so we have a nicer place to live, even if it’s not as much space as we’d like. We also have some company stock options that will vest in the next two years that may give us some financial cushion, so we could be in better shape to get ahead of inflated prices in a few years. We could also obtain the $400K downpayment money if we sold our house, but the 2.75% rate is just such an amazing deal…and the monthly mortgage payment would still be stretching us (and we really, really don’t like the idea of being “house poor”).

        We’re hoping doing some moderate renovations will at least make us happier in the short term and it always leaves the door open if we want to sell or rent it out in a few years.

        Thanks for doing what you do, Sam!

        1. Ah, gotcha. Thanks for clarifying. Lucky to get a new job soon and keep all that severance.

          “ We could also obtain the $400K downpayment money”

          Tell me more what you mean!

          1. To clarify, the house has appreciated over $400K over the last 10 years, so selling it could help with a future downpayment.

            A few questions that (hopefully!) help me + your readers make decisions in this challenging market:

            1) What goes into your analysis of selling a house for a downpayment vs. keeping it as an investment and renting it out? It seems you’ve primarily focused on keeping real estate as investments and suggest that if at all possible.

            2) In this market of high interest rates, what would you recommend in terms of paying for a primary home renovation in cash, selling assets (e.g. stock, mutual funds), and/or taking out a loan?

            It is mind-boggling how crazy real estate has become. While we feel like we’ve done so many things “right” and have had a fair amount of luck along the way, we still feel crunched (and I imagine others do, as well).

            1. “What goes into your analysis of selling a house for a downpayment vs. keeping it as an investment and renting it out? It seems you’ve primarily focused on keeping real estate as investments and suggest that if at all possible.”

              Good question!

  3. I suspect this is true in most of the US as it is in Phoenix. The reason prices are still rising (although more slowly) is because demand (although depressed) still outpaces supply.


  4. It doesn’t seem like a good time to buy, especially on the East Coast (prices are high and interest rates are high).

    I heard your podcast and agree with your wife. If your current home is providing happiness and the ocean view as she mentioned, why buy a subjectively “nicer” home. She seems really reluctant on the thought of actually moving. Finally as they say “happy wife, happy life” :-)

    It might be a good idea to instead invest in passive real-estate and use the rest to travel more – i.e., enjoy life/create memories.

  5. I haven’t followed the real estate market as much as I used to. But it’s something I continually find interesting especially now that I’m a homeowner.

    I’m not in the market to buy for the foreseeable future but a few of my friends are. I’ll direct them to this post! They have felt unsure about when to pull the trigger for a while and should benefit from your advice. So true that life doesn’t stop and keeps on going.

Leave a Comment

Your email address will not be published. Required fields are marked *