Interest Rates Are Rising Fast -- but Don't Rush to Buy a Home

Fear-based decisions are rarely the best decisions.

I get it. You've watched the mortgage rate tick up over 2 percentage points in the last few months and are concerned that you're about to get priced out of the housing market. As someone who's moving soon to another state, I'm right there with you. However, I think maybe it's time we all take a beat, slow down, and allow our heads to rule over our hearts. Here's why none of us should rush out and buy a home, hoping to somehow beat the market.

We risk owning a home that's upside down

What's odd about this moment in history is that house prices have not softened by much, even as interest rates increase. What that means for us now is that we'll still be paying top dollar for a home, without the advantage of having a super-low interest rate.

The danger of buying a house for top dollar is that we could end up upside down, meaning we owe more than the house is worth.

Let's say I get into a bidding war with five other people. In an effort to "win the war," I waive my right to a home inspection. I know I'm overpaying for the home, but convince myself that the value of real estate is going to continue to climb.

And then the bottom falls out. Rates continue to climb, the demand for houses decreases, and suddenly, the balance on my mortgage is more than the house is worth.

If you didn't own a house in 2008, take my word on this: Home values can (and do) decrease. If you didn't get a good deal on a house in the first place, you're at greater risk for being upside down when the market dips.

We're more likely to settle

If you've ever been to an auction, you may have noticed a weird energy in the room that causes people to bid on things they don't even want. Buying a house when we know there are other people interested is a lot like that. It's easy to tell the logical part of our brain to hush up so we can go ahead and do something foolish.

It's also easy to talk ourselves into settling, forgetting about our wish list because it feels next to impossible to find the house we want. The problem is that once the frenzy of buying a house quiets down, we're stuck with whatever it is we bought. And that may not include the home features we really want.

It's inevitable -- we're going to run into unexpected expenses

Would you pay top dollar for a home if you knew you were going to be hit with unexpected housing expenses shortly after move-in? Making emotional, fear-based purchases and telling the logical part of our brains to buzz off can leave us financially exposed.

I have purchased 11 homes, and every single one has come with an unexpected surprise. Whether it's an electrical system held together by duct tape or a dead squirrel in the chimney, there's been an issue that has required professional intervention.

Hurrying to buy a house makes us less likely to be discerning.

We may not have time to do due diligence

One thing that matters a lot to me (and should to you) is the neighborhood I'm buying into. It does not need to be big or fancy, but I want it to be safe and peaceful. The best way to find out what a neighborhood is like is to visit it multiple times.

That means driving by the house at different times of day before making an offer. It means swinging by on weekends so I get an idea of whether neighbors regularly have loud parties. It means knowing if the house next door has a yard full of barking dogs, if there are any neighborhood restrictions we need to be aware of, and how area schools are rated. We no longer have children at home, but the quality of schools is still important when it's time to sell.

Don't forget that home prices rise and fall, and interest rates wax and wane. This is not our last chance to buy a home. I think I'd rather spend a little more time dreaming of the perfect home than living in a home I regret buying.