Waiting for Rates to Drop? What Else Could Change While You Wait?

One of the most common things I hear from potential homebuyers is:

“I’m going to wait until mortgage rates come down.”

I understand the thinking. A lower interest rate can mean a lower monthly payment and potentially greater buying power. But there is another side of the equation that buyers sometimes overlook.

What else could change while you’re waiting for rates to drop?

Mortgage rates are only one part of the home-buying decision. Home prices, inventory, competition, your personal finances, and even your own life circumstances can change while you wait.

Lower Rates Don't Necessarily Mean a Cheaper House

Suppose mortgage rates decline and thousands of buyers who have been sitting on the sidelines decide it is finally time to purchase.

What happens?

Demand can increase.

When more buyers compete for the same homes, sellers may receive multiple offers, buyers may have less negotiating leverage, and home prices could rise.

You might save money because of a lower interest rate but end up paying more for the property itself.

That doesn't mean you should rush out and buy a house today. It means waiting for a lower rate isn't automatically the financial win people sometimes assume it will be.

Home Prices Could Continue to Change

Nobody can guarantee where home prices will be six months or a year from now.

If prices rise while you're waiting, some or all of the savings from a lower mortgage rate could disappear.

For example, a buyer waiting for a better interest rate might discover that the $400,000 home they could purchase today costs considerably more by the time rates reach the number they were waiting for.

The important question isn't simply:

“Where will mortgage rates be?”

It's also:

“Where will home prices be when rates get there?”

Your Buying Power Can Change Too

Your ability to purchase a home isn't determined solely by mortgage rates.

Income, debt, credit scores, insurance costs, property taxes, lending guidelines and available loan programs can all affect what you qualify for.

That's why I encourage buyers to talk with a knowledgeable lender before assuming they need to wait.

There may be financing options available today that you haven't considered.

And if purchasing today doesn't make financial sense, that's valuable information too.

The Right House May Not Be Available Later

Real estate isn't like buying an identical product off a store shelf.

Every home is different.

The house with the location, floor plan, lot, neighborhood, views, garage or features you've been searching for may be available today—and there is no guarantee something comparable will be available when rates eventually decline.

Waiting has an opportunity cost.

Sometimes that cost is financial.

Sometimes it's simply losing the house that would have been right for you.

Life Doesn't Wait for Interest Rates

There is another factor that doesn't get discussed nearly enough.

Life.

People buy homes because they get married, have children, relocate for work, retire, downsize, need more room, want less maintenance, move closer to family or simply decide their current home no longer fits their lives.

Those circumstances don't necessarily wait for mortgage rates to cooperate.

A home purchase should ultimately be based on whether the property and payment make sense for your life and your finances, not on trying to perfectly predict the financial markets.

What If Rates Drop After You Buy?

That's another question buyers frequently ask.

Depending upon the loan, your financial circumstances and future market conditions, refinancing may eventually be an option. There are costs and qualification requirements involved, so refinancing should never be assumed or guaranteed.

But here's the distinction:

You may have the ability to refinance a mortgage later.

You cannot go back in time and purchase yesterday's house at yesterday's price.

Don't Try to Time the Perfect Market

Very few people consistently predict interest rates, housing prices and economic conditions correctly.

Instead of asking:

“Is this the perfect time to buy?”

I believe there is a better question:

“Is this the right time for ME to buy?”

If you find the right property, can comfortably afford the payment, have appropriate financing, and expect to own the home long enough for the purchase to make sense, buying may be worth considering even if mortgage rates aren't exactly where you'd like them.

If those pieces don't line up, waiting may absolutely be the better decision.

The objective isn't to pressure you into buying. It's to make sure you're making the decision based on the entire picture—not one number.

Thinking About Buying in the Tucson Area?

If you've been sitting on the sidelines waiting for mortgage rates to fall, let's look at the numbers before you make your decision.

We can evaluate what homes are available, what your price range may look like today, and how different purchase prices and financing scenarios could affect you.

Then you decide whether buying now or waiting makes more sense.

Wes Stolsek,

REALTOR®

OMNI Homes International

520-404-9773

www.wesleystolsek.com

This article is for general informational purposes only. Mortgage rates, loan programs, qualification requirements and real estate market conditions can change. Consult an appropriate mortgage professional regarding financing options and qualification.