While most Americans might dream of buying a home, today’s high interest rates have prompted many to hit pause and ponder: Is now really the right time to buy, or should I wait?
The concern is understandable. In late October, rates for a 30-year fixed-rate mortgage reached a 23-year high of 7.79%. That’s more than double the rates two years earlier, adding approximately $1,000 to a typical monthly mortgage bill (assuming a 20% down payment).
Since then, mortgage rates have nudged down, but many home shoppers are still skittish about where rates might go next, according to real estate agents.
“Rates have absolutely changed the landscape of affordability for buyers over the last year,” says Cara Ameer, an agent with Coldwell Banker who is licensed in California and Florida. “They feel rates are too high, and there’s too much uncertainty of where the numbers might land.”
While many home shoppers might be convinced that this is a terrible time to buy, quite a few housing experts believe the current market could be hiding a window of opportunity.
Here are five reasons why purchasing a property right now makes a lot of sense—and why homebuyers might regret waiting on the sidelines.
1. You can buy a house now, then refinance later
Mortgage rates topping 7% might feel like a heavy financial burden month after month, but borrowers should note that they aren’t necessarily stuck with this same rate forever.
After their purchase, if rates subside, homeowners can refinance their home loan at a lower rate, a tactic some refer to as “Date the rate, marry the house.” A high rate, in other words, might be just a temporary inconvenience. But a home can be forever.
While no one can predict what mortgage rates will do next, real estate experts can look to other macroeconomic conditions and make some educated guesses.
“In October, mortgage rates hit a 23-year high as concerns about inflation, faster economic growth, and more government borrowing pushed up longer-term interest rates on all kinds of investments,” explains Realtor.com Chief Economist Danielle Hale. “Since then, mortgage rates have eased back roughly half a percentage point. Further declines could mean that today’s buyers get an opportunity to refinance.”
Max Carr, a real estate agent in Orange County, CA, says many of his clients are buying now with the hopes of refinancing down the road.
“While we certainly don’t have a crystal ball, the general consensus by many is that rates will decrease as inflation is brought under control,” he says.
Refinancing comes with hefty closing costs, so you’d want to crunch the numbers to make sure that rates have dropped enough for a refinance to make sense. The Realtor.com refinance calculator can help you with this math.
2. Home prices are probably heading up
While mortgage rates seem to be trending downward, home prices are lately inching up. This is yet another reason it might make sense to lock in a property now rather than later.
“Although experts and forecasters have been warning of the potential for home price declines, home prices have been remarkably resilient,” says Hale. “Weekly data show that home prices in November have trended above year-ago levels so far.”
Of course, different areas have different pricing trends, but Carr says that low inventory has kept average sales prices moving upward in his highly sought-after Southern California market.
In Orange County, home prices are up 9.4% year over year, he notes.
Likewise, Ameer says that she continues to see increases in both her Florida and California markets.
“All my clients who bought during the last four years have been very happy they got in when they did,” she says.
3. There’s less competition
One silver lining of high mortgage rates: They’ve persuaded many home shoppers to drop out of the running. With less competition, the buyers who remain have a surprising amount of negotiation leverage.
“The increasing rates have cooled the market and created these incredible opportunities for those buyers who are ready to jump in,” Carr says.
And while today’s market is tough financially, it’s important to remember that the market buyers faced during the COVID-19 pandemic years might have been much tougher in terms of competition.
“Anyone who went home shopping during the pandemic saw the outrageous competition and multiple-offer scenarios that the low-interest rates caused,” Carr explains. “It was a challenge for many buyers.”
Now, however, it’s a different game with different rules.
“If you’re comfortable with the monthly payment, there’s an opportunity now to lock down a home you love without having to compete at that level,” Carr says.
This tactic has worked for his recent buyers, he explains. “A first-time buyer of ours just purchased a beautifully renovated single-level home in Long Beach, with a huge yard and perfect location. In 2021, the seller wouldn’t likely have needed to finish a renovation like this to get their home sold. The buyer’s timing meant they enjoyed a brand-new kitchen, bathroom, flooring, and more.”
4. Inventory of homes is on the rise
Some buyers might be nervous about buying now because of low inventory. Indeed, the number of houses on the market has been reported at 41.8% below typical 2017 to 2019 levels. But things are looking up. Inventory grew 5.1% from September to October, and experts, including Hale, think more homes might be on their way to market.
“Seasonally, the number of homes on the market begins to stabilize or drop as we move past September into October,” she reports. “However, in 2023, the number of homes actively for sale increased by 5.1% from September to October instead. Additionally, price reductions, which are typically stable at this time of year, saw a pickup much like the market experienced in 2022.
“Although price cuts are rarer than one year ago, the increase from September to October could signal a shift in momentum and more negotiating room than usual for homebuyers in today’s housing market,” adds Hale.
5. If it’s the right time for you to buy a house, then it never makes sense to wait
While high rates and low inventory might make it difficult for many buyers to get into their next home, market conditions are only part of the equation.
“The advice I give to home shoppers is that if you find a home that fits your needs and your budget and you’re ready to commit to homeownership and living in the same place for the next several years, it makes sense to move forward,” says Hale.
Source Link: https://www.realtor.com/advice/buy/reasons-why-right-now-is-a-great-time-to-buy-a-house-despite-high-interest-rates/?cid=eml_promo_Marketing_PRSL_MultiArticleNL_1946:6578bf0c5448c77fe904d183:ot_Marketing_Consumer_AdHoc_EditorialMultiArticle