Many of YOU are waiting for interest rates to drop and are holding off on buying a home. Why it might seem like a good idea on the surface–why not avoid paying more money on interest, right? But waiting for rates to drop probably isn’t your best strategy.
First, let’s take a look at the real estate market. Right now, we’re in a seller’s market. In this kind of market, the number of homes for sale is lower than the number of buyers looking to buy a home. However, we are also seeing high interest rates right now. These high rates have tempered buyer demand, leading to lower competition and more moderate home prices than we saw a few years ago.
This goes back to Economics 101 and the principles of supply and demand. When the number of buyers on the market increases, so do home prices because there’s more demand than supply. When interest rates eventually drop, you can rest assured that more buyers will jump onto the market to snag a lower interest rate. The resulting increase in buyer competition and demand will drive the home values, and listing prices, much higher.
This means that if you wait for rates to drop, you might save money on interest with a lower rate, but you’ll also end up paying more for your home. In fact, it’s likely that you’ll spend more on the purchase price than the savings from a lower interest rate, putting you at a financial disadvantage compared to buying a home now.
Another thing to consider is that while you can refinance your interest rate down the line, you can’t refinance the purchase price of your home. As a result, it makes more sense to buy a home at a price that works for you when the timing works for you instead of trying to time interest rates.
Because refinancing exists for interest rates, the best strategy for many buyers is to consider buying now at a lower sales price and refinancing the interest rate later. When rates drop, you can refinance your mortgage and get a lower rate, but you’ll have locked in your home at today’s prices.
At the end of the day, the timing of when to buy a home really depends on your life and your financial situation. If you’re ready to buy, then jump in now to lock in a great new home and then, if needed, refinance to a lower rate in the future.
I’m Anita L Williamson, Associate Broker with James River Realty Group. If you are looking to buy or sell real estate in the Central Virginia area I would love to be your real estate resource of choice.
