Blog posted On October 13, 2023
Should I buy now or wait until rates fall? This question is plaguing current home buyers. Home prices are climbing, interest rates show no signs of cooling, and buyers are struggling to find affordable homes on the market. The result? Most buyers are choosing to wait. In fact, more than 80% of buyers believe it’s a bad time to enter the market, according to Fannie Mae Home Purchase Sentiment Index released in early September. However, there are some hidden perks and advantages to buying in the current market.
Massive earning opportunity if you buy now
One of the benefits of purchasing when home values are on the rise is the expedited equity gains. Equity is the amount of home you own (i.e. the amount of mortgage you’ve paid off). You can gain equity by completing your monthly mortgage payments and by home value increases. So, you can spend another year or two wasting money on rent (which is also rising), or you can start building equity now and reap the rewards of rising home prices. Once rates fall and demand picks up, prices will likely climb even more, putting you way ahead of the buyers who decide to wait.
You might be waiting a while
Mortgage rates are set to stay higher for the near future. Recently, the Fed released updated projections that revealed experts believe rates will stay higher for longer. The economy is going strong and isn’t slowing down any time soon. Though rates might start to see minor relief in 2024, it’s likely we won’t see a noticeable decrease until 2025. That’s two years of missed equity and wasted rent money. Plus, by then, it’s probable that the competition for homes will be worse.
"Regardless of where mortgage rates go from here, there is one piece of advice I always deliver to my clients in the home buying process: You marry the house, but date the rate," says Christopher L. Stroup, MBA, CFP, a financial advisor at Abacus Wealth Partners.. "If you choose to implement this strategy, you assume today's interest rates as a necessary evil. Then, you plan to refinance your mortgage at some point in the future once rates fall."
This isn’t your ‘forever rate’
Above all, if you’re financially ready to buy and you find a home that you love, don’t let rates get inside your head. It’s impossible to ‘time the market.’ A home is a long-term investment. A rate is a short-term commitment. You can always refinance to a lower rate later. Especially when lenders are offering deals that let you buy now and get a no-cost refinance later to lower your rate.*
At the end of the day, it has to be YOUR decision about whether or not it’s the right time to buy, NOT the market’s decision. If you want to talk things through with us, we’d be happy to chat.
*CMG Home Loans will cover all customary lender fees which are processing fee, administrative fee, tax service fee, appraisal fee and credit report fee. In addition CMG Home Loans will also credit the borrower up to $1,000 towards additional third-party fees. This offer does not cover discount points. Credit cannot exceed total fees. Rate Rebound is only valid on future conventional conforming, government, and jumbo loans in our retail channel (future Construction Loans, All in One, HELOCs, Bond or HFA loans are excluded). There may be additional restrictions based on investor. Offer may not be redeemed for cash or credit and is nontransferable. Offer cannot be retroactively applied to any loans. Offer may not be used with any other discounts, promotions or interest-only/buy-down and second lien products. This offer is subject to changes or cancellation at any time at the sole discretion of CMG Home Loans. Additional restrictions/conditions may apply. This is not a commitment to lend and is contingent on qualification per full underwriting guidelines. Program will be available on loans disclosed on or after 11/1/22. Program is applicable for refinances 6 months after closing up to 5 years from original note date and with a net tangible benefit which includes a rate reduction of 0.5%, going from an ARM to fixed rate, reducing loan term, movement to a more stable product, or a lower principal and interest payment. By refinancing the existing loan, the total finance charges may be higher over the life of the loan.