Why Waiting To Buy Doesn’t Make Sense

Change always brings about uncertainty, and we’re hearing all sorts of things about today’s market. Is it going to crash? Is a bubble going to burst? We want to talk about all of that today and address the uncertainty.

Interest rates have been steadily falling since 1981. Over the last six years, they've plateaued at around 3%. Now we have rising rates. The Federal Reserve raised rates by 0.5%, and mortgage rates climbed over 2%. That lets you know that the people with money were eager to raise rates as quickly as they could. 

The Fed came out and announced that they would raise rates throughout the year, and in truth, a lot of those increases are already factored into the mortgage rate. If you are handing out mortgages and you know you can almost double your rate of return in six to nine months, why wouldn’t you adopt that rate now? Because of this, many people believe that future increases have been built into the rates we’re paying now.

We are sitting at 5.25% for a 30-year fixed mortgage, which is definitely higher than 3%, but it is still a great rate historically. Many people look at this increase and decide to sit back and wait, thinking that the market might crash. Be careful what you wish for.

"The odds of prices dropping are almost zero."

If the housing market crashes, we’ll have a lot more to worry about than buying houses. Our national economy would be in the doldrums, and we’d have to think about losing our jobs. However, no one is really worried about that, and that’s why there’s not much national concern about the housing market.

We know that real estate wins over time. Buying a home is not a short-term game; most of us aren’t buying a house for only a year or two. So long as you plan to live in your house for a while, it is a good time to buy.

We expect that mortgage rates will continue to rise. It wouldn’t surprise us to see rates in the 6% to 7% range by the end of the year. A 1% rise in interest rates means a 10% decrease in your buying power. If you could borrow $400,000 now, you’d only be able to borrow $356,000 if rates rose by 1%. 

For waiting to make sense, home prices would need to drop 11%. What are the odds of that happening? In our opinion, about zero. The big real estate crash of 2008 is the only time that real estate values went down nationally since World War II, and even then, it took five years for us to see a 27% drop in prices. 

Our advice is not to wait. A lot of people decided to get out of the market when rates went up to 3%, and prices did not go down then. 

If you have any questions about our changing market or real estate in general, call or email us. We would love to help.