Home prices and mortgage rates have recently seen significant increases. If you are in the market for purchasing a new home, waiting until rates and prices decrease may be the best strategy.
Mortgage interest rates play an integral role in how much home you can afford and monthly payments, but you have various ways of controlling them.
1. Home Prices Are Falling
After rising precipitously after COVID-19, home prices started falling back in 2022 and have since been stagnating or decreasing in most markets. This decline can largely be attributed to mortgage rates increasing more than double from their historical lows; financing 80% of a typical home now costs more than last year – this change in calculations for potential buyers has altered their thinking drastically.
Home sales have been suffering due to mortgage rate reductions, yet a recent drop may be revving up demand once again. Real estate contracts signed have seen an uptick after six months of decrease while inquiries into real estate agents has spiked, according to research from brokerage Redfin.
Experts don’t believe we are currently experiencing a housing market crash, though they anticipate some local price volatility as demand ebbs and floods of new homeowners enter the market. Still, supply remains limited and buyer demand outweighs negative effects such as rising mortgage rates; home prices should likely not plummet like they did during recessionary conditions of 10 years ago.
2. You Can Refinance Down the Road
Refinancing may offer lower interest rates than what is currently being charged; however, it’s essential that you consider any associated additional expenses with refinancing before making this decision.
As an example, if you’re a first-time homebuyer, credit-related closing costs associated with your loan could outweigh any savings from refinancing. Furthermore, refinancing requires lengthening the length of your loan term; meaning more interest will accrue over the life of the loan.
One percentage point lower rates can translate to meaningful monthly savings, but your financial plan shouldn’t rely on them falling if and when they come down in future mortgage rates – especially given there’s no guarantee they will! Instead, focus on purchasing an affordable home now – finding an experienced lender will be helpful when calculating all these numbers so buying now makes sense for you!
3. You’ll Save Money in the Long Run
Potential home buyers frequently cite mortgage rates as one of the main deciding factors when purchasing their dream home. After all, when rates fall by just one or two points each month on mortgage payments they could save hundreds each month on payments – however this approach can prove fruitless as mortgage rates fluctuate constantly and their effects can take time to materialize – for instance if the Federal Reserve lowers short-term interest rates it can take time for mortgage rates to adjust as a result of these actions by banks like Chase.
Due to fluctuating interest rates and home prices, some potential home buyers have been waiting to purchase until interest rates and home prices decline, which is not in their best interests. Here are three reasons why waiting until mortgage rates fall may not be wiser.
4. You’ll Have More Options
Many buyers are waiting for mortgage rates and home prices to decrease before buying a property, but this could cost them dearly in the end.
Mortgage rates have steadily increased since the outbreak began due to Federal Reserve’s attempts at combatting inflation, placing undue strain on many prospective homebuyers and forcing some individuals to postpone plans of buying homes altogether.
Mortgage rates cannot be predicted precisely; one thing is for certain though – they won’t remain so high forever! Waiting to purchase until rates and home prices drop could result in you missing out on finding your ideal home, not to mention you never know what will happen between now and when rates reach COVID levels; COVID rates still appear relatively modest when compared to their historical averages.