We’ve been having a lot of discussions lately with buyers regarding their interest rate purchase strategy. With rates rising so fast, naturally they ask the question if now the right time is to buy.
Here is what we know about interest rates, and the 3 implications of waiting for rates to drop.
Interest Rates Could Go Up
If rates go up, it will cost you to wait. As rates increase, so does your payment. You may even qualify for less home if rates continue to rise.
Interest Rates Could Stay the Same
We could have a period where rates stay the same for a while. In this scenario, as a renter you’re getting nowhere. Your landlord thanks you, but you are gaining no equity whatsoever. When you rent, the interest rate is always 100% because all goes to somebody else and none to you or your equity.
Interest Rates Could Go Down
This is perhaps the worst possible scenario for buyers. Like you, other buyers have been on the fence too. When rates decline, other buyers hop off the fence and jump into the game. They become your competition for buying the same homes you are looking at.
When this happens, it can put pressure on the market and cause prices to go up. We saw this movie a few years ago when the rates were lower. Buyers were tripping over themselves to buy anything they could. At this point, sellers are not your competition. Your competition is all the other buyers looking to purchase the same home you are.
Not only can you lock in a home price today while there are fewer buyers competing for more homes, you have an added benefit. You may be able to refinance later when rates come down. Contrast this with buyers who wait. They may be paying a higher price for the home. You locked in your price when rates were higher, and now you can refinance at the same rate they’re trying to buy a similar home for. You’re both financing at the same rate down the road, but you may be in the home for much less because you bought before prices started rising again.
In all three scenarios a buyer is better off buying today than waiting for rates to drop. We haven’t even mentioned yet the tax advantages of writing off interest versus rent. It’s easy to follow the masses and do what everyone else is doing because there is safety in numbers.
The truth is, this is where the opportunity lays. Opportunity always comes from doing the opposite of the masses. In the stock market you buy when everyone else is selling and sell when everyone else is buying. While we are not giving stock advice or predictions on what the real estate market will do, we do know a few things.
Over time, owning your own home is a good bet. The sooner you start that process the more wealth you are likely to have over your lifetime.
Home Buyer Seminar
The Ellis Team conducts home buyer seminars for people wanting to learn how to get into their first home or build wealth through real estate. If you’d like to attend a future seminar, give our office a call at 239-489-4042 We’ll be happy to get you into our next seminar, or meet with you one-on-one if that helps too.
You can also search for all the homes in MLS at www.LeeCountyOnline.com Our team is experienced and can give you the latest market data to help you make better decisions. We also have access to financing options that you might not know about. We have ways to get that rate down and several programs to get that down payment down too.
The Ellis Team looks forward to helping you make a good decision for your family. If you are a seller, you should call us too. Put our Know How to work for you. Experience wins the day, and the Ellis Team definitely has the experience.
Good luck, and Happy House Hunting!