With a Rate Decline Expected, Should I Buy Now or Wait?

Buying a home is a significant decision, and figuring out the timing is a major point of consideration. Should I buy now or wait? What if I buy now and rates or prices drop right after I move in? It's impossible for anyone to read the future and know what is best for each individual buyer. So many factors go into this highly personal and subjective decision, and the right time for one person may be the worst possible time for another.

With mortgage rates expected to begin trending downward in the coming months, there is a lot of excitement and talk of people finally being able to enter the housing market after waiting on the sidelines for years hoping for rates to drop. But is waiting to see what rates do the best decision? Let's explore why seizing the opportunity now might be wiser than waiting for lower rates to arrive in spring of 2024.

Unpredictable Market Dynamics
The unpredictable nature of housing market dynamics are the biggest things to consider when evaluating your personal home buying timeline:

1. Interest Rates: Despite the allure of potentially lower rates in the future, the current rates are still historically low (we're looking at you, 18.63% in 1981!). Even if they decrease slightly later this year, the difference might not significantly impact your overall payments. There is also always the chance that rates don't decrease or even continue to go up, since anything can happen, and conditions change quickly in today's world!

One benefit of building a home in a declining rate environment (as opposed to buying an existing home) is that you don't lock in your rate at the time of contract. Instead, you lock about 30-60 days from settlement. This means that people purchasing now won't miss out on the better rates that may be arriving in the spring! This is a "best of both worlds" situation in which buyers can still take advantage of today's pricing and incentives (more on that below!) while also potentially snagging an improved rate. The option to build might bring great peace of mind to those wanting a new home but anxiously waiting to see what rates do this spring.

2. Competition and Prices: Due to the state of the housing market for the past few years, many people have been choosing to stay in their current homes, not wanting or being financially able to give up their lower-rate mortgages for a new, higher-rate loan. This has led to a lack of homes available to purchase, meaning more competition for fewer houses and a steady increase in prices - a simple result of high demand and low supply.

With a potential rate decrease, we could see more people willing to leave their current homes, which seems like a good thing... more inventory on the market to choose from, right? Maybe not. The owners of the newly available homes will now also be out there looking for their new homes, which means more people competing over the pool of available abodes. More people and available homes in the market may mean prices and seller selectivity remain consistent with what we see now, but many people think we will instead see prices go up at a faster rate and sellers who are pickier about which offers they accept.

Prices going up and fewer seller concessions available to buyers could end up negating any affordability gains that a rate drop would create, making the overall cost of a home purchase on par with what we are seeing now or potentially even worse.

Along with the housing market dynamics discussed above, here are some other factors to consider when deciding whether to wait to purchase your new home:

Long-Term Financial Planning
1. Equity Building: Every mortgage payment builds equity in your home. The sooner you buy, the earlier you start accumulating this wealth. Waiting for rates to dip might mean delaying this process, affecting your long-term financial goals.

2. Investment Potential: Real estate often appreciates over time. By purchasing now, you’re positioning yourself to benefit from potential property value increases in the future, regardless of minor fluctuations in interest rates.

Personal Circumstances
1. Lifestyle Stability: Buying a home provides stability. If you’ve found a suitable property that meets your needs and aligns with your future plans, waiting for rate changes might cause unnecessary delay and uncertainty.

2. Emotional Satisfaction: The satisfaction of owning your home might outweigh the financial nuances. If you’ve found a place that feels like home, the benefits might outweigh the marginal changes in interest rates.

Conclusion
While waiting for lower interest rates might seem tempting, it’s crucial to consider the reality of what will likely happen if we see rates decline. There is also the opportunity cost of waiting to think about: the longer you wait for rates to go down, the longer you miss out on the potential advantages of homeownership, such as tax benefits, equity building, and stability. Once you evaluate the pros and cons, you may realize that the current market might actually offer advantages that outweigh potential rate decreases.

Remember, personal circumstances and the specific property you’ve found play significant roles in this decision. Consider consulting a financial advisor to make an informed decision that aligns with your long-term goals and current circumstances. Our partners at Gray Fox Mortgage are a great resource. They can help you explore different loan programs, finding the best option for your specific financial goals.

If you're ready to stop waiting and jump into your new home journey now, start by finding your perfect community or browsing our quick-move-in homes! Contact us when you find your fit and our New Home Concierge will help answer your questions and arrange next steps, whether that be a home tour, virtual appointment, or phone call with one of our Sales Managers. Happy searching!