You might have seen our Instagram post earlier this week where we briefly explained why now is the best time to buy if you can. In this week's blog, we're diving deeper into why it’s more beneficial to buy your home now rather than wait.
Barbara Corcoran, in a recent Yahoo Finance interview, addressed the question: "Should people wait for interest rates to drop or buy when they can?" Her advice is clear: buy as soon as you can. She said, "The minute you go out on the marketplace when everyone else is out, you always pay more. Why would you wait for that?" We couldn't agree more.
Currently, interest rates are between 6-7%. This rise is partly due to a lack of inventory. Let's break down why waiting for lower rates might not be the best strategy.
The Impact of Future Interest Rate Changes
As interest rates are expected to decline, more buyers will likely enter the market. This surge in demand could exacerbate the existing inventory shortage. Basic economics tells us that when demand exceeds supply, prices rise. So, even if interest rates drop, the increased competition for the limited number of homes could lead to higher prices.
The Cost of Waiting
Consider this: you’re looking at a home priced at $450,000 with a current interest rate of 6.5%. If you wait for the rates to drop to 5.5%, by the time they do, the price of that home might have risen to $485,000. While you might save on interest, you’re paying a higher base price for the property. Moreover, you miss out on the equity you could have been building during that waiting period.
Why Buying Now Makes Sense
- Building Equity: The sooner you buy, the sooner you start building equity in your home. This can be a significant financial advantage over time.
- Beating the Rush: By purchasing now, you avoid the rush of buyers who will enter the market when rates drop, reducing the competition and potential bidding wars.
- Fixed Costs: Locking in a mortgage now ensures you have fixed housing costs, which can be a stable financial anchor compared to renting or waiting for uncertain market conditions.
Real-Life Scenarios
Imagine you’re a first-time homebuyer eyeing a charming three-bedroom home in a family-friendly neighborhood. The home is listed at x amount, and you secure a mortgage at 6.5%. If you wait for the interest rate to potentially drop to 5.5%, the competition might drive the price up with $50,000. The price increase overshadows the benefit of the lower interest rate, and you’re left paying more in the long run.
Similarly, for a growing family looking to upgrade, waiting could mean missing out on your dream home. The neighborhood you love, with its excellent schools and community amenities, might see increased demand, pushing home prices out of your budget.
Conclusion
All in all we can conclude that with waiting for interest rates to drop you might be in for a cold shower. Waiting for lower interest rates might seem like a good idea, but it often results in higher overall costs due to increased home prices and heightened competition. Buying now allows you to secure a home at today’s prices, start building equity, and avoid the rush of buyers waiting for rates to drop. Don’t miss out on your opportunity to make the most of the current market.
