Here’s why you shouldn’t wait for rates to drop

BY SCOTT MOORE, REALTOR

Buyers, right now you have a small window to be in the driver's seat on a home purchase. As soon as interest rates come down, that window will shut.

Here's why:

Right now, there are so many buyers out there waiting. When the rates drop, the dam is going to burst, and those buyers are going to flood the market. It will take a while for supply to catch up with the demand, so we will see multiple offers and homes will start selling for over listing price right away. 

The rule of thumb when you're competing for a home in the $400-$600k range is that you offer $10k more for each other offer that is on the table. To beat out one other offer, you increase your offer by $10k. To beat out two other offers, you increase by $20k, etc. Of course, the amount you have to pay to outbid another offer increases or decreases as the list price goes up or down.

An additional $10k in purchase price increases your payment by an extra $75/month over a 5 year term. That's adds up to be a lot. If you end up having to go $20-30k over the price you would pay now to secure a home, you could be looking at an additional $150-$225/month, just because you waited until everyone else was ready too.

Most people will be further ahead on a lower purchase price than on a lower interest rate. 

Interest rates have now remained stable through five interest rate announcements in a row and economists are predicting they could start decreasing as early as June. There are two ways you can buy now and still take advantage of rates when they lower. First, if the rate drops before your possession date, you will still get the lower rate for your mortgage. Secondly, if you choose a variable mortgage, it means your rate will drop as rates come down, so you can still take advantage of lower interest rates. 

If you wait, you will have a lower interest rate, but you'll likely have to pay a higher purchase price. Buying a home now means that you can negotiate. You are in the driver's seat. 

If you want to talk about how this applies to your personal situation, just reach out. I'd be happy to discuss.