Should I wait for Interest Rates to Drop Before Buying a House?

by Scott Moore, Realtor

This is wisdom that comes to us from the investment field, and it means that over time, staying the course and remaining invested nearly always outperforms trying to time buy/sell decisions to the fluctuations of the market. 

The same is true in real estate. In real estate, we often hear people say that the best time to buy a house was 20 years ago, but the second best time is today, which is getting at the same concept: time in the real estate market is ultimately the most important thing. 

As an example, let’s think about the last year. 

Last fall, when we started to see interest rates climbing - 3.25% then 3.75% - many buyers slammed on the brakes on their home purchase to wait it out for lower rates. A year later, many of them are still facing the same issues- wanting to be invested in real estate, needing more space, wanting a different neighbourhood- but rates are now even higher (although the Bank of Canada has held them firm twice in a row now, which lets us breathe a small sigh of relief!).

If those buyers hadn’t been concerned with timing the interest rates, they would have bought at 3.25% (instead of 5% now), they would be in a better home that suits their needs, and would have accumulated a year’s worth of equity and a year’s worth of appreciation on their asset. 

Also remember that interest rates aren’t the only factor and focussing only on one aspect of the market can cause you to fall short as well. Once interest rates do fall, the market is going to be flooded with frustrated & impatient buyers that are sick of waiting, which will trigger mega bidding wars and push prices upwards. 

Rates may be higher now, but the market is balanced and fair for buyers. Time in the market is an important part of building wealth and the cost of waiting another year or two to start building equity and earning appreciation can’t be ignored. Nor can the value of having a home that you’re happy with and that works for you. 

I do understand how painful it is to see these current interest rates, if you’re considering holding off on real estate as a result, I invite you to reconsider.

If you have any questions, contact me, I’m here to help.