Should I Wait to Buy Until Interest Rates Go Down?

Interest rates have been at the forefront of real estate conversations now for years, and rightfully so. We have seen rates as low as 2% in the past 5 years, as well as rates pushing 8%. And where rates are does have quite a significant impact on the buyer's purchasing power. Because of that, I hear all that time the question of "well shouldn't I just wait until rates go down?"

Before we answer that question, let's take a quick look at the history of 30-year rates over the past 50 years. While mortgage rates were at historic lows in 2021, average 30-year rates are still below the historic average. Since 1981, when rates peaked at 16.63%, they have been at a relatively steady decline, up until 2022. And where are they now? As I write this post, rates are in the mid 7s%. Where are they going? It is difficult to predict. While experts do believe they will ultimately trend down this year, it is impossible to know.

The other factor we need to look at is home prices, as that is the other major factor in a buyer's purchasing power. Between 1970 and today, here's how much the median sale price in the U.S. has changed (data provided by the US Census bureau):

• 1970: $22,600

• 1980: $66,400

• 1990: $121,500

• 2000: $172,900

• 2010: $224,300

• 2020: $358,700

Keep in mind that this is the median value of all of the United States, and prices vary widely based on location. Overall, home prices have grown exponentially and continue to rise given the historically lower supply of homes on the market (lack of supply and peak demand create the perfect storm for home price surges).

So let's circle back to the question of should you wait until rates go down. My answer to that question is: no. Given the history of interest rates, the unpredictably of where they may go, and rising home prices, I recommend you buy a home when you're financially ready and can afford a home you can see yourself living and growing in. And if rates drop, refinance! But my biggest piece of advice: don't buy a home above your means with hopes and plans of rates decreasing, because as we have seen in the past few years, a decline is never a given.

Are you prepared to financially to buy a home? Get in touch and we can talk through the process and next steps!