–Hey Taylor – I saw that mortgage rates started coming down, but I also see that interest rates will probably drop in September. If I want to buy a home, do I start shopping now or wait to see if rates come down even further in the Fall?

–Hey John – This is a great question because it’s very hard to answer. Buying at the right time is a tricky endeavor, as mortgage rates will always be a moving target. Chances are high that they’ll fall again when interest rates get cut, but that doesn’t guarantee you’ll pay less in the long run.

  1. Slow-moving market. After burning red hot for over a decade, the home-buying market finally cooled off the last couple years. Fewer people bought houses and, as interest rates went up to combat inflation, mortgage rates followed. Even though things slowed down, the median home price didn’t drop much. Now we’re at a place where low mortgage rates might entice a lot of buyers, and then it’s pretty likely that bidding wars will start driving home prices back up. As great as it is to pay less on interest, you have to do the math on how much you’ll pay with a 6.5% mortgage versus a 5% rate on a house that costs $90,000 more.
  2. Location. Changes in housing prices and mortgage rates tend to ripple through the country, so the area where you’re looking makes a big difference. If you’ve got your eye on a property in an urban area or just on the outskirts of a city, you may need to jump on it sooner than later. If you’re looking at a rural spot without as much competition, you might benefit from waiting for the rates to drop a little bit. Again, there’s no definitive answer on this—the price you end up paying depends on the mortgage rate, the realtor, the other prospective buyers, and a dozen other factors. Timing definitely matters, but there’s no secret formula that guarantees you’ll pay the absolute lowest price.
  3. Pay what you can afford. We have to be strategic and market-savvy and so many other things when buying real estate. Above all, we have to be smart with our money. People get caught up in seeing what other people are doing and how the markets are moving and so often forget to look at their own bank accounts. How much can you afford as a down payment? What’s your monthly income and how do your current rent payments compare to mortgage rates? How will buying a home, and all the costs associated with that decision, affect your quality of life?

You’re smart to keep an eye on interest rates. Be aware that house prices will probably jump when those rates fall, and then be very mindful of your personal finances and try to make the right decision for you and your family. Good luck!

 

TAYLOR J KOVAR

CHIEF EXECUTIVE OFFICER

CERTIFIED FINANCIAL PLANNER™