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MoneyWatch: Managing Your Money
By Joshua Rodriguez
Edited By Angelica Leicht
/ CBS News
If you're in the market for a new home, today'smortgage rates can hinder your efforts. After all, the higher your mortgage rate, the higher your monthly payments will typically be. So, it can be difficult to find affordable housing options in today's high-rate environment.
But the good news is that there are still good housing options available. And, while waiting for a lower interest rate might seem like a smart move, some experts say doing so would be a mistake. But why wouldn't you want to wait for lower mortgage rates before you purchase a new home?
Find out how affordable your mortgage loan can be today.
Why some experts say you shouldn't wait for mortgage rates to fall
Interest rates are a common consideration among home buyers — butshould you wait until mortgage rates fall to buy? Many experts say no. Here's why.
Lower rates could lead to lower inventories and higher prices
"Buying a home is a big decision that needs careful consideration," says John Dustman, SVP, head of consumer lending and advisor banking at Axos Bank.
"One common concern among buyers relates to market conditions and how changes in interest rates impact home prices and inventory levels," says Dustman. "As most house hunters know, inventory levels in just about every community in the U.S. are very low and have been since the COVID-19 pandemic and historically low mortgage rates available in 2020 and 2021."
"Active inventory fell to levels that were a third or less than inventory levels in 2019 during the 2021 peak in demand," says Dustman. "Since then, inventory levels have increased but are still at levels equal to about 50-60% of available inventory in 2019."
Considering the low inventory levels, home prices would typically rise. However, with rates as high as they are right now, it may be keeping home values from increasing further, according to Dustman. But that may change.
"Many buyers have been waiting on the sidelines due to high rates and challenges they are facing qualifying for mortgages with high rates and home prices," says Dustman. As rates fall and these buyers on the sidelines flood the market, inventory could fall further and home prices could rise.
That's why, generally speaking, the best time to buy a home is when rates are higher and demand is lower, according to Dustman.
Find the best mortgage loan offer for you online now.
You could miss out on your dream home if you wait too long
It can be difficult to find your dream home with inventories low across most housing markets nationwide. However, if you wait too long, you could miss out entirely.
"People are always going to need to buy homes — whether they are upsizing with a growing family, downsizing as empty nesters, moving for a job or are simply ready to take the next step in their life's journey and become a homeowner for the first time," says Austin Niemiec, chief revenue officer for Rocket Mortgage.
"Maybe someone's dream home becomes available and it doesn't coincide with the most favorable rate environment, but waiting for rates to drop could mean missing out on that perfect opportunity," says Niemiec. "As long as they can comfortably afford the payment now, the homebuyer always has the chance to refinance if rates drop in the future to get a better monthly payment."
It's hard to time the market
"Trying to time the homebuying market and rates is difficult because no one has a 100% accurate crystal ball to predict what conditions will look like even in a few months from now," says Bob Driscoll, SVP and director of residential lending at Rockland Trust Bank. "The 'perfect time' to buy a home is a myth."
"Instead, prospective homebuyers should buy a home on a timeline that works best for their life and future plans," says Driscoll. "Aligning your home purchase with your goals and values will certainly have a better return on your investment than waiting around for rates to fall."
Learn more about your mortgage options now.
The bottom line
Interest rates could drop in the future, but you may not want to wait for that to happen to buy a home. If you wait for rates to fall, you could face higher home prices or miss out on your dream home. Rather than waiting for rates to fall, it may be a wise choice to purchase your home now and consider refinancing later.
