High Interest Rates could be the PERFECT time to buy a house
For many, the current economic climate is the absolute best time to buy a house. Yes, you read that right. Even though constant interest rate hikes have caused mortgage rates to jump to their highest levels in years, there are other factors to consider which could make a home purchase in a high interest rate environment a very wise move.
The home buying environment has been more challenging in the past 2-3 years than at any time in recent memory. Very limited inventory across a combination of both new home construction and resales on the market gave sellers a huge advantage over buyers. It’s simple supply and demand. Millions of sellers leveraged this inequity (which resulted in multiple buyer prospects for every listing) to raise home prices to record heights.
Buyers were forced to pay these prices if they wanted, or in many cases, really needed to buy a home. The conventional wisdom quickly shifted from offering less than the list price—in some cases maybe even floating a lowball offer—to offering more than the seller was asking. That quickly became the norm in many markets due to stiff, deep-pocketed competition for every listing.
This resulted in many potential buyers, particularly first-time homebuyers, being frozen out of the market. The silver lining for homebuyers in this high mortgage rate environment is that the red-hot housing market has cooled down considerably. The number of listings, especially new construction, is on the rise—and average prices are on the decline.
The world of Real Estate has changed
The dynamic has quickly changed from making offers above the list price to making offers at, or slightly below the list price. For some buyers, this means that a house that was out of reach a year ago could now be well within their price range, and they will very likely find sellers to be more flexible when negotiating home inspections, closing costs, and other terms.
Won’t the monthly payments be higher due to interest rates? Yes – for a short while. There is no question that interest rates should come down before too long. When they do, you can refinance at the lower rates—on the house you wanted all along at a great price. You’ll pay more interest temporarily, but that payment will drop once rates come down and you refinance. Plus, you may be able to take cash out when you refinance for upgrades like finishing a basement, etc.
Make today’s high rates work FOR you
As rates fall, the value of your home will increase at the same time. This is the reverse of the current market, where higher rates result in lower home prices. When the rates fall, home prices rebound almost immediately.
You’ll wind up paying less each month and building equity at an accelerated pace. Don’t forget the many advantages of owning your own home vs renting from a landlord. Speaking of which, rental rates are skyrocketing right now, so you have that going for you as well.
It could well be that purchasing a home in a “Buyer’s Market” could be the best decision you ever make—even at today’s high interest rates.