Interest Rates are High. Is It A Good Time To Buy? June 16, 2023

This question is the one I get the most. This is why I am invited to the coolest parties!

Why you would want to buy a home? Do you want to upgrade, purchase a vacation home, or purchase your first home? These are circumstances to consider in answering the greater question. If you have no need for housing, then the answer is no.

With today’s economy and concern over the future, as compared to the fairly recent days of mortgages on the 2’s and 3’s. This is a valid question as compared to other times when there is little question in advantages of buying your home.

The default consideration to not considering buying now, and to put that transaction off to another time can only be based on the assumption that market considerations or personal resources may improve in the future. I can assure you, we will never see rates as low as they were in the last few years. We are not going back.

Truth be told from an economic standpoint, the Federal Reserve did us no favors in having rates at 0% for so long. They created an anomaly in not making adjustments that are economically unfeasible. So here we are. What are you going to do?

The argument for waiting: Personal circumstances may absolutely improve. Better job, more time to save, etc. Then that answer to the question is a personal one.

In your lifetime, how often do prices for items you have wanted, large or small, reduce? How many times have you considered a purchase, waited, and the price actually increases, or the model, design etc. of that particular item may have become unavailable or the price increased even more?

Housing is definitely going up every day, and long term forecasts for rent, predict annual rent increases of 4 to 5% annually. Waiting for anything to economically get better is a gamble, and the odds are not in your favor.

Now, back to the housing market. At this moment, we are in a place ripe for opportunity for you. Yes, interest rates may be higher, but we have survived the rapidly increasing housing prices that were prevalent last year. Interest rates were at unheard of interest rates, even in ‘the 2’s’. Realtors representing buyers can go on with stories about fighting through multiple offers and unreasonable sellers.

Buyers were paying above the asking price, and above the market, for properties. Sometimes a transaction would occur without a buyer being allowed a property inspection. Those days are mostly past; although a buyer still needs to avoid delaying a decision on a property they like. At least the price isn’t shooting through the roof by the hour.

So essentially, your interest rate may be higher today, but the price of your property should be lower than if the rates remained low and the buyer’s market continued. I can only imagine how high home prices would be if rates did not settle in where they are.

Should rates drop, you can readily refinance. My firm, Qualfirst Mortgage, offers to refinance for up to 2 years, at no origination cost for a refinance.

Considering the big picture, rates aren’t so bad, actually. I saw 19% in the mid-eighties, and rode through the 90s at 9-11%,. The early 2000s have seen rates from 6 to 8%. So, today’s average onventional rate of 6.71% (considering not paying origination fees on this amount or points) is on the better end of rates in the last 20 years.

The bottom line is you will pay more for your house today, because rates are higher despite the break you’re getting on home prices. However, the comparison is not to yesterday. You can never go back. The comparison is in the time before us.

For every point that rates increase, you will pay that much more, and the goal of owning a new property is that much further away. Your payment will be higher, and will cost that much more than they are today. Not to mention the cost of the home will increase. So yeah, it’s a good time to buy. Better than later.

David Koons is the owner of QUALFIRST MORTGAGE, with 40 years in the mortgage industry, and a graduate of Winthrop University.