We get this question a lot – Should I buy now while rates are low and home prices are higher? Or should I wait for prices to go back down but I might end up with a higher rate?
In this video, Homespire COO Todd Sheinin weighs in on this topic and shares his expert insight.
Autumn: Rates are still really low, historically speaking, and I’ve been reading a lot saying that they’ll likely stay low for a while. And right now, we’re seeing a lot of people looking to buy but very little inventory out there, which is leading to bidding wars and the sale price of a home going above and beyond list price. So, my question to you is – Is it better to buy now when rates are low but you’ll likely have to pay more for a home, or should you wait until the market settles down, there’s less competition, and home prices sort of even out, but interest rates may be higher than they are today?
Todd: It’s the million-dollar question. How do we handle this? It is an incredibly challenging market right now for a home buyer. There is historically low inventory. I was reading an article yesterday that said they think in the history of all home sales and when this data has been reported, this is the lowest that it’s ever been. So, there’s no inventory. Home prices are skyrocketing. When you go in for an offer on a house, there are multiple offers.They’re putting escalation clauses in. Home prices are going well above what they’re listing for and what prices anybody has seen in those neighborhoods ever before. And at the same time, we’ve got low rates, and the rates are starting to rise a little bit.
It would seem to most people, I think, that they would say, “Hey, I’m going to sit on the sidelines because home prices are just getting out of control, and I’d rather buy later when I think there’s going to be a correction.” If there’s going to be a correction. There are a lot of theories that this is not a bubble like in 2008, that it’s very different, that it might be sustained. “So, I’ll buy later when home prices have gone down and maybe rates have risen a little bit, but at least I’ll get a cheaper home.”
That’s absolutely the wrong approach to go with if you can afford to buy the home now. There is a lot of information that’s out there. There are a lot of different websites, calculators. Homespire has access to some of this information to be able to show you the value of buying now when the home price is higher and rates are lower versus the opposite when the home prices maybe come down a little bit and rates have risen.
You’re actually going to end up paying more – and substantially more – if you’re waiting and buying when rates have gone up. So, the time – as challenging as it may be – is now to act, if you can.
Autumn: You said that now is the time to buy. So, what if a potential buyer is not quite a believer yet? How do they get those hard numbers to show them the benefits of buying now versus later?
Todd: The first thing I would do is I would contact your lender. Reach out to them. The Loan Officer at the lender can run all these different numbers and scenarios for you. They can work up and deliver to you an estimated fee worksheet. And that will have the breakdown of all the closing costs, loan terms, loan amounts, based off of different purchase prices. And they can run those scenarios on current interest rates, and they can run them on forecasted interest rates that you two can talk about together and determine, hey, if rates are 3.25 now and we’re thinking maybe in a year when we’re looking to buy, maybe they’re at 4% or 4.25. Nobody knows, but maybe that’s what we’re just going to use as a barometer to determine this. They can run all those different scenarios for you and deliver a couple different worksheets. And they can go over that with you, line by line, and you can compare apples to apples, and see the difference in the payment. When you do that, you’re going to see that buying now at a higher purchase price/lower interest rate is going to be more cost advantageous to you than if you wait and do it later.
To find a Homespire Mortgage Loan Officer in your area, visit https://www.homespiremortgage.com/loan-officer-search/ and get your personalized worksheet today.