Why You Should Buy A Home Before Mortgage Rates Drop

Expect Lower Mortgage Interest Rates for 2024. Yet Buying a Home While Mortgage Rates are Higher Can Actually SAVE YOU MONEY vs. Waiting for Rates to Drop. #NewYear #Newopportunities #2024housingmarket #buynowrefinancelater

In the fall of 2023, the US housing market experienced the highest mortgage interest rates of the past 23 years. Many would-be homebuyers waited out the market from the sidelines. Rates were on the decline by year-end, yet the average 30-year fixed rate still remained in the low 7% range. Leading economists and policy makers anticipate further decline in mortgage rates by early-mid 2024, likely reigniting the housing market.

As counter intuitive as it sounds, here are 3 COMPELLING REASONS prospective home buyers should actually buy a home while the rates are still higher.

#1 - Less buyer competition now

As potential home buyers hold out for rate cuts, there's less buyer competition. Buyers taking advantage of the cooler housing market of 2023 were able to negotiate with sellers on terms, repairs, and in many cases price. Some homes actually sold at (or below) original list price. With less competition, recent buyers also benefitted from lower up front, out of pocket costs of earnest money deposits and due diligence fees. As more buyers enter the pool, the competition will return, resulting in multiple offers on more homes. Buyers will likely need to resort to paying above list price, above market value, to win a home during bidding wars. Sellers will once again be reluctant to complete repairs or make other concessions. And of course greater demand will once again drive up home prices. Buying while there's less competition, will result in thousands in buyer savings on the front end of the purchase. Savvy buyers who act now to buy a home at current mortgage rates can refinance later once the rates decline.

#2 - Buy now, refinance later

Talk to a mortgage lender. You might be pleasantly surprised how much home you can afford, despite higher interest rates. As lenders are processing fewer applications, they have more time (and motivation) to help you explore creative solutions to make your monthly mortgage payment more affordable. In addition to rate buydown options, most loan products allow the seller to contribute toward some of the buyer's closing costs. Some lenders even participate in down payment assistance programs for eligible applicants. Ask questions and allow your lender to evaluate your credit, income, assets and liabilities, then advise you on how much monthly housing expense you can afford. Set realistic expectations. Then consult with your trusted REALTOR®, as your buyer's agent, to begin formulating offer strategies to make home ownership a reality, sooner than later. Get off the sidelines and into the game, at the best rate you can earn now, before home prices rise again. Then once rates comes down, either refinance, or sell and trade-up to your dream home, as your borrowing power improves.

"Mortgage rates look to head towards 7% in a few months and into the 6% range by the spring of 2024." – Lawrence Yun, Chief Economist, National Association of REALTORS®

#3 - Prices will be on the rise again

No doubt, as interest rates come down, more buyers will enter the market. Resulting in more buyers than available homes for sale. Many current homeowners are choosing to remain in their homes for longer periods of time, updating or renovating the house they have. This means fewer resale homes being listed. As demand and pressure on a short supply of inventory goes up, so will home prices. Lower interest rates and greater demand will also trigger more new construction starts. As builders compete for skilled labor and materials, labor and material costs will rise, resulting in higher prices for new construction home builds.

There will never be a better time to buy a home.

The unprecedented double-digit, year over year, US home value appreciation in recent years has ended. For now. And while home prices and other consumer goods remain higher than pre-pandemic levels, rampant inflation appears to have cooled. Lower mortgage rates are expected to follow. Seize the opportunity to buy now while home prices are stable and there's less competition.

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About the Author: Troy Grimes is an actively licensed NC real estate broker and the principal Member-Manager, and Broker-in-Charge, of Troy Grimes Realty LLC. His firm specializes in general brokerage home sales in the greater Raleigh, NC region and surrounding areas. An alumnus of East Carolina University, with a background in luxury retail sales, Troy's recent blogs offer expert editorials on the housing market, consumer behaviors, and related anecdotes. You may connect with Troy and follow him on social media including LinkedIn, Facebook & Instagram @TroyGrimesRealtor, or email him at HOMES@TROYGRIMES.COM

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