Should I buy a house now, or wait until interest rates drop?

I was sitting with friends at lunch recently and this topic came up YET again.  One of my friends was considering buying a home but wasn’t sure if now is a good time.  “Shouldn’t we wait until interest rates go down, she said?”  Well, while that seems like a smart move, it doesn’t make a lot of sense to make such a huge decision based solely on where interest rates are currently. 

Yes, interest rates are still high. They have come down a bit from their peak in October of 2022, but let’s face it, they’re still double what they were in early 2022 before they started their rapid climb.  To help clarify why this shouldn’t be the only factor in deciding to buy or not to buy right now, just consider what most other buyers are also thinking.  What could that possibly be?  Hmmm….could it be they are waiting for interest rates to drop too?  Indeed they are. If you consider supply and demand and basic economics, if you suddenly have more buyers in the real estate marketplace looking for a home, you now have increased competition for the homes you’re looking at.

What does more competition for a product typically mean….If you guessed higher prices, ding, ding, ding, you’re right!  So, if you think by waiting for interest rates to drop you will actually be able to save on your mortgage payment, that may not actually be the case.  With increased competition you may end up paying more for the home you want, so there is really no solid guarantee that you WILL save money on your mortgage payment if you wait until rates go down.  The only true guarantee is the actual payment you WILL have, and that can only be determined by selecting the house you want to buy at today’s prices with today’s interest rates.

No one can predict exactly where we are headed with regard to interest rates or home prices. Either one could go up or down.  If you can afford to purchase a home now, don’t wait.  Should rates actually go down substantially down the road, you will already have secured your home and you can refinance then.  Happy house hunting!