Whenever a homebuyer is in househunting mode, it's a frenzy of pouring over
Should I wait Until Interest Rates Go Down?
Dated: April 5 2023
By Robert Keilman, Real Estate Agent at Prodigy Realty
Here's the million dollar question - should I wait to buy a home until interest rates go down? It does make sense though - get a mortgage loan only when the market returns to those wonderful days of 2.9% to 3% mortgages. That should happen anytime now; just have to wait for the housing bubble to burst...at least that's what a lot of people think.
If you were to ask a Realtor, Mortgage Lender, or even your friends or family; you're likely to get mixed answers. This is going to be a decision you're going to have to make on your own. So, here are 5 things to consider before buying a home...or waiting:
1. In the Hampton Roads area of Virginia, supply of available homes is still a real problem. Let's face it, nobody in their right mind is going to sell their current home with a 3-4% interest rate, only turn around and get themselves a new mortgage for a 5-7% interest rate. It doesn't make sense unless it's for a definite need. Not only that, the lack of supply has made many homes in desireable location surge to the point of unafforadability of most. So that makes it very difficult to upgrade to a larger home or downgrade to a smaller home. Because that smaller home could be just as expensive as your current home if not more!
2. Interest rates may not return to the 3-4% range anytime soon. Here's a terrible thought...what if home prices continue to rise and interest rates don't return to the 3-4%? That's definitley a probability. Think of the reason why we had lower interest rates to begin with - See Quantitiative Easing. The upside to QE is that it made interest rates lower and lending terms easier, and we've been enjoying those upsides since the Great Recession. of 2007-2008. The downside of it is that it causes inflation and the devaluation of currency. Kind of reason why if you go to a fast food spot and buy a meal; it's like $12 instead of like $6 or $7.
3. Great Migration is Happening in Hampton Roads. Next time you're on interstate, look around and count how many NY license plates you see. And I know what you're thinking - they are probably military. But that's not necessarily the case.
If I had a dollar for everytime I spoke to someone from NY thinking about Hampton Roads or North Carolina as their next home, I wouldn't need to sell real estate. The cost of living has surged since the pandemic; hitting many Americans hard in the wallet. But, to a New Yorker, the cost of living here in Hampton Roads is a blessing compared to what they have to pay for where they live. Think of what a $500,000 house buys them in New York vs one in Hampton Roads.
Not only that, the pandemic has changed working habits for a lot of professions. Now, people are telworking more now than ever before. And in order to retain and attract top talent; companies are having to adjust to new working demands.
4. Rental Prices are Surging Along with Home Values. If you're a landlord right now, you should be laughing all the way to the bank. For those who aren't ready or don't want to buy a home, end up renting one. And there are much more renters than there are home buyers in our market. In a desirable location, it's not uncommon to have multiple rental applications on the same property; with some offering higher rent amounts or longer lease terms to entice a landlord to accept their application.
5. Getting Priced Out of the Market. This is a difficult one here; getting priced out of the market. For example, if you wanted to live in Virginia Beach and needed a 3 bedroom single family home and had a mortgage loan approved up to $200,000; you could have bought one about 10 years ago. Now, you would be lucky to get a 2 bedroom condo or townhome for under $200,000 in Virginia Beach. And the one you do find, is likely going to need repairs and may not qualify for some mortgage types. Now, you can still find such homes in decent condition in Portsmouth, Hampton, Norfolk, and Newport News, but the supplies at this price range are rapidly diminishing.
If you are in the position to buy, then buy. Don't buy the interst rate, buy the house. You can always refinance to a lower interest rate if the rates go down. Lack of supply, migration, high rental rates and strong demand are causing housing to continuously rise in many areas. If you wait too long, you may not only get priced out of the market you desire to be in for buying a home; but also for renting one too!
Buy the house, not the interest rate.
I earned my real estate license in 2018 while still on active duty in the U.S. Navy. What started as a part-time job quickly became my passion, and subsequently became my full-time career in 201....
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