Powering through misconceptions about interest rates and the right time to move
“We’re waiting until interest rates go down”. I’ve heard this quite a few times this year, however going over the market data we can see why this strategy may work against you.
Here’s why sitting on the sidelines waiting for the perfect moment may cost you thousands of dollars.
- PRICES: We are in a record low of homes on the market, elevating the price of homes, and buyers have less choice than ever. Pricing is strong and any talk of foreclosures or home prices dropping does not apply here in Northeast Florida.
- BUYING: When the interest rate drops the feeding frenzy will start. An avalanche of pent-up demand will spur multiple offer situations, forcing home prices to go higher.
- Do you want to pay more for your next home, or would you buy now and refinance in 2 years? Could that strategy actually save you money in the long term?
- According to national statistics, 60% of all mortgages are below 4%. This “lock in effect” has buyers waiting on the sidelines, and as pent-up demand builds, some forecasters say 2024 and 2025 will be the biggest years in real estate yet.
- Buying a payment: While monthly payments going from 4-7% may be impossible to do for many, a $700 jump for example, if the rates get to 5% and the average monthly payment goes up by $105 (not including PITI), we will see people act.
- SELLING: In today’s market homes may also sell for more as there aren’t options out there for buyers that need to buy. Homes for sale now will reap those benefits.
- THE BIG WINNER: With less homes on the market, builders are reaping the benefits as buyers lean into new construction, priced at the same, or in some cases even lower than resale homes. As more resale homes come on the market, this advantage will revert back to what we normally see.
Ask yourself these questions:
- What does the rate have to get to match your desire to move?
- Would you rather pay more for a home later or less now and refi later?
- Could a higher rate now actually be the same payment as if you waited and paid a higher sale price?
- Would you rather buy in a calmer market or a frenzied market?
The future
Analysis are projecting that 2024 and 2025 will be some of the biggest years of real estate transactions we have seen in the United States. Due to pent up demand, a tremendous amount of transactions will take place in 2024. Some are even saying we will see 500,000 more transactions than in 2023, and this will continue to increase by the same amount in 2025.
If this comes to pass, how do you feel about buying or selling in that environment? Some food for thought as we navigate the real estate waters. I hope this provides insight to enable you to comfortably act at the right time for you.
