Interest rates are understandably getting a lot of attention from homebuyers right now.
For many buyers, the thinking goes something like this: I’ll wait until rates come down, and then I’ll buy. That may turn out to be the right decision for some people. But there’s an important piece that’s easy to overlook:
The interest rate is only one part of the transaction.
A home’s purchase price, monthly payment, down payment, closing costs, condition, seller concessions and the amount of competition for the property can all affect whether a particular purchase makes sense.
And sometimes a market that feels less comfortable for buyers can create opportunities that aren’t as readily available when everyone else is eager to buy.
A Lower Rate Doesn’t Automatically Mean a Better Deal
Suppose a buyer finds a home today that works well for them.
The seller may be willing to negotiate on price. They might consider contributing toward the buyer’s closing costs or an interest-rate buydown. There may also be less competition for the home than there would be in a more active market.
Now suppose that buyer decides to wait because they hope mortgage rates will be lower six months from now.
They may be. But what will the house cost then? How many other buyers will be looking? Will sellers still be as willing to negotiate?
We don’t know.
That’s why I don’t think a home-buying decision should be based on trying to predict one number.
Mortgage Rates Don’t Simply Wait for the Fed
It’s also easy to hear that the Federal Reserve may raise or lower interest rates and assume mortgage rates will move by the same amount afterward.
It isn’t quite that simple. Mortgage rates are influenced by the financial markets, which are constantly reacting to expectations about inflation, the economy and what the Federal Reserve may do next. By the time the Fed makes a widely expected decision, some of that expectation may already be reflected in mortgage rates.
And if the Fed—or the economic news surrounding it—turns out to be different from what markets expected, rates can move in ways that surprise people.
That’s another reason I’m cautious about trying to time a home purchase around a particular Fed meeting or prediction.
The better question is what financing, price and terms are actually available to you today.
Look at the Whole Transaction
When I’m helping a buyer evaluate a home, I want to know much more than the advertised interest rate.
What will the buyer’s actual monthly payment be?
How much cash will they need to close?
Is the asking price reasonable based on comparable sales?
How long do they expect to own the home?
Is the seller willing to negotiate?
Could a seller credit be used toward closing costs or an interest-rate buydown?
And ultimately: Does this particular home, in this particular place, with these particular numbers and terms, make sense for you?
Those answers can be very different from one property to another.
The Numbers Matter. So Does Your Life.
There’s another part of the home-buying decision that doesn’t fit neatly into a mortgage calculator.
Where do you want to live and enjoy your life?
Maybe you want a shorter commute, a quieter street, a backyard, room for family to visit, a neighborhood where you can walk in the evening—or simply a garage and a place to park without thinking about it every day.
Those things have value too.
A home is both a major financial decision and the place where a large part of your everyday life happens. The numbers need to make sense. But if you’re comparing buying now with waiting for some future combination of rates and prices, I think it’s also fair to consider what living in the right home would add to your life in the meantime.
Seller Concessions Can Change the Equation
One of the advantages buyers sometimes have in a slower or more balanced market is greater negotiating flexibility.
A seller who isn’t willing to accept a substantially lower purchase price might be willing to provide a credit toward a buyer’s closing costs or an interest-rate buydown.
Which is better? That depends on the buyer.
For someone with plenty of cash but concerned about the monthly payment, using a seller credit toward a rate buydown may be attractive.
For another buyer, preserving cash for moving expenses, repairs or reserves may be much more valuable.
That’s why I prefer to think of seller concessions as dollars that can potentially be structured where they help the buyer most, rather than assuming there’s one solution that’s right for everyone.
The buyer’s lender should be involved in evaluating the financing options and showing exactly what each alternative would mean.
What About Refinancing Later?
You’ve probably heard some version of: “Marry the house and date the rate.”
I wouldn’t make a major financial decision based on the assumption that you’ll simply refinance later.
Rates may come down enough to make refinancing worthwhile—or they may not. Refinancing also has costs, and every homeowner’s situation is different.
If a future refinance becomes advantageous, wonderful.
But I believe the better question is: Does this purchase make sense based on the numbers we know today? If it only works if something favorable happens later, that’s important to recognize before buying.
There Is No Perfect Market
When interest rates are very low, buyers may face more competition and sellers may have less reason to negotiate.
When rates are higher, affordability becomes more challenging—but buyers may encounter sellers who are more flexible.
Neither environment is automatically better.
And that’s really the point.
The best time to buy isn’t necessarily when one particular number reaches a certain level. It’s when the home, the location, the financing, the price and the terms come together in a way that makes sense for you and the life you want to live.
You don’t have to predict the market perfectly. You just need to understand your options well enough to make a decision you can feel comfortable with long after the transaction is over.
Have Questions About Your Next Move?
I’ve been having a lot of these conversations lately. If you’re wondering what today’s market means for your plans, your options, or a move you’re considering, I’d be happy to help.
Janey Bishop
Broker | DRE #01838769
(818) 570-1144
[email protected]
SRES, CPE, CPRES, RCSD
Senior Real Estate Specialist
Certified Probate Expert
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