Should I buy a home now or wait for rates to drop?
I'll share some perspective on our local real estate market. $400,000 house with 10% down = $40,000 initial investment $400k house appreciates at a super conservative 3% per year over 5 years (15%) The home value has now gone up in value $60,000 which equals a 150% return on investment!!! Not to mention some of the money you are paying towards the mortgage will be applied to the principal balance of the mortgage! There are tax advantages to owning a home as well. Where else can you get 150% ROI?? Homeownership is the best investment out there.
FYI appreciation over the last 3 years works out to @4-5% per year! Yes interest rates aren’t awesome right now. Yet that allows for massive opportunities for buyers right now. You get one chance at sales price, the rate is just temporary, and can be refinanced at a lower rate later. The opportunity cost/loss of waiting far exceeds the difference in rates.
For those of you sitting on a lot of equity in your current homes, take that money out and make the move to a bigger home that you need now rather than wait. Everything I'm hearing is rates will come down, likely middle next year. When that happens, home values and demand will increase.
Maybe it’s not the right time for you but maybe it is. The 2/1 buy-down strategy is still available and we’re seeing more now. That will go away as rates come down.
So go ahead and buy your bigger or more expensive home now, or get in the game and become a homeowner instead of renting! Move into that neighborhood you always wanted to get into. Don't be like most uninformed buyers/homeowners and wait until the next boom. Just trust the math.
A mentor of mine taught me the value of your primary/secondary real estate should equal to 3x-5x your annual household income. So if you are ever going to push yourself on something, push your real estate. So the answer to the question "should I buy a home now, or wait for rates to drop?" is a resounding yes.
PS. When the rates come down, there will be two frenzies. One will be a group of people fighting to get into a home, (lower inventory, multiple offers, paying over the asking price, NO seller concessions, waiving inspections and appraisals) and the other group will be waiting in line to refinance, with the equity they have built up while waiting for the drop.
I personally would not want to be in the group looking for a home when rates come down.