Why It’s Less Expensive to Buy Now, Even With Higher Interest Rates

Emily Terpak November 15, 2022

When interest rates were 3%, buying a house was less expensive than ever. That is until buyers had to go well over asking in order to secure the house against other offers. I saw buyers go as high as 20% over asking! Houses weren’t looking so inexpensive anymore.
At the time of this post, interest rates are at 7%. This means buying a house is more expensive than ever, right? Yes and no. Your mortgage payment is definitely higher than it would have been a year ago. But the increase in interest rates has caused a lot of buyers to pause their search and wait for rates to drop. And because rates have gone up, buyers can’t afford to go over asking. This has created a softening in the market and we’re starting to see prices stay steady (not increasing) or dropping slightly.
The good news, what goes up, almost always goes back down. And this phrase can be applied to interest rates. The interest rate you lock in at is not forever. There is always an option to refinance if they drop. Lenders usually say that if rates drop one percentage point, it’s worth refinancing. Except experts are predicting rates to drop to 4-5%. It might be tempting to wait for those rates to drop but the competition will most certainly heat up and we’ll start to see prices going up. Remember, it’s a lot less expensive to get a house at or slightly below asking and refinance into a lower rate than it is to buy a house at a lower rate and pay well above asking. Not to mention, buyers will often add in appraisal gaps and waive parts of the inspection to win the house. All of this will cost you more $ both in the short term and long term. However, a higher interest rate will just cost you more in the short term.
Moral of the story? Don’t be near-sighted. Look further down the road to see that now is actually the best and least expensive time to buy.

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