Why Waiting for Rates to Drop Could Be a Mistake

A lot of buyers seem to be sitting on the sidelines now, waiting for rates to drop as they are predicted to throughout the rest of the year and into next. Is this a smart move?

Let’s look at how a rate decrease could impact your payment when rising home values are taken into account. 

Take a $1,000,000 purchase with 20% down at a 6.5% interest rate. Let’s call this “today’s scenario”. Your monthly mortgage payment would be $5057 per month.

Now, with the inventory of available homes at around 1-2 months supply locally (which is very, very low), this should yield annual home price appreciation of about 20%.

Now let’s look at “next year’s” scenario. The same $1,000,000 house could now cost $1,200,000. Now let’s assume mortgage rates go down and they land at 5.5%. Your monthly payment goes up to about $5451 per month, and you end up paying $200,000 more for the same house.

So the bottom line is, waiting for rates to drop may not save you money because price increases will negate any savings you may have been expecting.

Fall can be a great time to buy in a less competitive market. Are you thinking of selling but are not sure where you would go? Or trying to figure out how to sell and coordinate a new purchase? Let’s discuss your lifestyle objectives and run some numbers and find out what makes sense for you. Reach out to us at [email protected]!

The Allison Ziefert Real Estate Group is a top-producing real estate team based at Compass in Short Hills, New Jersey. We are local market experts, specializing in real estate and homes in Maplewood, South Orange, Millburn/Short Hills, Montclair/Glen Ridge, West Orange, Morristown, and the surrounding New Jersey towns. We’ve also got you covered coast to coast with the best connections to top agents around the country in any market you are exploring. We are driven by earning great testimonials and referral business from happy clients.