I think it is important to start with the conclusion of this post: A good real estate agent is not trying to get you to list your home or buy a home; a good real estate agent is trying to get you where you want to be on your terms and will always keep your best interest at the forefront of every recommendation and decision. When is the best time to buy? The answer is: the best time to buy is when you can afford to buy. This means the current cost of owning a home should not break the bank and leave you house-poor. Rates are not guaranteed to go down, go up, or stay the same, however, you can always refinance to a lower rate if rates do drop. The only thing that is guaranteed is that if you continue to rent you will be building someone else's wealth and not your own.
I cannot tell you how many times I have heard a prospective buyer say: Interest rates are too high, homes are too expensive, and I am waiting for the market to crash. I've got some bad news! No expert (that I am aware of) in the real estate, lending, or economics industries believes that the real estate market is going to crash. To name a few points why the market is not expected to crash: there is now stricter government regulation, people have significant equity in their homes, many people already have low interest rates, and there is low supply and high demand (at least in the Greater Atlanta area). Let's say the market does crash though, would you be unaffected and be able to afford a home? Remember, the entire economy collapsed last time the housing market crashed.
The phrase "date the rate and marry the home" is a real estate analogy that encourages homebuyers to focus on the home itself, rather than the interest rate of the mortgage. The idea is that the interest rate is a temporary factor, while the home is a long-term investment. Interest rates can fluctuate over time, so it's important to remember that the rate you lock in today may not be the same rate you'll be paying in 5, 10, or 15 years. If you want more good news, the home you buy today is likely to appreciate in value over time (~4% per year on average), so even if you pay a higher interest rate, you'll still be getting a good deal in the long run. Waiting for more "favorable" interest rates can actually cost you more over the purchase of the home. The table below shows this concept - everything from the property value to the loan amount, down payment amount, etc. increases even though the rate is lower with each consecutive year.
You have to ask yourself if you want to keep building someone else's wealth or start building your own. The average rent in the past 150 days (as of the writing of this post) in the Greater Atlanta Metro area is $3,076.12 per month. If you're part of the average, you will have paid $36,913.44 per year towards someone else's mortgage. Let that sink in!
As a buyer, it is still important to get the best interest rate on a mortgage, however, the interest rate should not be the only factor you consider when choosing a home. Focus on finding a home that you love and that meets your needs, and don't worry too much about the interest rate because you can refinance to a lower rate if rates drop and it makes financial sense to do so.
Mortgage rates are still below the historical average rate of 7.75% in the United States (this data is from Freddie Mac, which has been tracking mortgage rates since 1971) and are currently hovering in the low- to mid-6s (as of the writing of this post). True, it is not the historical lowest average of 2.65%, but those days are long gone and we should all be thankful it is nowhere near the historical high average of 18.63%! Every lender I have spoken to said they would be shocked if rates dip below 5% again in our lifetime because of the unique set of circumstances we experienced from 2020 to 2022 (thanks to the pandemic, among other things).
People have gotten so used to seeing rates in the 2-4% range that it shifted their mindset to believe that is the norm when, in reality, it was extremely abnormal! As we see the market shifting back a state of normalcy, rates in the 6s and 7s are to be expected and we need to realign our expectations with reality. The past is over and buyers need to look forward, not backwards, if they want to invest in the biggest purchase of their lives.
I am going to close with the same paragraph. A good real estate agent is not trying to get you to list your home or buy a home; a good real estate agent is trying to get you where you want to be on your terms and always keeps your best interest at the forefront of every recommendation and decision. When is the best time to buy? The answer is: the best time to buy is when you can afford to buy. This means the current cost of owning a home should not break the bank and leave you house-poor. Rates are not guaranteed to go down, go up, or stay the same, however, you can always refinance to a lower rate if rates do drop. The only thing that is guaranteed is that if you continue to rent you will be building someone else's wealth and not your own.
Digest all of this for a minute and then give me a call! Let's start you on the journey to buying your own home and building your own wealth. I encourage you to scroll back up and look at the conclusion at the start of this post after checking out the tips below.
BONUS TIPS for homebuyers:
Get pre-approved for a mortgage before you start shopping for homes. This will give you an idea of how much home you can afford and will make the home buying process go more smoothly.
Do your research. Learn about the different types of mortgages available and shop around for the best interest rate.
The asking price is just a starting point. Your real estate agent (aka me!) may be able to get a lower price if you're willing to negotiate.
Be prepared to walk away. If you're not happy with the terms of the deal, don't be afraid to walk away. The right home is out there.
Buying a home is a big decision, but it doesn't have to be overwhelming. Make sure you find a qualified expert real estate agent.
Graham Witt
Director of Sales and Real Estate Consultant
with Keller Williams Atlanta Partners
c: 847-507-7126
o: 678-341-2900