When interest rates rise, many prospective homebuyers hit the brakes, questioning whether now is the right time to purchase a home. At first glance, this hesitation makes sense, especially for those sitting comfortably with low, fixed mortgage rates in their current homes. But what if you’re renting or need to move? Let’s unpack why buying a home during high-interest rate periods could be the smartest financial decision you make.
The Current Market Reality: A Tale of Two Strategies
From the peak of home sales in Salt Lake County a few years ago, we’ve seen a significant slowdown. Today, only about 50% of the homes sold during the market’s peak are changing hands. Why? The assumption is simple: Interest rates are high, so now isn’t the time to buy.
For those content in their current homes with low mortgage rates—think high twos or low threes—staying put may be the right call. But if you’re in a position where you need to buy, waiting for rates to drop might not be the best strategy. Instead, buying now and refinancing later when rates fall could work in your favor.
Why Buy Now? The Case for Acting in a High-Rate Market
Here’s the reasoning:
- Interest Rates Are Expected to Decline
Predictions from experts like Fannie Mae suggest that interest rates will average 5.7% in 2025. Currently, rates have peaked around 7.5%. This means you could buy now and refinance later, potentially securing a lower monthly payment without missing out on today’s market opportunities. - Leverage a Buyer’s Market
With higher rates, inventory has risen, and sellers are more flexible. In Salt Lake County, the list-to-sale price ratio is 96%, meaning sellers are accepting offers about 4% below their asking price. With median home prices in the $600,000 range, this translates to a $25,000 savings on average. - Avoid Price Surges in a Hot Market
When rates drop and demand spikes, the list-to-sale price ratio often jumps to 100% or higher. We’ve seen ratios hit 101%, 102%, or even 103% in competitive markets, representing a $50,000 price swing. Buying now allows you to sidestep this future premium. - Calculate the Cost of Waiting
Let’s say buying now results in a higher monthly payment—$800 more, for example. Over a year, that’s an extra $10,000 in payments. But if you’re saving $25,000 or more on the purchase price, the net financial benefit is clear.
Timing Is Everything: Why Winter Might Be Your Window
The best opportunities often arise when others hesitate. December 2024 and January 2025 could offer a prime buying window. Historically, these months see lower competition as buyers pause for the holidays. Following Warren Buffett’s advice to “be greedy when others are fearful” might position you for long-term success.
Making the Right Decision
The key to navigating this market is education. It’s essential to understand the dynamics of timing, pricing, and refinancing opportunities. By considering both the short-term costs and long-term benefits, you can make an informed choice that aligns with your goals.
Final Thoughts: Your Move Matters
If you’re ready to explore buying a home, start by crunching the numbers. A well-planned strategy can help you take advantage of the current market conditions and set you up for success when rates eventually decline. Connect with a trusted advisor who can guide you through this process and ensure you’re making the smartest financial move for your situation.
Remember, the best opportunities often come when others are hesitating. Now might just be your moment.