The Waiting
This week’s musical inspiration comes from the 1981 hit “The Waiting” by Tom Petty. The song conveys a theme of waiting and indecision, much like many potential first-time or move-up homebuyers who are hesitant, hoping for interest rates to drop and make their next purchase more affordable. The question remains—should they take the leap now? Unfortunately, I believe waiting could take much longer than expected, and saving money may not be in the cards either. While you have read my articles in the past where I do believe that rates will move lower over the next 6-9 months, I simply do not think that the move to lower mortgage rates will be anything more than maybe .50% to .75% by year-end, which may take mortgage rates near 6% to maybe high 5% range for a 30-year fixed rate mortgage. With that said, a 30-year fixed-rate mortgage payment at 6.75% on a $500K loan amount is about $3,250 per month (P&I only), and a 30-year fixed-rate mortgage payment at 6% would be about $3,000 per month (P&I only). Don’t get me wrong, $250 per month is a nice savings… but a game changer? Probably not. If you consider that the house you are looking at rises in price by just 2%, your savings are probably closer to less than $200 per month. It’s not quite the bonanza you were probably expecting.
Mortgage rates are currently hovering near historical averages, and thoughts of rates returning to under 4% soon are simply “Gone With The Wind” for now. There are many things affecting our economy, and I do believe that the future for our economy looks much brighter as compared to the most recent years, especially regarding home purchases. Could we see rates approach 5% by the end of 2026? I do think that is very possible, and if I am correct, you will simply refinance your above 6% rate to a lower rate while enjoying the buildup of equity from your newly purchased home due to higher buying demand. The other thing is… and if I am wrong about rates, and they do fall closer to 5%… the demand for new homes will rise sharply. Demand will rise, and prices will rise by more than the 2% I was talking about. Think back to before 2023 when prices rose 20% per year, in some cases, due to high demand fueled by mortgage rates below 4%. Be careful of what you wish for. You may get your below 5% rate, but the house you wanted could now be 20% higher.
I hope I am wrong about rates falling .50% to .75% over the next 6-9 months. But I don’t think waiting to purchase a new home is a good idea if you are truly looking for your first home, moving up to your dream home, or even a second/vacation home near the beach or in the mountains. It may very well be a good time to purchase your new home.
Remember… the BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
Thank you for reading this blog. I hope that the facts and insights I share provide value to you.
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Blog post date: Thursday, March 27, 2025
