The Waiting…
This week’s “Rock” pick, as it relates to current-day economics, is the 1981 Tom Petty hit “The Waiting”. This is for all those folks who have been “waiting” for rates to go down before they buy their next house. Well, let’s see what has happened in the past year. We have seen rates go from 6.75% at this time last year to now 7.34%. We have seen home prices rise, on average, by 7% since this time last year. So, if you were looking to buy a home at $500,000 last year, the same house is now worth, possibly, more than $535,000. If you were putting down 5% last year and borrowing $475,000, you are now borrowing $508,250 with the same 5% down payment. Given the move to higher rates, from 6.75% to currently 7.34%, you would be looking at over a $400 monthly increase in payment for the same house you could have bought for $35K cheaper and a $400 monthly lower payment.
I have repeatedly said this in the Weekend Update: “Date the rate…marry the house.” From the example above, you would have saved money monthly and would have $35K in additional equity in less than 12 months. Not too bad of an investment! While I do believe that our folks at the Federal Reserve will begin to move rates down sooner rather than later due to overall slowing economic data, this will give you an opportunity to refinance somewhere down the road. However, falling rates will not cure the continued rise in housing prices as we are still seeing a housing inventory shortage, at least for the foreseeable future. As rates fall, more people will enter an already competitive housing market, which will likely continue to push prices higher.
Those waiting for rates to fall over the past year so you can refinance your over 20% interest rate credit cards and other consumer debt while not giving up your current 3% mortgage rate have also probably paid too much interest over the past year. Call your mortgage banker to run numbers on a cash-out refinance to pay off some or all your non-mortgage debt. You may save money monthly even without your 3% mortgage rate, but you will also not have credit card and other consumer debt at rates above 20%. This is not the answer for everyone, but there is a sizeable group out there that may help with monthly cash flow. The key is to pay it off and not run those debts back up. Studies show that the average US credit card debt is currently at record levels. It is worth a phone call to find out if you can save some $$$.
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, May 30, 2024
