The Federal Reserve’s recent decision to lower the Federal Funds rate by .50% signaling a shift in easing monetary policy has pundits speculating lower home mortgage rates are on the horizon. Spoiler alert, lower home mortgage rates have declined sharply since July 2024, but before the Fed decision on September 18th. Regardless, many would-be home buyers and home sellers are again paying attention for the right time to jump back into the real estate market. If you are waiting for the rates to drop to around the 3% range before jumping into the real estate market, consider these four points that also come with ultra-low or some would say artificial interest rates:
Bidding Wars
In the simplest of economic concepts, supply and demand drive prices. When there is more demand than supply, prices increase. If we look back to 2021 – 2022 bidding wars were the norm, especially in the first-time home buyer market. Couple that with a housing shortage and you will be paying way more in price than what it would cost in interest savings.
Financing Vs Cash
Cash is king in any market, yet over 60% of home buyers either by necessity or by choice still need to finance a portion of their home purchase. In super-heated markets buyers with limited or low-down payments will have a difficult if not impossible time getting their offers accepted when competing offers are for cash or very large down payments.
Contingencies
Would you like to have time to inspect your home or be able to buy your new home subject to the sale of your current home? Home inspections in our opinion are a must. You want to know what you are buying and more importantly have an idea what to plan for financially for future repairs, maintenance, and replacements like the roof, water heater, AC, etc. During the bidding wars, buyers that were willing to waive their inspection contingency or significantly shorten the inspection time often won the bid compared to those who needed time to do their due diligence. If you had a home to sell and you wanted your home purchase to be contingent on the sale of your current home…good luck. You either get passed over or must decide to remove the sale contingency and risk your deposit if you cannot perform on the purchase contract.
Seller Concessions
One of the bright spots for home buyers in the last couple of years was seller’s willing to provide some assistance for the buyers closing costs or rate buy downs. Why? To sell there home and move on. If rates come back to the 3’s and the buying frenzy is on, say goodbye to seller assistance for the buyer. There are homeowners today because they got assistance from the seller. If you require such assistance, this point alone can make the difference between being a renter or a homeowner.
The above four factors alone will at a minimum cost you thousands more than having and obtaining the unicorn interest rate. If you are looking to buy or even sell and buy again, beat the crowds and do it today! Don’t know where to start? Contact us for a free private consultation and we will build a customized plan for you.