Higher Interest Rates Offer Opportunities for Home Buyers

Yes, you read the tile correctly. It’s not a typo. Most often, buyers consider higher interest rates a big negative in the home buying process. Many simply walk away from the market, waiting for interest rates to drop. Have you ever stopped to think that this is actually a really good thing for the buyers who remain in the market?

Cash buyers are usually well aware of the advantage that higher mortgage interest rates bring. It’s a time when homes may sit on the market a little longer and prices may adjust. It’s a time when multiple offers and bidding wars still exist, but they are rare. It’s a market where a buyer who wants to keep some common sense contingencies in place for inspections and investigation, can usually do so. In some rare cases, a buyer may even get their offer accepted with a contingency for selling another home first. Best of all, there may be times when inventory of homes for sale is up, providing a better selection of homes to choose from. 

While it’s obvious that the cash buyer has an advantage, without the negative of a larger monthly home payment, all of the other advantages should be considered by the buyer who will be getting a loan, as well. Yes, the monthly payment will be higher with the higher interest rate. But let’s look at the advantages highlighted above, from the perspective of when interest rates drop. Homes often sell quickly, for higher prices and with multiple bidders. It may be challenging to be the successful bidder on the home that you want…and you may have to pay significantly more, to get it. If you end up needing to pay more for a home, your property taxes will also be higher, for the duration of the time that you own the home. If you’re bidding in a strong seller’s market, it may be challenging to get your offer accepted with contingencies that protect you and make the process easier and less stressful. If values go up and inventory of homes for sale goes down, you may not be able to find the type of home you really want, in your preferred location. 

Please don’t misunderstand. There are times when financing a home results in a payment that is simply too high for the borrower, even if a lender is willing to make the loan. That’s not what this is about. For the buyer who can safely afford the payment, but who wishes that rates were lower, it’s important to look at the flip side of opportunity. Waiting to buy also comes at a cost. It includes high rent payments that are forever gone, not having the tax benefits that come with homeownership, and in some cases it turns into a missed opportunity to buy now and build equity. Be sure to do the math to compare the cost difference between the higher interest rate and a possibly higher purchase price in a year or two. If you’re not sure where to start, reach out to your preferred lender or REALTOR® to run the numbers for you. You may be surprised by the cost of waiting. If you buy and interest rates drop significantly in the future, you might choose to refinance and take advantage of lower rates, while enjoying the benefits of having bought when the rates were higher. 

Every home sale or purchase is unique. Please feel free to reach out to me at 925-964-5010 or via email at Lisa.Hopkins@Compass.com with questions or for a custom analysis and consultation. Even if you’re not planning to move, I’m happy to help by providing you with relevant data, enabling you to make a well informed decision. It’s never too early to start planning for success!