Should you buy a house now or wait for rates to drop? (Podcast)

“The best time to buy a house”

Mortgage rates have risen steeply from last year’s lows. But should that be enough to push you out of the market? Mortgage expert Ivan Simental says that’s a definitive “no” — at least if buying now is within your means.

“Right now is the best time to buy a house, in my opinion, because you’re not competing with all the other people that you were competing against the last two years,” Simental said recently on an episode of The Mortgage Reports Podcast. “If you are in a place where you can afford the mortgage payment and it’s not going to make you ‘house poor,’ then 100%, buy a house.”

Keep in mind that if rates drop next year, you can always refinance. But if they keep rising, you’ll be glad you locked in sooner rather than later.

Listen to Ivan on The Mortgage Reports Podcast!

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It’s the time of the season (to buy a home)

There are several reasons Simental believes it’s a great time to buy a house — even with today’s higher interest rates. The biggest reason, Simental said, is the recent shift from a sellers’ market to a buyers’ one.

“The last two years were 100% a sellers’ market,” he said. “But things have officially changed. We are now in a buyer’s market. It’s the complete opposite.”

On top of that, fall and winter normally present better opportunities for home shoppers. Even in a normal market, listing prices tend to drop late in the year and sellers become more motivated as their homes sit on the market longer.

“Rates rates are higher, but keep in mind that what goes up is going to come down — except the value of your property. It might correct itself a little bit, but in the long run, it’s going to continue to rise.”

More inventory and concessions

Another big advantage of today’s market is that inventory is rising. As Simental explained on the podcast, “There are [more] homes for sale and not enough buyers for those homes. In its simplest terms, that is what a buyer’s market means.”

This extra supply — coupled with waning demand — is giving buyers more power. It’s also forcing sellers to reduce their listing prices and be more willing to negotiate. “We’re seeing sellers coming down on their sales price,” Simental said. “We’re seeing them give concessions, too.”

Those concessions can offer important perks for buyers. They can help cover closing costs or even reduce your interest rate — a huge benefit in today’s higher-rate market. “One of my recent borrowers was able to get a house for $5,000 under the list price,” Simental said. “Plus, on top of that, they were able to get a $10,000 seller credit.”

More time and leverage

Thanks to less competition, homes aren’t selling at lightning speed these days, as they were just a few months ago. Now, buyers have the luxury of time. They can more carefully consider their decision and make sure they’re finding a home that’s right for their needs and budget.

“Houses are sitting on the market a little bit longer — some of them 30, 45, 60, or 90 days even,” Simental said. “They’re not being sold in one to two hours anymore.”

Since homes aren’t flying off the shelves as quickly, buyers have more leverage. They can haggle on price, include contingencies, and ask for repairs. Depending on the market, they may be able to ask for other extras, too.

“You can negotiate the price of the house,” Simental said. “You can negotiate closing costs, concessions, and repairs. I’m seeing all of this right now in this current market. You can even say ‘Hey, let me keep the furniture.’”

One tip for first-time home buyers

If you do opt to buy now and take advantage of the easier market, Simental recommends reducing your out-of-pocket cost as much as possible. That way, if rates drop in 2023 and you decide to refinance, you won’t have to worry about losing any “extra” money you spent upfront.

“Once interest rates drop in the next 12 to 24 months, which we all think they will, you’re going to want to refinance to that … lower rate,” he said. “And if you’re paying thousands and thousands of dollars in discount points, you’re going to lose all that money, because now you’re going to refinance and be charged again.”

Low- and no-down-payment loans can help reduce your out-of-pocket costs, as can asking for concessions from the seller. You can also work to improve your credit score to reduce the rate you’re quoted.

Should I buy a house now?

Buying a house right now might seem scary with mortgage rates so high. But according to Simental, if you can make it work financially, there are some serious advantages to purchasing in today’s market.

“Rates rates are higher, but keep in mind that what goes up is going to come down — except the value of your property,” Simental said. “It might correct itself a little bit, but in the long run, it’s going to continue to rise. You’re also going to build equity, get tax write-offs, and enjoy other incentives.”