Is It Better to Wait for Mortgage Rates to Decrease Before Buying a Home?

If you're thinking about a move, you might be weighing whether to wait until mortgage rates decrease before selling. Here's some insight that could help with that decision.

In the real estate market, there's a well-established connection between mortgage rates and buyer demand. Generally, when rates are higher, there's a decrease in buyer interest. This occurs because individuals looking to relocate may be reluctant to commit to a higher mortgage rate for their new property. Consequently, they opt to postpone their plans.

However, when rates begin to decrease, the dynamics shift. Demand transitions from being limited or weak to becoming robust or strong. This shift occurs because a significant portion of buyers who remained inactive when rates were higher will re-enter the market and proceed with their plans. The graph provided below offers a visual representation of this correlation and our current position within it.

According to Lisa Sturtevant, Chief Economist at Bright MLS,

"The elevated rates we're currently observing are expected to prompt more potential buyers to refrain from entering the market and await a decline in rates."

Reasons to Consider Not Waiting

If you're wondering about the implications for your relocation, here's the key insight: Experts suggest that mortgage rates are still expected to decrease this year, albeit slightly later than initially anticipated.

As rates decrease, there will be a surge in market activity, with more individuals re-entering the market. Consequently, when you're ready to buy your next home, you may encounter heightened competition from other buyers. Waiting could potentially increase the stress of your move, as heightened demand may result in more instances of multiple offers and accelerated price increases.

However, if you're prepared and capable of selling now, it might be advantageous to take action. You'll have the opportunity to relocate before competition intensifies.

Bottom Line

If you're contemplating whether to wait for rates to drop before making your move, remember to consider the impact on buyer demand. With a decrease in rates, competition is expected to increase further. If you aim to stay ahead of the curve and sell promptly, it's advisable to consult with a real estate agent.