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You want to buy a house. But mortgage rates are twice what they were less than four years ago. Should you wait? You could, but experts don’t see much relief on the horizon. The average 30-year fixed mortgage rate is 6.81%, and economists at the Mortgage Bankers Association don’t see that dropping below 6.4% through at least 2027. Property values also continue to go up after skyrocketing 43% during the first two years of the pandemic. This is great once you own, but not so great when you’re looking to buy. Looking at mortgage rates over time does give some helpful perspective, though. Those pandemic-era deals below 3% were an aberration. Before the Great Recession, rates had never dipped below 5%. And double-digit interest rates were the norm in the 80s. Of course, home prices relative to income are much higher now compared to the last few decades. The median sale price on a single-family house in the U.S. has risen well over $100,000 just since the pandemic in 2020. And steep prices are a lot tougher to stomach when your borrowing costs are higher, too. Of course, home prices relative to income are much higher now compared to the last few decades. The median sale price on a single-family house in the U.S. has risen well over $100,000 just since the pandemic in 2020. And steep prices are a lot tougher to stomach when your borrowing costs are higher, too. In fact, buyers of a typically priced home today are signing up for a monthly housing payment of $2,860, according to data from the real estate broker Redfin. That’s roughly $1,200 higher than when rates started rising at the start of 2022. So what? If you’re looking to buy a house sooner rather than later, you might need to adjust your approach and expectations. Higher mortgage rates could be the new normal and real estate prices, while not climbing as fast as before, are still climbing. A few strategies to help you adapt:• Buy now, refinance later. If you can afford to buy at today’s mortgage rates, you can aim to refinance your loan at a lower rate in the future to lower your payments. Just be prepared if rates don’t drop, since there’s no guarantee.
• Apply for an “ARM” loan rather than a fixed-rate loan. Rates on adjustable-rate mortgages (ARMs) may be lower than those on fixed-rate mortgages, at least for the first three to 10 years. That can make it a more budget-friendly option, especially if you’re not planning to live in the home forever. Just know that if rates rise after that initial period ends, your costs will go up.
• Try lowballing or asking the seller for concessions. Even though prices are high, sellers don’t have the same upper hand they once did. List prices are rising more than twice as fast as sale prices , according to Redfin, showing buyers have increasing leverage. (For more on this and other strategies, read 5 Things to Do If You Don’t Want to Wait to Buy a House.)
Related Reading
• 5 Things to Do If You Don’t Want to Wait to Buy a House (SoFi)
• Is It Finally a Buyer's Housing Market? What to Know About Home Prices, Rate ‘Lock-In' (USA TODAY)
• Buying a Home Now Requires $50K More Income Than Renting (Axios)
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