Whether you’re buying or refinancing, you’ve probably been watching interest rates go down (and back up) over the past few months. You may be waiting to buy a home or refinance until rates go back down below the five percent mark. If so, then ask yourself two questions. First, how long have you been waiting for the perfect rate? And second, how much longer are you willing to wait?
A few months ago, rates were in the mid to high 4 range for a 30 year fixed (and the high 3 range for a 15 year loan earlier this year). They’ve since gone up and are seeming to stay in the low 5 percent range. The bottom line is that rates are about as low as they’re going to get. And even right now, the rates are artificially low because the Treasury has been buying their own bonds for about 6 months now. They’re going to stop buying their bonds this month, and rates are expected to continue to climb up again. What does this mean to you as a consumer, whether you’re buying or refinancing? If you’re happy paying 5 percent for a home loan, go ahead and lock in your rate because it will probably get higher in the coming weeks.
While interest rates affect consumers on a national level, a buyer’s individual real estate market can also largely influence your decision. If you’re refinancing, there is no worry about not being able to get the home you like - because you’re already in the home you want (hopefully). However, if you’re in the market to buy a home, the current trends in your real estate market may make the decision for you about when to ratify a contract on that home and lock in your interest rate. In Charleston, SC we’re seeing lots of multiple offer situations again like we saw back in 2005. Although several buyers may want one home, only one buyer/family is going to get it. As demand for Charleston real estate has increased significantly in the past few months, many buyers are now not able to get the home of their first choice and are having to settle for their second or third choice.
In these warmer real estate markets like Charleston, it would be best to go ahead and buy a home. Rates are some of the lowest they’ve been in years because they have been artificially made to be so low. Sure, the rate is not the four and three quarters that it was a few months ago, but there is a good chance that we won’t see that low of a rate again for years. It would be better to go ahead and make an offer and lock in that rate so that you get your first choice home. Of course, you may buy now and see a tenth of a point lower next month, but at least you’ll have the home you want. If you’ve already found that home you want to buy, it would be worse to take the risk and not only lose that home, but also have to pay what could be (and almost inevitably will be) a higher rate in a few months. The takeaway point from this is: don’t be greedy!
If you’re in a cooler real estate market, you may not have to worry about not being able to get the home you want. You may be able to wait a little longer for the chance of a lower interest rate with the only risk being that you may end up with a higher rate in the end. And, it may save you money in the long run to risk getting a higher interest rate because you’ll be able to buy at an even lower price. If you’re in one of these cooler markets, it may be worth taking that risk and hoping for the perfect interest rate and home price.
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