As we quickly approach spring, the real estate market is experiencing a diverse mix of activity. Believe it or not, we’ve already seen some multiple-offer scenarios; while many buyers and sellers are coming to terms with the current interest rates, some are also hesitant to make a move. We’ve heard, “I think I’m going to wait” from both sides of the table. Sure, it sounds like a good idea to hold off for rates or prices to come down, but you may end up putting yourself in an even worse situation.
“Don’t time the market.” This is a common refrain from real estate professionals, and for the most part, this is extremely sound advice. Let’s look at a quick example. Say you’re going to buy a $500,000 home right now, putting 10% down at a 7% interest rate. Your monthly payment would come out to roughly $3,464. If you’re waiting to make a move, you’re banking on rates to come down, and/or prices. From 2012-2021, the average annual appreciation in Colorado has been 9.85% - let’s round this up to 10% for our example. So, if you wait a year, that $500,000 home would now be $550,000, and if rates remain around 7%, your monthly payment would now be $3,782. Even if rates came down to 6% in a year, if that home is now priced at $550,000, your monthly payment would be $3,457, which is almost exactly what you’d pay if you bought now at $500,000 and 7%. Of course, nobody can predict how much prices or rates will rise or fall. And even though the current rates may be a tough pill to swallow, when you consider the historical appreciation we mentioned above, odds are that waiting will cost you more in the long run.
We can be relatively confident that prices will continue to trend in an upward direction, but with interest rates, we have no clue. If they do happen to decrease, one smart option is to refinance, but that can also be a costly endeavor. Fortunately, our partners at 8z Mortgage have an amazing new solution for this - our Refinance Rewards Program.
With 8z’s Refinance Rewards Program, if you buy now and rates drop at all within the next three years, 8z Mortgage will cover all lender and appraisal fees. You can rest easy knowing you have the ability to take advantage of lower rates in the future. Again, rates could go up; lock in a great home at a better price now, and if rates do drop, we’ve got you covered! We’re thrilled to offer this solution to our clients. Please give me a call or shoot me an email if you have any questions!