Tips For Buying a Home While Rates are Rising, Pt. 2

Is house price or interest rate more important?

In an ideal world, you would wait to buy until both interest rates and home prices are low. However, sometimes you need to move now, regardless of the state of the market. In that case, your home buying decisions will be governed more by interest rates, which are relatively fixed. Home prices, in some cases, can be negotiated and you can always choose a less expensive house.

If interest rates fall in the future, you can always refinance your mortgage. Until then, you want to set yourself up to afford the home you buy now.

Is now a good time to buy a home?

While mortgage interest rates are higher than they were a few years ago, they are still historically very low. Between 1971 and 2020, the average rate on a 30-year-mortgage was close to 8%. It may seem counterintuitive, but higher interest rates in general are associated with periods of economic growth, lower unemployment, and wage growth. So, it may cost you a bit more to buy a home now than it would have in 2021, but it’s still a good time to buy.

Is it better to buy a home when interest rates are high?

As a silver lining, the increase in rates will likely cause a drop in home costs as the market cools off. The housing market has been incredibly competitive for the past few years due to low inventory and other factors, so rising rates could actually be a boon for homebuyers who have wanted to avoid overpaying for a house. The current market environment should eventually make it easier for first-time buyers who couldn’t afford peak home prices.