Mortgages rates are going down! Woohoo! Not so fast my friend…
Yup, according to economists, mortgage rates are “expected to fall to the low-6% range by the end of 2024, dipping into high-5% territory in early 2025.” Great news, right? Well, sure - lower mortgage rates mean lower monthly payments! That sounds like a win! BUT lower mortgage rates also mean more buyers, and more buyers mean more competition, and more competition means higher prices, and higher prices mean…, well, you get the gist. By the end of 2021 and the beginning of 2022, most homes for sale in the Bay Area sold for $100,000 over the list price. In some parts of Contra Costa County, 92% of homes were selling for much higher than the list price. So what was the common thread in 2020 to the beginning of 2022? The lowest mortgage rates in history! The average 30-year fixed rate reached an all-time record low of 2.65% in January 2021(U.S. News and World Report). Sellers were practically licking their lips as buyers lined up to throw money at them. Buyers didn’t blink at spending over a million dollars for homes that one year earlier been estimated to be valued around $700,000, or lower!
So, what’s a buyer to do? Well, a quick home search on www.saoudarikat.com will show you that homes prices have stabilized (relatively speaking) over the past year and a half. Also, homes that were on the market for a matter of hours in 2020/2022 (many sold before market) are now averaging 61 days, from list date to closing (Marketplacehomes.com). What does this mean for potential buyers? It means that sellers are more willing and more likely to negotiate on price, do repairs, offer concessions like a rate buydown, etc. Lower prices! Great! Right?! “Ok”, you think to yourself, “but interest rates are still in the high sixes and low sevens right now”. That’s right- right now. But remember way back at the beginning of this little bit of prose? Mortgage rates are “expected to fall to the low-6% range by the end of 2024, dipping into high-5% territory in early 2025.” So what does that mean to you, if you buy right now? It means that you can buy a potentially much more affordable home right now, and then REFINANCE when rates drop. Now, although it does ultimately depend on your lender’s rules and regulations with respect to your particular loan, “in many cases, there's no waiting period to refinance. Your current lender might ask you to wait six months between loans, but you're free to simply refinance with a different lender instead. However, you must wait six months after your most recent closing (usually 180 days) to refinance if you're taking cash out” (theMortgageReports.com).
Do I have your attention now? Of course, I realize that everyone’s situation is different. You may have to move, or you may have to stay put. Some folks are looking for their first home, some are looking for their forever home. There are people looking for that special home for their family, and there are investors looking to add to their Real Estate portfolio. But the bottom line is it doesn't hurt to ask questions. Maybe do a quick “health check” on your particular situation. That’s what I’m here for! I am happy to meet with you in person, via Zoom, a quick text or email, or a good old fashion phone call. I’m always standing by…