Rates have been on hold in a range of 5.25 to 5.5 percent since July. Policymakers think that borrowing costs are high enough to achieve their goal of curbing economic growth if they are kept at this level over time.
By cooling demand, the Fed is hoping to prod companies to raise prices less quickly. Overall price increases decelerated to 3.4 percent as of September, from more than 7 percent at their peak, according to the New York Times. With rates holding steady, even at the current levels, NOW is a good time for buyers because competition is at one of the lowest levels we’ve seen in a while. A lot of buyers are on the sidelines waiting for a rate drop. We don’t expect rates to start to come down until at least mid 2024 and even then it will be at a very slow pace.
So will home prices drop in 2024? Probably not, says NAR chief economist Lawrence Yun: “Home prices will rise around 3 to 4 percent,” he predicts. Prices are intricately connected with housing inventory, as well. Sellers are likely to remain reluctant to give up their low interest rate for a much higher one, so inventory will remain constrained.
Here’s a simple example of why now is a good time to buy:
Home Price: $350,000 with 10% down payment
Mortgage Rate of 7.5% on $315,000 loan = $2192 principal and interest
Wait 6 months until April 2024
Home Price: $357,000 (based 4% annual appreciation) with 10% down payment
Mortgage Rate of 7.25% on $321,300 = $2236 principal and interest
A .25% drop in interest rate coupled with 2% (6 months) price appreciation results in a payment that is $44 higher per month.
This also doesn’t factor in any increased competition which may drive prices even higher.
The bottom line: Don’t wait to buy real estate; buy real estate and wait. And remember, rent is a 100% interest rate with no equity!
Contact us now to discuss how you can get a great home and get ahead of the competition.