The latest economic news has sparked excitement in the housing market. Inflation has dropped to its lowest point since 2021. This shift could lead to significant changes for both buyers and sellers.
Here’s what’s digusting me. I receive emails daily, screaming, “Rates are dropping! Now is the time to refinance. Do it quickly!”.
I call BS. If you’ve been waiting to refinance when the rates drop, why would you do it when the rates are at the beginning of their downward trend? Why not wait until they have had time to drop into “make sense” territory?
Lenders want the business, so they will push you to refinance now. But is it in your best interest or theirs???
Tread lightly.
But what if you want to purchase?
Purchasing calls for a completely different strategy. Inflation has dropped, which means rates are falling. When rates fall, values rise.
It’s true – we will see more properties on the market as rates fall, and more homeowners who have been waiting to move decide now is the time before values fall.
Do you see the irony here? If you’re a seller, you are afraid values will fall, so you must hurry. If you are buying, you’re afraid values will rise, so you need to hurry.
The moral of the story is that trying to time the market won’t get you anywhere.
So what should you do?
If you are thinking of refinancing…
Let’s look at it logically. If you want to refinance, why? It probably isn’t to lower your rate unless you purchased your home in the past couple of years, since rates have gone up. In that case, wait if you can because rates will fall more over the next couple of months.
If you already have a low rate from pandemic times, consider a line of credit in the form of a 2nd loan, or HELOC. This way, you preserve your low-rate first mortgage, and you can use the new 2nd for whatever your liquidity needs are right now.
You can always refinance both loans into a new, single loan if rates fall enough for it to make sense.
What about if you want to buy…
Inflation has dropped and should continue on this trajectory in the near future. If the Fed begins to lower interest rates, we could see a significant increase in the number of people looking to buy homes. Lower rates make mortgages more affordable, which means more people can qualify for loans. This influx of buyers could create a buying frenzy, driving up home prices.
If you’ve been on the fence about buying a home, now might be the time to consider it seriously. Waiting too long could mean facing higher prices as more buyers enter the market. The good news is that even if rates drop further after you buy, you’ll have the option to refinance later, at a lower rate, but at least you will have a home to refinance.
A Word of Caution: Don’t Wait Too Long, but Don’t Leap Before You Look
Think it through. Discuss it with your spouse to get clear on your goals. Then, talk to a mortgage professional or financial advisor, someone you trust to have your best interest in mind, not their bank account.
Leave a Reply