Date the rate, marry the home

“wow, those rates are crazy, might have to reconsider” 😵

It’s a common refrain I hear from clients these days. But as long as you stay within a budget you can afford, now might be the right time to buy. Let me explain why.

First, let me just say I understand the sticker shock on rates - mortgage rates are higher than they’ve been in 20+ years.

But let’s zoom out a bit and add some perspective. Check out the chart at the bottom of this post showing the average 30-yr fixed mortgage rate going back to the 1980s when I was born. The average 30-yr mortgage rate was 16.93% (!) on my birthday. Today, it’s a little north of 7%.

One of the things I like to ask clients is, do you think our parents would regret having bought their homes in the 1980s and held onto them until today? Of course not. (Homes are up 600%+ since then by the way).

There’s some truth to the old line in real estate that you should “date the rate, marry the house”. Yes, if you buy now, there’s a good chance you’ll be able to refinance later. But buying a home shouldn’t be based on speculating about where interest rates might be going.

Instead, buying a home is about whether it makes sense to own at this point in your life based on personal reasons (family, community, careers, etc). And if it does make sense to own, buying a home is probably a good idea as long as you're not reaching beyond what you can truly afford.

The good financial reasons to own are that you can buy now and your rate stays the same, but your income will grow and your house will appreciate in value. And yes, you can probably refinance later.

The problem with waiting to buy because interest rates are higher is that there's a lack of housing inventory and a lot of pent up demand. When rates drop, more buyers will enter the market, and prices will surge for the very few homes that get listed.

At that point, you might end up not being able find a home you can afford at any interest rate.