Buyers looking to shop for houses this year are finding themselves in a different situation than those who bought or were looking to buy homes last year.
To begin with, the interest rates that now are hovering at 7% were nearly half of that last year and as such when contemplating a new home to purchase, this year’s buyers need to figure in a mortgage payment probably nearly double the amount that would have been a year ago, possibly compensating by taking a smaller mortgage and putting a larger down payment down on whatever purchase they are trying to make.
The jump in interest rate has also affected available houses for sale. Inventory is very low, mostly due to the fact that so many sellers took advantage of the low interest rates over the last 10 years or so and now do not want to lose the really low interest rates they have on their present mortgages and as such are opting not to move—unless there is no choice—given that they do not want to take new mortgages with higher rates even if they might be ready to sell and buy something bigger or better.
Given that the inventory available is so lean, prices continue to climb on houses now available for sale and buyers are gritting their teeth with the high interest rates and just taking the plunge and buying their new home, since who knows when those rates may change again in the future and even if they change, they may not drop down to where they were a year ago. In the interim life goes on and people want to buy into the neighborhood and live their lives.
This kind of situation has always gone in cycles anyway: the rates drop, everyone runs to either purchase or refinance, and then another cycle begins with higher rates and people wanting and needing to buy homes bite the bullet and take whatever interest rate they can get in order to get them into their new home.
I remember the year I went out to buy my first home, the interest rates were 13–14%, which was double the almost 7% rates we are dealing with today. Somehow even with those high interest rates we still managed to buy a home and then when the rates dropped in the next year or two, or three, we would refinance our mortgage to bring the rate for our mortgage lower.
A similar situation exists today except with much lower rates than the 13–14% I had, but the same policy applies so you can buy a house today without waiting.
Buyers need to jump in, buy the house that works for them with today’s interest rates, and then move in and enjoy living in their home with the idea that when the interest rates drop down the road—however long that road is—they can refinance at a lower rate, get the benefit of the savings in their mortgage, and then breathe a sigh of relief that they were able to both buy a house and work out lowering their mortgage rate to a better monthly payment for their budget without having to worry about finding the house that they wanted.
Even though you may not get the lower rate you would have preferred, it all works out in the end, since waiting to buy your house until the rates go where you want them to go otherwise means holding out for an unknown period of time for your quality of life of being a homeowner.
Anessa Cohen lives in Cedarhurst and is a licensed real-estate broker (Anessa V Cohen Realty) and licensed N.Y.S. mortgage originator with over 20 years of experience offering full-service residential, commercial, and management real-estate services as well as mortgage services. She can be reached at 516-569-5007 or via her website, www.AVCrealty.com. Readers are encouraged to send questions or comments to anessa@AVCrealty.com. Read more of Anessa Cohen’s articles at 5TJT.com.
