There are a lot of buyers out there – I see them weekly at open houses. But it seems many are stuck on mortgage rates, waiting for them to drop before they make offers.
One study showed that over 64% of buyers have put their home searches on hold in order to see if mortgage interest rates drop, with 94% of buyers surveyed stating they will change home buying plans if rates do not drop below 6% some time in 2026 – that is a LOT of buyers who may choose to wait… and who may all descend upon the market at the same time if that happens.
There are a few caveats to keep in mind when it comes to waiting to purchase:
Building Equity
Every month you own a home is time you are building equity. Here in San Diego County, home prices can drop slightly but do not tend to follow the rest of the country – we are a tourist destination located on or near the coast, so property here is always desirable. Even with price drops we get back on track quicker as well, so if your equity drops it will likely rise again.
Monthly Payment Decreases Predicted
Housing economists are predicting that for the first time since 2020 monthly payments are expected to decline slightly; this despite the fact that home prices are still rising across the nation, with 18% of listings selling above list price.
More Choices
Inventory levels are currently 20% higher than they were a year ago, giving buyers more choices than at any time in recent years. Here in San Diego County average market times hover around 30 days, so oftentimes there are price reductions and/or buyers may be able to negotiate price and other terms favorably.
Less Competition
Because many buyers seem to be “waiting it out,” it is actually a great time to make an offer. You may find you are better able to negotiate, not just on price but other terms as well, when there are not multiple offers. If rates drop there may be an influx of buyers starting to make offers at the same time, which could drive the price up.
Avoid Higher Interest Rates
If you lock in a mortgage interest rate now you might avoid higher rates if rates go up, such as if something happens in the world to trigger a rise. If not, you can refinance if the rate goes down in the future. Current rates are still lower than they were in the past (prior to the crazy lows we saw after the pandemic), so technically the rates are not “bad.”
Taxes and Housing Cost Benefits
Owning a home provides tax benefits and fixed housing costs, so if you are currently renting you not only immediately start building equity, but you have tax incentives, and a fixed rate mortgage protects you from rising rents in the future.
Buying now makes sense if you find a home that fits your lifestyle and budget, you are financially stable, and you plan to stay for a while. You are investing in your future through equity, and do not have to put your money into someone else’s pockets. Plus, we never know when rates may – or may not – drop.
