on Monday, January 15th, 2024 at 9:00am.
It has been quite the whirlwind of a real estate market over the last few years here in Chattanooga, TN. We hit all time lows with interest rates as well as all time highs with home value increases. Homes were selling in less than 24 hours and with little to no contingencies. Throughout 2022 and 2023, we started to see that change a bit as the interest rates began to increase which changed a lot of people’s buying power. It has been all over the news and social media lately that interest rates are expected to drop in 2024 which would mean a lower mortgage payment for buyers. While you may be saying to yourself, “I’ll wait to buy a home when the interest rates drop,” we’re here to discuss why that may not be in your best interest. While we can’t predict exactly what will happen with interest rates in 2024, we can tell you what that means for you as a potential buyer.
Pro | The Cost
The number one reason people want to wait until interest rates drop is because it means their monthly mortgage payment will be less. Interest rates at 3% vs 6% can mean a difference of hundreds of dollars per month.
Lower interest rates also gives buyers more buying power which means they can potentially be approved for a higher amount than they would with a higher interest rate.
Con | The Competition
We get it. Who wouldn’t want to save hundreds of dollars on their mortgage? The problem is that it’s not just you who wants to save money. So does everybody else! The more buyers there are looking to buy a house, the more buyers you are competing against for a house.
What the real estate market experienced when interest rates were historically low was what most would describe as unheard of. Buyers were submitting an offer on a house only to compete with 10 sometimes 20 other offers. Buyers were offering thousands over asking price, having to pay more out of pocket by covering closing costs, and waiving contingencies like inspection periods just to be considered.
What to consider:
You are playing a guessing game by trying to time how low the rates will go.
You could miss out on an amazing house by waiting.
Waiting could cost you more in upfront expenses depending on how many other buyers you are up against.
You might also lose negotiating power when it comes to the initial offer or even once under contract.
You could also refinance later to still take advantage of those lower rates.
While there are pros and cons to waiting for the rates drop, we always recommend discussing this with a professional to answer questions specific to you. Drop your questions below or let us know if you’d like to be connected to a local lender to see what is best for you!