Wait or Buy Now? The Mortgage Rate Dilemma

By George Koutsos

It’s probably the question I’m getting more than any other from homebuyers right now:

“Should I just wait until mortgage rates come down?”

It’s a perfectly reasonable question.

Mortgage rates are back around 7%, home prices on the North Shore are still high, and nobody wants to buy a house today only to find out six months from now that they could have gotten a much better rate.

But after more than 35 years in the mortgage business, I think there’s a better question to ask:

What happens if you wait and rates actually do come down?

Because a lower mortgage rate doesn’t happen in a vacuum.

The North Shore market is changing

There are some signs that buyers around Essex County have a little more breathing room than they did a year ago.

As of September, active listings in Essex County were up nearly 22% from a year earlier. Homes were also spending more time on the market. Meanwhile, the median sold price was approximately $685,000, slightly lower than a year ago.

Redfin's numbers tell a similar story. Over the three months ending in August, the median Essex County sale price was about $690,000, down 1.1% from the same period last year.

That doesn't mean homes suddenly became inexpensive.

They didn't.

And it certainly doesn't mean every house is negotiable. More than half of Essex County homes sold above asking price in August.

But we're not looking at exactly the same market buyers were dealing with when seemingly every decent house had a line out the door and 15 offers by Monday morning.

That matters.

What buyers gain from lower rates, they may give back somewhere else

This is the part I think gets overlooked.

Suppose mortgage rates fall substantially.

That's obviously good for affordability. The same mortgage becomes less expensive every month.

But you're probably not going to be the only buyer who notices.

People who have been sitting on the sidelines may come back into the market. Buyers who couldn't qualify at a higher rate may suddenly qualify. Someone who wasn't comfortable with a $4,500 payment may decide they're comfortable at $4,100.

More purchasing power can create more buyers.

And on the North Shore, where desirable homes in many communities are still relatively limited, more buyers competing for the same houses can change negotiations quickly.

So waiting for a lower rate isn't necessarily wrong.

But waiting has a cost and a risk too.

You could get the lower rate you've been waiting for and find yourself competing against more buyers for the house.

There's something else buyers should understand about today's rate

As of September 24, the average 30-year fixed mortgage rate in Massachusetts was approximately 7.12%, according to rate data published by NerdWallet and sourced from Zillow. Actual rates vary considerably based on credit, loan type, down payment, points and the individual borrower.

Nobody knows exactly where rates will be six months from now.

That's important enough to repeat.

Nobody knows.

There are forecasts, and they're useful, but they're still forecasts. A recent Reuters survey of property experts projected mortgage rates remaining above 6.5% through 2027, with only modest declines expected over the coming quarters.

Could rates fall faster? Absolutely.

Could they remain stubbornly high? Yes.

Could they go higher first? We've already seen how quickly that can happen.

That's why I don't love building an entire home-buying strategy around predicting interest rates.

Instead, start with the house and the payment

When someone asks me whether they should buy now or wait, I usually want to know something much more basic.

Can you comfortably afford the house today?

Not if rates fall.

Not if you get a raise next year.

Not if you refinance.

Today.

If the payment works, you have adequate reserves after closing, you plan on staying in the home for a reasonable period of time, and the house makes sense for your family, then we can start looking at the financing strategically.

If the payment doesn't work today, that's a different conversation.

I would never tell someone to stretch themselves into a house because “you can always refinance later.”

You might be able to refinance later. But that's an opportunity, not a guarantee.

A higher-rate environment can also create opportunities

Here's where working through the numbers gets interesting.

A house that's been sitting for 30 or 40 days may give a buyer options that weren't available when that same house would have sold in three days.

Instead of only negotiating price, we can sometimes look at seller credits.

Those credits might be used toward closing costs or, depending on the transaction and loan program, toward a temporary or permanent interest-rate buydown.

Sometimes that creates more immediate value for the buyer than simply negotiating the same dollar amount off the purchase price.

This is why I always encourage buyers and Realtors to run the numbers before deciding what to ask the seller for.

Don't automatically assume $10,000 off the price is better than a $10,000 seller credit.

Let's calculate both.

And this is very specific to the North Shore

A $700,000 budget doesn't buy the same house everywhere.

Current median listing prices range from roughly $549,000 in Lynn and $580,000 in Salem to around $665,000 in Peabody, $749,000 in Danvers, $795,000 in Beverly and nearly $1.2 million in Newburyport.

That's why broad national headlines aren't particularly helpful when you're deciding whether to buy a house here.

Your decision isn't based on the “U.S. housing market.”

It's based on the payment on a particular house in Beverly, Danvers, Peabody, Salem, Gloucester, Andover, Newburyport or wherever you're actually looking.

And sometimes the opportunity is one town over.

So, should you buy now or wait?

I wouldn't make that decision based solely on where you think mortgage rates are going.

I'd look at the entire equation.

What can you comfortably afford today? How much cash will you have left after closing? What's happening with the specific homes you're considering? How much competition are you seeing? Is the seller willing to negotiate? Are there financing strategies that change the numbers?

And most importantly, is this the right house?

I've been doing this long enough to know that there is rarely a perfect market.

When rates are low, buyers often complain about competition and prices.

When competition slows, buyers worry about rates.

There is almost always a reason to wait.

The better approach is to understand the numbers in front of you and decide whether the opportunity makes sense without needing something outside your control to happen later.

If rates eventually come down and refinancing makes financial sense, great.

But if you're considering buying a home now, let's first figure out what today's numbers actually look like.

LET’S TALK THROUGH YOUR OPTIONS

George Koutsos
📞 781-864-0889
✉️ george@teamgk.com

George Koutsos
The Koutsos Team | CrossCountry Mortgage