A Buy Now Refinance Later Approach

The number of Americans that believe now is a good time to buy a house is at a record low and some buyers are using this to their advantage

REAL ESTATE

3/10/20241 min read

top-view photography of houses at daytime
top-view photography of houses at daytime

The situation: You didn't snag a 3% mortgage rate while binging Netflix in global-pandemic-quarantine-hell. Now you're ready to buy but stalling and hawking interest rates waiting for the right time to strike. You are not alone. According to this Gallup poll, only 21% of respondents believe now is a good time to buy. This is the lowest reading since 1978, the year they first started asking the question. Are they right? It is really that bad? Lets take a look at how 30 year fixed mortgage rates have trended over the last few decades:

To summarize: Back in the early 1980s the Federal Reserve was waging yet another war with inflation. And just like we're seeing now, this resulted in a dramatic push driving interest rates astronomically high. Take a look at 1981- homebuyers were working with interest rates over 18%! While our current climate is a somewhat complicated market with low inventory and pessimistic potential buyers, when you zoom out and take a look at the bigger picture the view feels more hopeful, and we're trending in the right direction.

The buy now refinance later approach: There are many homebuyers with their eyes on interest rates and ready to make a move as they continue to decline. When they decide to jump in, the increase in buyer competition will create upward pressure on home prices. With home prices currently being driven down by low competition, some buyers are deciding to take advantage of this and making their home purchase now, with a plan to refinance as interest rates decrease.

Source: Trading Economics