? High Interest Rates? This Could Still Be a Great Time to Buy a HomeThere’s no getting around it: mortgage rates are higher than most homebuyers would like.
After years of hearing about historically low rates, today’s numbers can make buyers wonder whether they should simply wait. Wait for rates to come down. Wait for the market to improve. Wait for a “better” time to buy.
But there’s another side to the current market that doesn’t get nearly as much attention.
Higher interest rates have pushed some buyers to the sidelines — and that can create opportunities for the buyers who are still in the market.
Remember What It Was Like When Rates Were Low?
It wasn’t that long ago that buyers were benefiting from incredibly low mortgage rates. But there was a catch.
Everyone else wanted to buy, too.
In many St. Louis neighborhoods, attractive homes would hit the market and immediately generate multiple offers. Buyers routinely found themselves competing against five, ten or even more offers.
That often meant:
- Offering significantly above the asking price
- Making quick decisions
- Limiting inspection requests
- Offering appraisal-gap coverage
- Giving sellers extremely favorable terms
- Losing several houses before finally getting an offer accepted
A 3% mortgage rate sounded fantastic. Actually getting the house you wanted at a price and on terms you were comfortable with could be another story entirely.
Higher Rates Have Changed the Competition
Today’s higher mortgage rates have made affordability more challenging, but they have also reduced the number of buyers competing for many homes.
That can completely change the experience of buying a house.
Depending on the property, price range and neighborhood, buyers may have more time to evaluate a home instead of feeling pressured to make an immediate decision.
There may also be greater opportunity to negotiate on price, closing costs, repairs or other contract terms.
And perhaps most importantly, buyers don’t necessarily have to take on as much risk simply to make their offer competitive.
Of course, desirable homes that are priced appropriately can still receive multiple offers. Real estate is incredibly local, and every property is different. But the environment is very different from a market in which virtually every attractive listing generates a bidding war.
The Interest Rate Isn’t the Only Number That Matters
Buyers understandably focus on mortgage rates because rates directly affect their monthly payment.
But the interest rate is only one component of the transaction.
Consider two very different scenarios.
In one market, mortgage rates are extremely low, but you have to compete against numerous buyers, pay well over asking price and potentially give up important protections to win the house.
In another market, the mortgage rate is higher, but you have less competition and may be able to negotiate a better purchase price or more favorable terms.
Neither scenario is automatically better. The point is that you have to look at the entire transaction — not just the mortgage rate.
You May Have More Negotiating Power
This is one of the biggest potential advantages for today’s buyers.
When a seller receives ten offers during the first weekend, the buyer has very little leverage.
When a property has been sitting on the market and the seller doesn’t have multiple buyers competing for it, the conversation can be very different.
Depending on the circumstances, buyers may be able to negotiate:
- A lower purchase price
- Seller-paid closing costs
- Repairs or credits following inspections
- A home warranty
- A more favorable closing date
- Financing or appraisal protections
- Other terms that would have been difficult to obtain in a highly competitive market
Not every seller will agree to these things, of course. But having the ability to ask is very different from being told that there are 12 other offers and you need to submit your “highest and best” by 6:00 PM.
You Can Refinance a Mortgage. You Can’t Renegotiate What You Paid for the House.
There’s also an important distinction between the price you pay for a house and the interest rate attached to your mortgage.
Your purchase price is permanent.
Your mortgage doesn’t necessarily have to be.
If rates decline significantly in the future, homeowners may have an opportunity to refinance, assuming they qualify and the costs make financial sense.
There is no guarantee that rates will fall, when they might fall or that refinancing will make sense for a particular homeowner. That’s why I would never recommend buying a house today based on the assumption that you’ll simply refinance later.
Instead, I tell buyers to make sure the house and payment work for them with today’s numbers.
If rates eventually fall and refinancing becomes advantageous, that’s a potential bonus — not something the purchase should depend on.
What Happens If Everyone Is Waiting for Rates to Drop?
This is another factor worth considering.
A lot of prospective buyers are sitting on the sidelines waiting for mortgage rates to come down.
But if rates decline substantially, those buyers don’t disappear.
They come back into the market.
More buyers can mean more competition for the same homes, particularly in desirable St. Louis neighborhoods where housing inventory is already limited.
Lower rates could improve purchasing power while simultaneously making it harder to get an offer accepted or increasing competition for desirable properties.
That’s why trying to perfectly time the housing market can be so difficult.
So, Is Now a Good Time to Buy?
For the right buyer, it absolutely can be.
That doesn’t mean everyone should rush out and buy a house because competition has decreased. If the monthly payment stretches your budget, you don’t have sufficient savings or you’re unsure whether you’ll remain in the home long enough for buying to make sense, waiting may be the right decision.
But if you’re financially prepared to buy, you find a house you genuinely like and you’re comfortable with the payment at today’s interest rate, there can be real advantages to shopping while fewer buyers are competing with you.
I’ve worked with buyers through very different St. Louis real estate markets over the years. One thing I’ve learned is that there’s rarely a perfect market.
When rates are low, competition may be intense.
When competition decreases, borrowing may be more expensive.
The goal isn’t necessarily to wait for the perfect combination of low rates, low prices and little competition. That combination may never arrive.
The goal is to understand the market you’re actually in and determine whether there is an opportunity that makes sense for you.
If you’re considering buying a home in St. Louis, I’m always happy to talk through what I’m seeing in the market — no pressure, no hype. Just an honest conversation about whether buying right now makes sense for you.
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