The text came in from a potential buyer client yesterday around noon.  There was a link to an article on interest rates, and then the question was raised, “Should we buy now since rates will go up soon?”  I replied back that “If you want to buy a house now, then buy it.  Don’t try to use prognostications as a justification to purchase.”  As I’ve mentioned in the past, at Deerwood Realty, we have different solutions for different clients.  For example, if you have great credit, and plenty of money in the bank, that will be a different solution and buying experience then if you are struggling to get into a house at all.  Let’s look at this particular home buyer who texted me a little closer so that we can better understand their best options.

This particular buyer had started the home buying journey over two years ago.  Divorced, he was living in a rented condo with his two children in a quality school district.  His main motivation to move was that the landlord kept raising rents but was always slow to fix anything.

I referred one of the lenders I use on a frequent basis, and the results were somewhat underwhelming.  Turns out that during the divorce there were some credit issues.  Still, if the buyer worked diligently, he could likely improve his score enough to purchase a home in this school district.  We gave him the tools he needed to help with his credit.  He didn’t have to use a service, he just needed to pay off some bad debt and then show a consistent record of payments.

The following year, the potential buyer had better credit, but due to paying all the debt, he had very little in the way of a down payment.  Luckily, he was going to get a gift from his parents for the down payment so we were back in business.  We looked at quite a few homes and were ready to make an offer before one of his parents became sick with cancer.  The uncertain health outcome stopped the search.  After that, my potential buyer also lost his job, so it was probably for the best that he didn’t attempt a purchase after all

This year, the buyer has steady employment, his credit is good and getting better, and he has some cash for a down payment.  Should he buy now?  After all, the interest rates may go up.  To me, the question of purchase in this case is irrelevant to a question of interest rates.  He should buy a home because he has the means and most importantly, wants to buy a home.  There is only one consideration he should make at this point.

Because of his current situation, the longer he waits, it is likely two things happen for him.

  1. He will have more money for a down payment
  2. His credit will improve even more, which will lower his interest rate paid.

Here are the real concerns with waiting

  1. Home prices have been increasing over the past five years in St. Louis County.
  2. Interest rates really could rise, which would lead to a decrease in possible purchasing power.

We don’t know for sure what will happen.  We do know that this particular buyer wants to buy a house.  If that’s what he wants to do, the decision isn’t really related to what could happen in the marketplace.  You purchase a new home because you want to.  Don’t bother with interest rates, market fluctuations, spiritual calendars, etc.  I say this because I think it’s the most sound reason for buying a home in the first place, and I think it speaks to being comfortable with a home purchase.

Let me explain what I mean by being comfortable with a home purchase.  When you buy a home because you want one, irrespective of rates or market conditions, the justification is something that you control.  “I bought a house because I wanted one” is a strong argument.  Therefore, when the market goes down some day, there’s no hesitation as to why you bought the house.  The same thing will happen when the market goes up.  You are in the home precisely because you wanted it.

When a buyer buys a house because rates or low, or the area is going to improve in value, they are often not comfortable actually living in the home.  Every day, a new report or article has them on edge.  “Am I losing my equity?”  “Am I in over my head?”  These questions cause buyers all sorts of issues when they finally purchase, and it isn’t a good buying experience.

Some might argue that it’s irresponsible to not look at rates or market timing when purchasing a home.  I think it definitely depends on your situation.  For many, they look at their home as a source of pride and enjoyment, and not nearly so much as a tool for investment.  In that case, the most important thing is that they buy a home because they want to.

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