Best time to buy: when interest rates are low or high?

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Services for Real Estate Pros with John Henry Masterworks Design International, Inc.

In a Washington Post article today, about predictions of the market for 2019, I read an interesting post, and wonder what AR members think:

"I do remember being told it was a great time to buy because interest rates are low.  In the back of my mind, I thought:  the great time to buy is when interest rates are high.  The purchase price goes down, and you can re-finance that low principal mortgage when rates go down.  

When you buy a property at low interest rates and relatively high principal, you cannot re-finance.  In fact, if interest rates go up, you are then stuck in your current property, and probably are underwater or near underwater.   

When housing prices start dropping, the market tends to fall quickly and deeply.  Who wants to buy a house to be underwater for ten years?  Even this slight uptick in rates caused anxiety."

 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Peter Mohylsky, Bucket List 01/15/2019 03:03 AM
Topic:
Mortgage / Finance
Tags:
buy a house when interest rates low or high

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Rainmaker
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Michael Jacobs
Pasadena, CA
Los Angeles Pasadena 818.516.4393

Good morning, John -the time is right when you are ready and prepared. 

Jan 08, 2019 07:18 AM #1
Rainmaker
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Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

John Henry - What you described about being "underwater or near underwater" is especially true for people who bought new construction in 2007. 

It's a very interesting article you wrote and something to pay attention to as well. 

Jan 08, 2019 08:52 AM #2
Rainmaker
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Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

John,

Like Michael Jacobs said when you are ready to buy regardless of interest rates or any other blah, blah.  And yes, it is blah blah aka excuses.  A

Jan 08, 2019 12:38 PM #3
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

John Henry  I just had this conversation and I agree with Patricia Feager, MBA, CRS, GRI,MRP  many people who bought way back when interest rates were high (18% ) when they went to refinance discovered they had a pre-penalty clause in their mortgage and it was pretty hefty too

Jan 08, 2019 12:47 PM #4
Rainmaker
1,879,053
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Southlake, TX
Selling Homes Changing Lives

John Henry - to pick up where Hannah Williams left off, I had two buyers (both new construction) in 2007 when the market took a sharp hairpin turn shortly thereafter. The stress level on both buyers was severe. One continues to live in the house and made it through the toughest times of their life. The other couple had a bad taste in their mouth and as soon as the market started to shift into a more positive direction for them and they were out of the woods, they asked me to list and sell it. I did and they bought another home, thankfully with me. 

Everything that Hannah brought up is true! Homeowners were trapped in a neverland situation. No matter what decision they made, it cost them plenty and tremendous stress. Agents were helpless, working harder than ever to help them get out of their rabbit holes. I pray we never see days like that again or anything worse. 

Jan 08, 2019 03:05 PM #5
Rainmaker
500,085
Francine Viola
Coldwell Banker Evergreen Olympic Realty, Olympia WA - Olympia, WA
In Tune with your Real Estate Needs - Olympia WA

What stood out to me is the assumption that if interest rates are high, home prices are lower.  That's not always the case but interest points here and love the comments!

Jan 08, 2019 06:19 PM #6
Rainmaker
2,681,298
James Dray
Fathom Realty AR LLC - Bentonville, AR
Exceptional Agents, Outstanding Results

Morning John.

Just because interest rates rise doesn't (in all cases) demand that prices go down. IMHO, it all depends on the local market

Jan 09, 2019 01:04 AM #7
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Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
Charlotte Homes for Sale - Charlotte Neighborhoods

I agree with Patricia Feager, MBA, CRS, GRI,MRP 100% - Some of the new construction, purchased in 2007 has just recently shown some good escrow, allowing owners to sell and buy again. Sadly, many are choosing new construction once again. 

If you don't have plans to stay put for 10 years (and sometimes we never know), a resale is the smarter choice - regardless of the interest rates, John.

As for pre-payment penalties - thankfully, those have been done away with for years now, allowing for those who purchase at high interest rates to take advantage of a future lower rate.

Jan 09, 2019 06:46 PM #8
Rainmaker
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Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I’ve heard more about low interest rates being the way to go in most contexts in most situations.

Jan 09, 2019 11:48 PM #9
Rainmaker
5,021,254
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Smart consumers are anxious to take advantage of the current low mortgage interest rates. Higher rates will make it more difficult for many to qualify.

Jan 10, 2019 04:03 AM #10
Rainmaker
475,063
Peter Mohylsky, Bucket List
Gulf Place @ 30A - Santa Rosa Beach, FL
Do you have a bucket list in the works?

The time to buy is always good.  It is really a personal decision that is very emotional.

Jan 15, 2019 03:02 AM #11
Rainmaker
115,825
John Henry
John Henry Masterworks Design International, Inc. - Orlando, FL
Residential Architect, Custom Home Design

Peter Mohylsky  Yes, emotion, finance, situation, etc.  all work together.

Jan 15, 2019 08:49 AM #12
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Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

The lower interest rates can mean the difference to those who have very limited budgets to purchase a home. I'm not sure the prices drop dramatically enough to make up the shortfall in their loan approval abilities. But, hey, I guess it could happen.  And, I guess the bottom line, as others have said,  the time to buy is when you can. Regardless. D 

Jan 18, 2019 07:53 AM #13
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John Henry

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