With Mortgage Rates Inching Up, Should You Buy Now or Wait?
NEW YORK -- Home mortgage lending rates are up again last week, to 4.18 from 4.15 percent according to BankingMyWay's weekly mortgage rate tracker, but not all that much higher than the 4 percent rates on 30-year mortgages a year ago. It's the upward path of mortgage rates that concerns lending professionals.
"The market's volatility is not so substantial that there will be wide swings," says Cody Kessler, a mortgage banker at HomeBridge, a privately owned mortgage lender based in Rockville, Maryland. He adds that future hikes are already "baked in" to the rate mix, and the upward pace would be a slow and steady one -- but the days of the sub-4 percent mortgage rates are "behind us," he says.
%VIRTUAL-pullquote-If you ask a real estate attorney, they will tell you it's almost always a good time to buy and hold.%Does that mean buyers should jump into the market and grab a home before rates go any higher? It's a personal choice, and as the saying goes, your mileage may vary. That said, some say the market is still wide open for opportunistic homebuyers.
"If you ask a real estate attorney, they will tell you it's almost always a good time to buy and hold," says Nina B. Ries of Ries Law Group in Los Angeles. "The reason is simple: Particularly in markets where there is little room to grow -- as with major metropolitan centers like Los Angeles -- real estate is a limited quantity and demand is always going to exceed supply. And where there is more demand than there is supply, prices go up. While there is fluctuation in the market in the short term, long-term growth is a certainty."
There's another way to look at it.
"If you look at all the aspects of renting versus buying, I'd say buying is typically the best financial decision with rates moving up," says Ross Bimson, a real estate professional at Arizona Best Real Estate, in Scottsdale, Arizona. "Considering a 1 percent rise in interest rates is equivalent to losing approximately 10 percent in buying power. If you could afford a $150,000 [home], now you are looking at $135,000 in buying power."
"Most people buy for a better place to live, [because it's] safer for their children, [has] more space for themselves and [because they get] control over their own space," he adds. "Waiting can jeopardize this opportunity or require significant changes in the family goal."
Buyers should be both well prepared and cautious, though.
"Mortgage rates are still historically very low, so if one is qualified to purchase and committed to staying in a particular community, one should buy," says Leslie Kilpatrick, branch manager at the San Diego real estate firm Willis Allen. "The challenge in most cases is the low inventory of homes available, so the search must be focused and diligent."
"Like a good paint job, the preparation is absolutely critical," she adds. "Get pre-approved, not just pre-qualified, by a reliable and respected lender in your area. Work only with a full-time realtor who specializes in the area you want to live in and who works with lots of buyers. Also, ask for references from other recently successful buyers they represented."
In the end, the best move may be to look at your house as a home and not as a financial entity, with all the emotional wear and tear that entails.
"It's important to remember your home is your home first," notes Daniel R. Zajac, a partner at Simone Zajac Wealth Management Group in Exton, Pennsylanvia. "We need to stop thinking of a home as an investment -- if you make money on it, it's a bonus. By removing that thought, you should be able to remove the concern of rising interest rates from the equation."