Buy now or continue to save?

Question

I am looking to buy a duplex in the Houston area and house hack the property. I have found a couple of properties that I like, but am questioning if I should buy now or continue to save in hopes that mortgage rates drop in a couple of months. Any advice will be helpful as this will be my first purchase.

Louisa Davis · Answer

Buy now. Think of all the other buyers, just like you, who are standing on the sidelines waiting for interest rates to come down.

Best case scenario: You buy in the off-market later this year when competition is at it's relative lowest, and then interest rates drop at some point in the next few years, and you can refinance.

Ashlee Fake · Answer

Hi Kelvin, not sure about TX but here in NJ prices are already too high and interest rates are pretty high. As interest rates drop, house prices will go higher. As an agent, my suggestion is to do what is right for you and what you can afford comfortably. House hacking is a great way to get your foot into homeownership AND investments. two birds, one stone! Hope this helped!

Chris Kersey · Answer

Hey Kelvin,

Good idea to get into house hacking. This is a great way to be able to put down a smaller down payment for an investment property.

The question of buying now VS later when rates come down is a good one. I believe a lot of other people are asking themselves the same question right now and are sitting on the sidelines. The problem is that when rates do come down, all of these people are going to be ready to buy as well and this may drive the price of real estate up. So it really comes down to buying now at a lower price, or waiting for rates to drop to buy at a higher price.

My opinion would be to buy now and refinance out later if the rates drop to a level that make sense to do so. You can change your interest rate through refinancing, but you can't change how much you pay for the house after you purchase it.

I'm a real estate agent, investor and developer in central Houston (i build duplexes). Feel free to reach out with future questions.

- Chris Kersey

Bruce Woodruff · Answer

^^^Yes, if the numbers work at all right now, then imagine how it'll look when you ReFi.....Plus your competition is all sitting around too scared to jump in. Take advantage of that!

Mindy Jensen · Answer

Kelvin, with rates having been so low for so long, it can feel like right now we're too high. But we're not. 7% is the average interest rate, historically speaking. (Of course, prices have skyrocketed since the last time rates were 7%...)

The problem with "...am questioning if I should buy now or continue to save in hopes that mortgage rates drop in a couple of months. ..." is that rates might not go down for YEARS - if at all.

Inflation keeps coming in hot. The unemployment numbers keep coming in hot. All factors that could indicate the economy is cooling down are NOT, in fact, indicating that the economy is cooling down.

Can you afford the property at the current rates you will lock in indefinitely or would the payment eventually crush you?

If it would crush you, then no, don't buy. We don't have any idea when rates might come down, if at all. The Fed does NOT seem inclined to reduce them, and all the people saying they'll come down have absolutely no idea when that will actually happen.

If, however, you can afford to make the payment indefinitely, then now is a great time to buy because should rates come down, you'll be the only one refinancing that property, instead of being in a bidding war with others who were also waiting for rates to drop.

Tanner Lewis · Answer

In my opinion, it is better to buy now while there is less demand and then refinance once rates drop.

Morgan Tondre · Answer

Kevin, I would buy now while demand is low like everyone else is advising! Any investor I've worked with that waited for interest rates to go down never end up seeing the number they actually wanted anyways - don't make that same regret. If you're looking to make it a LTR, reach out to me!

Travis Main · Answer

Hey Kelvin,

Given that you're planning to house hack, my suggestion would be to make the purchase now. As Ashlee mentioned, when rates decrease, property values tend to increase. By buying now, you'll benefit from a discounted price but potentially higher interest rates. You'll have the option to refinance later when rates decrease, if necessary. Otherwise, you'll be acquiring a property at a lower price with the expectation of selling it for a higher return when rates drop and property prices surge.

Brian Jackson · Answer

Time in market over timing the market.

Buy now and then save for the next year and do it again.

Best of luck on your journey!

Manny Vasquez · Answer

Kelvin - Buy now.  Every investor, my self included, wishes we would have bought sooner than we did when we fist invested.

If the numbers on the duplex work NOW, given today's prices and current interest rates, then you are good to go!  When rates drop, you can always refinance and your cash flow will be even better!  Furthermore, you will already have a cash-flowing property in your hands and you won't have to compete with the crowd of people jumping in to purchase real estate because rates dropped.

Another piece of advice you will read from time to time on these forums, "Marry the property and date the rate!"  Lock up that property you want and then you can always refinance later when rates drop.

Buy now or continue to save?

Most Popular Reply