A Quick Look at the Numbers: Higher Price, Lower Interest or Lower Price, Higher Interest?

Affordability is the biggest barrier to home ownership in Washington State, with economic uncertainty following close behind.   Many people want to buy but just don’t feel like they can.  There are also many who actually can, but are choosing to wait for interest rates to come down, thinking they’ll save money.  Everyone is secretly hoping to see those 2% interest rates again, but it’s probably not going to happen.  (and if the tradeoff is a pandemic, I’ll be happy it’s not going to happen).

There’s currently quite a bit of inventory out there and if interest rates plunge, demand will jump and by a lot!  Suddenly, buyers will find themselves competing, foregoing inspections and paying a higher price just to get their offers accepted.  Waiting for lower rates isn’t always the most cost-effective strategy.  Let me show you….

There are a lot of factors to consider on loans, but if all things are the same, this shows you the maximum home price with approximately the same $4,424 monthly principal and interest payment.  This is assuming 30-year loan with zero down.

It’s possible that a home selling for $700K today could have a much higher price in a lower-rate environment if increased buyer demand pushes it upward.  Let’s say for example, it pushes to $800K, the payment is the SAME!  The point isn’t that everyone should buy today. Every buyer’s situation is different. The point is that waiting solely for lower interest rates can come with trade-offs that are easy to overlook. Sometimes buying at today’s price and refinancing later may cost less than waiting for lower rates and paying more for the home.  If you’re wondering which option makes the most financial sense for your situation, I’d be happy to run the numbers with you. Every buyer’s story is different, and seeing the math can make all the difference.