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When Will Mortgage Interest Rates Go Down?
When will mortgage interest rates go down, the caller asked yesterday. Sure, he’s just doing construction across the street or maybe he lives in the neighborhood. Not really a buyer, he says. After a much longer discussion, turns out the caller is actually a vet with a VA eligibility. What he really wanted to know was is it a good time to buy a home?
But like so many other first-time home buyers today, he asked the question of when will mortgage interest rates go down. As though that is some kind of secret measurement of the gateway to homeownership.
Never. That’s my answer. Our days of historically low interest rates, oh, please dear, God, let them be over. Interest rates have been superficially suppressed for almost 10 years and are not an indicator of a strong economy.
You live long enough, you see everything. Why, in 1995, I recall feeling almost giddy that I was able to score an interest rate of 8%. Also, when making the transition in the 1970s from escrow officer to real estate agent, I saw first-hand the days of 18% to 20% interest rates.
So when rates hover around 5% today, which gets buyers fretting and wondering: when will mortgage interest rates go down, part of me says they have no idea how good they have it. It also makes me want to ask: hey, have you looked at your VISA card statement lately? Making the minimum payment, are we? How much is that interest rate?
Quentin Fottrell, personal finance editor at MarketWatch, says making minimum payments on a credit card is insane. He offers the following: “A $2,000 credit balance with an 18% annual rate, with a minimum payment of 2% of the balance, or $10, whichever is greater, would take 370 months or just over 30 years to pay off.”
Yet, you don’t hear anybody complaining about that 18% credit card interest rate. Instead, they focus on a 5% mortgage interest rate and wonder when will mortgage interest rates go down.
Further, what do borrowers have to show for paying on that 18% credit card rate? Not a house, that much I can tell you. Generally, it’s impulse purchases or depreciating items. For some borrowers, all living expenses are financed, like gas and groceries.
However, facts are prices are soft on many homes as inventory rises, which makes it a great time to buy. Our Sacramento housing trends for September 2018 show double the number of homes for sale since January. Plenty of selections. Just lock in that interest rate. Because every one-half of a percent drops your purchasing power by about $25,000. That means if you had hoped to buy a $400,000 home, you can only afford $375,000.
It is OK for Sacramento Buyers to Pay List Price for a Home
It is OK to pay list price to buy a Sacramento home.
For some reason, it has been drummed into the heads of Sacramento home buyers that it should not be OK to pay list price for a home. Which is the silliest thing I’ve ever heard, and yet I hear it a lot. I heard it back in the 1970s when I started selling real estate. My mentor at that time taught me that owning real estate is the most important thing. Even if I pay list price, it’s OK. There is nothing wrong with paying what a home is worth. Yet, we always want to get a deal . . . when the truth is there are no deals if you don’t buy the home.
Five or 10 years from now, you won’t remember how much you paid. Whether it is $5,000 more or $10,000 less, you won’t recall. It’s immaterial. On the other hand, you’ll certainly remember NOT buying the house. You’ll forever replay those memories of losing the house you really really wanted but could not get past your persistent attitude of thinking you need to pay less. So, you did not buy it.
I’m here to tell ya: You don’t have to pay less. It’s OK to pay list price for a home. I have done it myself. Many times. Granted, this concept seems easier to grasp when you have money than when you do not. But it applies to both ends of the spectrum. Further, in some ways, those with money are often so afraid to part with it that they lose, over and over. They blame their agent. They say if only everybody did what they wanted, the world would be a different place. Ha! Such little-picture thinking.
Worried about overpaying? Overpaying is very unlikely because you’ll get an appraisal. Even if your agent doesn’t know how to properly prepare comparable sales, and many agents do not, it’s all right. An appraiser will pull up the closest viable comps, and an underwriter will double check that work.
You do not need to grind the seller and insist the seller lower her expectations. That causes bad feelings and animosity. In addition, I know what I’m saying goes against your grain. You were probably raised to believe that you need to negotiate the purchase of everything in your life lest you be scorned. You don’t. It is OK to pay list price for a home, especially if the home is worth it to you.
I tell people money provides the means to afford to buy what you want. If you can’t buy what you want, there is something wrong with your approach. Everything has a price. You don’t have to dicker. Don’t get so hung up on giving a seller what the seller wants. The seller has something you want. It’s worth the money. You don’t have to pay less than asking price to buy your dream home. That is fallacy that was handed to you by people who don’t know any better but mean well.
Yeah, it’s outrageous to consider. I know this. You truly do have permission to buy what you want. You hold the power to make it happen.
