As I have discussions with clients, the same questions always arise; When is the right time to jump in?  Do you think the interest rates will come down?  Do you wish you were 6’0’’?

Well – these are very fair, and more importantly serious questions that have a financial impact on the client’s bottom line.

First – what needs to be made crystal clear is; “the interest rate is controlled by the Fed” as everyone knows. I, like you and millions of others read countless viewpoints, “inside information”, “my buddy is a banker/financial planner and he says….”  But what we all know is the rate will come down when it’s announced. That’s when our friends at the banks become popular again.

Second – “When is the Right Time?”  Well, personally, that’s entirely up to you and how you want to view things. My approach is to lay out scenarios and let you make the educated decision as at the end of the day, it’s your hard-earned loot, my job is to give them sound advice, advice that I would give pause to and more than likely act upon. Then it’s up to you!

Hers is my take:

Interest Rates for a 30-Year Fixed is 6.875%.  Lenders have many tricks to make that a bit more palatable, but let’s discuss using what we all know.

Here in the South Bay, 2019 – 2021 was an absolute feeding frenzy of buyers and sellers. Offers on any given property would garner 10 to 20 offers. List prices were meaningless.  It came down to who wanted more and who had $$$$.  Trust me, I was on the wrong end of countless offer ass-kicking’s, and swear I thought I was going to be fired by my clients at various times. Fortunately, that didn’t happen, but there were sleepless nights.

So, what does all this mean in relation to interest rates, inventory and the current market and you and your desire to buy / sell?

Well – let’s use some basic numbers:

Scenario #1

Pretend Buy of a List Price Sale – 1 offer

  • Home Price: $2.0m
  • 20% Down: $400k
  • All in At Close: $446k
  • Interest Rate: 6.875%
  • Monthly Payment: $13,129

*Re-Fi 6-8 months down the road

Scenario #2

Pretend Buy of a List Price – 7+ Offers (est. of overage of list price based on analysis of numerous South Bay Homes)

  • Home LIST Price: $2.0m
  • Sold Price: $2.45m (+450k)
  • 20% Down: $490k
  • All in At Close: $544k
  • Interest Rate: 5%
  • Monthly Payment: $14,336

Now – In scenario #2, you’re bringing an additional $100k to close, and an additional $1,200 per month towards your mortgage. If that makes sense to you and you can brave the “bidding wars”, by all means, go for it!

Or, you bite the bullet now, get in, find the right home in the right area for you, and ideally not have a bidding war. Then 6 months or so down the line, you re-fi.

Look – it seems simple, and I do not have a crystal ball, but all indicators lead to the lowering of interest rates and all those buyers sitting on the sidelines waiting for that to happen are going to be coming in with a vengeance, and that vengeance may equate to many tough calls and or overpaying for a property.

Buckle up folks, there is a Dog Fight Nearing in the South Bay Home Market Place!

C