Op/Ed: Interest rates are high, but it's still better to buy your new home now

When rates jumped to 8% a few weeks ago, I gasped. I haven’t seen an 8% rate since I bought my first house in 1990. Back then, it was a great deal.

It doesn’t feel so great today.

When rates go high, people tend to stay away. That’s not always the best course of action. Don’t obsess about one number. There are lots of factors to consider whether you plan to sell a house or buy one.

When interest rates started to climb a year ago, some buyers said they were going to wait out the market, thinking prices were going to plummet. That didn’t happen. Prices are up, and we still have a supply issue.

Here’s what’s happening in the market now:

  • Home sales are down this year compared to the same time in 2022. Sales are down about 12% in Carmel, 18.5% in Fishers and 12% in Washington Township on Indy’s northside.

  • Average home prices are up, about 5% in both Washington Township and Fishers, and 2.5% in Carmel. Average home prices increased in the double digits from 2021 to 2022.

  • Homes are still selling. In fact, the average sales price is about 99% of the list price; it was 100% a year ago.

  • Buyers are out there, but there aren’t enough houses to meet demand in lots of areas of metro Indianapolis. Now is a good time to sell a house.

But is it a great time to buy a house? Yes!

I get it. If you own a home with an interest rate in the 2s or 3s, that would be hard to give up. However, buyers often obsess about the interest rates, and miss the big picture. Waiting to buy can end up costing you more in the long run. If you wait, you’re likely going to have to pay more for the price of the house. You can’t change what you paid, but you can refinance your mortgage when rates come down.

Nearly all financial analysts say rates will go down in 2024. Historically, rates are always lower during a presidential election year, regardless of the party in office or who is running for office. All indications are that prices will continue to go up.

Here’s what I fear for those who decide to wait out the market: There will be pent-up demand once rates start to fall, which will result in bidding wars like we experienced a couple of years ago. Sure, maybe you’ll get a better rate, but you’ll pay more for the house.

“Two years ago, no one was complaining about rates in the 2s and 3s. It was fantastic for customers refinancing,” Ian Arnold, a loan officer with Advisors Mortgage Group in Carmel, said. “But as a homebuyer, you were competing against 20 to 50 offers in one or two days and then people were spending $20,000 to $80,000 more. Remember rates are like gas prices, they shoot up fast but come down slowly.”

Brad Lux, a loan officer with Fairway Mortgage agrees, reciting the investment adage: “Time in the market beats timing the market.”

The longer you wait, the more you lose out on building equity.

Still, the higher rates can be a challenge for buyers, who may be priced out of the market. If that’s the case, work first on paying off debt and improving your credit score.

Sometimes, it may mean being creative, too. Home builders long have used incentives to buy down rates for buyers, homeowners can offer the same incentive, says Deanna Downey, a loan officer at Tucker Mortgage. Some sellers are willing to pay the cost to buy down a rate, which means a lower rate for buyers now. If the offer is right, it can be a win-win for sellers and buyers.

Still not sure what to do? First, talk to a lender or financial advisor about your options, ask a trusted realtor to do a market analysis. Please, just don’t make your home buying or selling decision solely on the interest rate.

Laura Musall is a broker/realtor with F.C. Tucker in Fishers and has been helping people buy and sell homes for more than 15 years. You’ll find more home stats at LauraMusallHomes.com.

This article originally appeared on Indianapolis Star: High interest rates are scary but prices likely won't drop. Buy now