If you’ve been thinking about buying or selling a home, you’ve probably noticed that the numbers look a little different than they did just a few years ago. Mortgage rates have climbed to levels not seen in nearly three years, with the nationwide average cited at 7.5% APR earlier this month. That’s more than double (and nearly triple) the lows we saw around five years ago!
For many people, this raises an important question: Is it better to act now or wait to see what happens?
The truth is, there’s no one-size-fits-all answer. Market conditions matter, but so do your finances, your goals, and what you need from a home. And how should you prepare either way?
We all know that lower interest is better. But what does that look like in everyday dollars? Early this year, nationwide average rates were about 5.5% APR. The difference between a 30-year loan at 5.5% APR and 7.5% APR means about $130 more per month per $100,000 of loan. For example, if your home loan is $400,000, that means the mortgage payment is $520 more a month than the 5.5% loan. That cost seriously adds up over time. Over the course of those 30 years, the homeowner with the 7.5% rate will pay a total of just over $189,000 in extra interest above the 5.5%, almost half the loan size again in additional interest even though it’s only a 2% difference in the APR.
For Potential Buyers
Reasons to consider:
One potential advantage of buying before rates decline is avoiding a future surge in competition. If mortgage rates eventually fall, more buyers may feel comfortable entering the market. Increased demand can lead to bidding wars, fewer available homes, and upward pressure on prices in some areas. In that scenario, a lower interest rate may not translate into a lower overall cost if you have to pay considerably more for the same type of home.
Risks to keep in mind:
As the math above points out, higher interest rates mean higher monthly payments and more interest paid over time. That can put pressure on your budget and leave less room for savings, emergencies, or other priorities.
It can be tempting to buy now with the expectation that you’ll refinance when rates fall. Refinancing may be an option in the future, but it isn’t guaranteed. Your eligibility will depend on factors such as your credit, income, home value, outstanding loan balance, and the rates available at the time. In other words, it’s important to choose a mortgage you can reasonably afford today, rather than relying on a future refinance to make the numbers work.
Who might benefit most:
Buying now may be worth considering if you have stable finances, a solid emergency fund, and enough room in your budget to handle the payments even if rates remain elevated for several years. A larger down payment can help reduce the amount you need to borrow.
If you’re a first-time buyer, down payment assistance programs may also be worth exploring. Most importantly, make sure the home and the payment work for your life as it is today, not just the life you hope to have if the market changes.
For Potential Sellers
Reasons to consider:
In many markets, home values have risen substantially over the past several years. If you’ve owned your home for a while, you may have built up considerable equity that could help fund your next chapter. Depending on your circumstances and local market conditions, this may be an opportunity to turn some of that equity into greater financial flexibility.
Risks to keep in mind:
Before putting your home on the market, think carefully about where you’ll go next and what that move will cost. If you currently have a low-interest mortgage, moving into another home with a higher rate could substantially increase your monthly payment, even if you have significant equity in your current property.
Selling and renting instead isn’t necessarily a less expensive option, either. Rental prices vary widely, and in some areas, monthly rent can be comparable to or even higher than a mortgage payment. Remember, too, that selling comes with its own costs, including potential repairs, preparation, closing costs, and real estate commissions.
Who might benefit most:
Selling may be especially appealing if you’re downsizing to a substantially less expensive home, moving to a more affordable area, or planning to purchase your next home with cash or a much smaller mortgage. The key is to look at the entire financial picture. A strong sale price is certainly appealing, but what matters just as much is whether your next living arrangement supports your lifestyle and budget.
For Those Considering Waiting
Reasons to Consider:
Sometimes, the best move is not to move at all, or at least not yet. If your current home meets your needs and your mortgage payment is manageable, staying put can give you time to continue building equity without taking on a new, potentially more expensive loan. If you’re renting, waiting can also be a productive choice.
You may be able to use the time to strengthen your credit, build your savings, reduce debt, and prepare for the costs of homeownership. There’s value in being financially ready before making a major commitment. Waiting doesn’t have to mean standing still; it can mean putting yourself in a stronger position to act when the time is right for you.
Risks to keep in mind:
As with all investments, waiting is trading potential future profit for current security and stability. A high rent payment may feel like you’re not making progress toward your goals or could make it hard to see ever having the savings needed for a first-time purchase.
Who might benefit most:
Waiting may be the best fit if you’re still working toward your financial goals, need time to improve your credit or savings, or are comfortable in a home that meets your current needs. It can also be a reasonable choice if buying or selling right now would stretch your finances too thin. There’s no prize for making a move before you’re ready. A little more preparation today can create more options tomorrow.
The Bottom Line
Trying to predict the housing market can feel like trying to predict the weather months in advance. You can watch the forecasts, follow the trends, and listen to the experts, but you can’t know exactly what will happen. Fortunately, you don’t need to. Instead of waiting for the perfect moment, focus on the things you can control:
Review and work on your credit.
Whether you’re preparing to purchase, planning to sell and apply for rentals, or just planning to wait, knowing your score and ways to boost it are always helpful. Review your reports at www.annualcreditreport.com to scan for errors. Aim to pay down credit card balances as much as possible, and keep up with on-time payments.
Monthly cash flow review.
Self-knowledge, including your spending habits, is self-empowerment. Knowing what you can comfortably afford is just as important as knowing what a lender might approve. If you don’t already track your monthly spending, start by looking at flexible expenses such as groceries, gas, shopping, and entertainment. The goal isn’t to judge every purchase; it’s to understand where your money goes and how much flexibility you have.
Give your new housing payment a trial run.
Run some numbers to determine how much a mortgage would be in the price range you’re considering. This mortgage calculator is an excellent resource; you can adjust terms, including interest rate and loan amount. You can use that to determine generally how much to expect the mortgage payment to be on a loan of that size.
When you’re planning the budget, don’t forget to factor in any homeowner’s association or condo dues and upkeep costs. If that total, mortgage + dues + upkeep, is more than your current housing payment, here’s one useful exercise:
Test yourself by putting the difference into savings each month. If you can consistently save that money without feeling financially squeezed, you’ll have a better sense of whether the proposed payment is sustainable. Plus, you’ll be building savings at the same time. If it feels difficult, that’s useful information, too. You may need to consider a lower purchase price, build more savings, or give yourself more time.
Compare your options.
If you’re considering buying, talk with multiple lenders to compare rates, fees, loan terms, and available assistance programs. First-time homebuyer programs may offer helpful options depending on your location and eligibility.
If you’re considering selling, estimate your likely proceeds after transaction costs and compare those proceeds with the cost of your next housing arrangement. And if you’re planning to wait, set a few practical goals for the months ahead—whether that means paying down debt, saving for a down payment, or simply keeping an eye on your local market.
Stay flexible.
Your plans may change as your finances, priorities, or the market evolves. That’s okay. Even if you save toward a home and eventually decide that buying isn’t the right choice, the money you’ve set aside can still provide security and flexibility.
And if you decide to sell but discover that staying put makes more financial sense, you’ll have gained a clearer understanding of your options. The goal isn’t to predict the market perfectly. It’s to make a decision that supports your needs and gives you room to adapt.
Buying a home, selling a home, or deciding to wait can all be reasonable choices. The right answer depends on your finances, your goals, your local housing market, and what will help you feel secure in the years ahead.
