Questioning the Paradox of Rising Home Prices Despite High Mortgage Rates: The Role of the “Life Goes On” Phenomenon in Home Buying
Many people postponed significant life decisions for one to three years during the pandemic, including purchasing a home. Early on, the uncertainty led many to stick with renting or stay in their current houses.
Pandemic-related delays affected other life events as well, such as:
- Entering college
- Pursuing higher education
- Relocating for work
- Launching a business
- Proposing marriage
- Starting a family
- Expanding a family
- Retiring
But as the saying goes, life continues! We cannot keep our lives in limbo indefinitely. It would be tragic never to pursue our aspirations.
The Urge to Buy Despite Unfavorable Mortgage Rates
Mortgage rates spiked in 2022, causing a slump in home demand. The second half of 2022 and the first quarter of 2023 were notably slow in the housing market.
Although rates have slightly decreased from a high of 7.25%, they remain elevated. The gap between mortgage rates and Treasury bond yields is still higher than usual.
The Federal Reserve’s potential rate hikes only add to the uncertainty.
Patience Versus Action in Home Buying
While patience may be a virtue, people are growing weary of waiting for lower mortgage rates. The building anticipation suggests that once rates decrease, demand could skyrocket.
A common expression in real estate, “date the rate, marry the home,” emphasizes that mortgage rates may change, but a home’s purchase price won’t. Missing your dream home due to high rates could mean losing it forever.
This sentiment often holds true, especially since interest rates have generally been declining since the 1980s. Temporary hikes and inflationary bursts usually last just a few years.
Strategies for Saving on Mortgages
One can opt for a lower-rate Adjustable Rate Mortgage (ARM) with a fixed introductory period to save on mortgage expenses. This approach has allowed some property buyers to save significantly.
A Note of Caution
However, be wary of being swayed by catchphrases without considering the facts. Mortgage rates might decrease in the next year or two as inflation decreases. If temporary higher payments are manageable, buying now might be wise.
Time’s Influence on Decisions
The awareness of time passing influences many areas of life, from career moves to starting a family, building net worth, and upgrading homes. There are always opportunities to seize, and life doesn’t wait for the ideal moment.
Survey Insights on Current Home Buying Trends
A recent Zonda survey explored why people are buying homes despite high mortgage rates. The reasons range from a shortage of resale supply to relocation, family changes, marriage, fear of missing out, and more. In essence, life’s ongoing momentum drives the decision to buy.
Staying Sensible in Home Purchasing
While acknowledging that life goes on, it’s essential to buy a home within one’s means. Following practical guidelines can prevent emotional decisions that may lead to financial stress.
It might be wise to wait for mortgage rates to drop or to increase net worth before buying. Yet, waiting too long could lead to missing out on precious family time or risk prices soaring once again.
