Why the interest rate doesn't matter
Opinion - Shaun Kent
While your parents and grandparents "sage" advice is that you should wait to buy until the rate drops, they are making this statement while sitting on top of the mountain of wealth they gained by entering the real estate market and letting time grow their net worth. The reality is - if rates drop next year, you will refinance and take advantage of that anyway. Buy your house. If not your dream house, just something - and stop paying your landlord's mortgage.
I am a landlord, as well as a mortgage lender, so perhaps this advice seems counter-intuitive. There is a time and place for renting. That said, consider the fact that rents typically go up in line with property values and you must realize your rent today is low compared to what it will be in the coming years. In 1940, the average rent for a two-bedroom in Oregon was $21. Let that sink in.
To say the interest rate is not an important part of your pending real estate transaction probably seems naive. This coming from a lender could come off tacky, like a sticky sales tactic or a disingenuous burying of the head in sand. Sure - you will pay more than the people who bought last year, but does that matter when weighing the alternative?
Real estate is a solid investment. Not all real estate decisions are good ones, but generally speaking - over time - real estate grows in value. According to Better.com, the national median home price in 2020 was $336,900. In 1970, the median price was $17,000, and inflation adjusted to 2020 dollars this metric is $112,941. As such, the median growth in equity over that 50-year period was approximately $224,000. Consider that buying 1 home often puts you in a position to buy another after a few years, and you can see that most people who have owned homes over the past 50 years have done very well. I am not a financial advisor, but my experience as a lender in evaluating hundreds, if not thousands of tax returns over the past 20 years suggests that home ownership and real estate investment has been the most significant factor in building wealth for most individuals.
Work with a great and reputable team that will prepare you to buy and guide you into responsible decisions. We are that team - call us today.