If you’re thinking about buying a home right now, you may feel like the odds are stacked against you.
Mortgage rates are still hovering around 6.7%, keeping monthly payments considerably higher than they were several years ago. And with rates still elevated, many potential buyers are wondering whether they should simply wait for mortgage rates to come down.
But there’s another side of today’s housing market that deserves attention.
While higher mortgage rates are working against buyers, other factors are working in their favor.
In fact, buyers today may have more negotiating power than they’ve had in years.
Higher Mortgage Rates Are Still a Challenge
There’s no reason to sugarcoat it: mortgage rates remain one of the biggest obstacles facing homebuyers.
The national average for a 30-year fixed-rate mortgage was around 6.7% this week. That’s considerably higher than the rates many homeowners locked in several years ago.
Higher rates mean higher monthly principal and interest payments, which directly affects how much home a buyer can comfortably afford.
That’s one reason many prospective buyers are still sitting on the sidelines.
But that hesitation has created an interesting dynamic in the housing market.
More Buyers Are Hesitating — and That Can Create Opportunity
When fewer buyers are competing for homes, sellers have to compete harder for the buyers who are in the market.
And that is exactly what we’re seeing in many markets across the country.
Houston is a particularly interesting example.
According to the Houston Association of REALTORS®, Greater Houston ended July with 40,750 active listings — the highest inventory level ever recorded by HAR.
Houston also had approximately 5.5 months of single-family home inventory, putting the market in much more balanced territory than the extremely seller-favorable conditions buyers experienced several years ago.
That matters.
When buyers have more homes to choose from, they don’t necessarily have to rush into the first house they like.
They may have more time to negotiate.
And that’s where today’s market gets interesting.
The Buyer Advantage
A higher mortgage rate isn’t the only factor determining whether a home purchase makes financial sense.
The price of the home, seller concessions, closing costs, rate buydowns and other terms of the transaction can all affect the buyer’s overall cost.
For example, a buyer may be able to negotiate with a seller for:
- A lower purchase price
- Seller-paid closing costs
- A temporary interest-rate buydown
- A permanent rate buydown, when appropriate
- Assistance with certain allowable expenses
- Repairs or other concessions
The exact opportunities depend on the property, the seller, the loan program and the circumstances of the transaction.
But the important point is this:
The mortgage rate is only one part of the deal.
Don’t Just Negotiate the Price — Look at the Entire Deal
Suppose two buyers purchase identical $400,000 homes.
Buyer A gets a slightly lower purchase price but receives no assistance from the seller.
Buyer B pays a little more but negotiates significant seller-paid closing costs or a rate buydown.
Which buyer got the better deal?
You can’t answer that question by looking only at the sales price.
You have to look at the total cost of the transaction and the monthly payment.
This is why buyers should look beyond the headline mortgage rate and evaluate the entire financing strategy.
Should You Wait for Mortgage Rates to Fall?
This is probably the biggest question for prospective homebuyers.
And unfortunately, nobody can tell you with certainty exactly when mortgage rates will fall, or how far they will fall.
Waiting can make sense for some buyers.
But there is also a potential downside to waiting.
If mortgage rates eventually decline, more buyers could return to the market. Increased competition could make it more difficult to negotiate with sellers, and home prices could respond to stronger demand.
In other words, a lower mortgage rate doesn’t automatically mean a better opportunity to buy a home.
The market you’re buying in matters.
The price you’re paying matters.
The terms you’re negotiating matter.
And, most importantly, whether the resulting monthly payment fits comfortably within your budget matters.
What Should You Do?
Today’s housing market presents buyers with a strange combination:
Higher mortgage rates are working against them.
Greater inventory and increased negotiating power are working in their favor.
That’s why I don’t think the right question is simply:
“Are mortgage rates going down?”
A better question is:
“Can I find a home I want, at a price and with terms that make sense for me, at today’s rates?”
If the answer is yes, today’s market may offer opportunities that weren’t available when buyers were competing against multiple offers and sellers had most of the negotiating power.
And if mortgage rates improve in the future, refinancing may become an option if the numbers make sense at that time.
You don’t need mortgage rates to be perfect to get a good deal on a home.
You need to understand the market, negotiate intelligently and structure the financing properly.
That’s where having an experienced mortgage professional in your corner can make a difference.
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Sal Trapani, Mortgage Banker & Owner, MJ Mortgage LLC, 281-608-2846 cell, sal@mjmortgagellc.com, www.mjmortgagellc.com, Magnolia, TX 77354, NMLS 1055510 / NMLS 2381195
Mortgage rates and market conditions change frequently. The information above is for educational purposes and should not be considered a commitment to lend or a guarantee of any particular interest rate or loan terms.