January Real Estate Roundup: The Benefits of Buying While Rates Are Higher

Happy new year! Although 2024 had its challenges for real estate, there are many positives to be excited about as we enter 2025. Here’s a rundown from MBS Highway CEO Barry Habib’s recent update on the tried-and-true adage, “date the rate, marry the home.” If you have any questions about his predictions, just reach out, and don’t forget to have your clients talk to me about a “cost of waiting analysis” to determine their best time to buy. 

PS – Atlantic Bay and Barry will be hosting an economic forecast webinar in March - stay tuned for more details! 

Barry Habib on 2025 Homebuying 

As we know, late last year, rates fell to around 6% or just below. It didn’t last long, but when rates go down again, that will spark the “move-up” buyers and create a vibrant housing market with a lot of demand. 

That said, for your clients waiting for rates to come down again, it’s best for them to widen their perspective a bit. While it may seem like a bad time to buy, the timing could actually be to their benefit. Higher rates mean less competition, and during winter months, we tend to see home prices decline a bit, giving your buyers a better deal. 

Plus – and this is important – many buyers forget about appreciation (my 2025 estimate: 4.1%) and its impact, how they’ll need to borrow more money if they wait but want to keep the same LTV. 

Then, when rates do come back down, demand will go up. NAR estimates that for every 1% drop in rates, there are 5 million more eligible buyers. Not all of them will buy, but those who do will make inventory tighter and move prices higher. Remember, “date the rate, marry the home.” 

Here’s a quick example of a $700,000 home, with 20% down. If a client bought today with a 1% higher rate (let’s say 6.875%), there would be a cost, roughly $182 per month, or $2,184 over the next year. And when rates come down 1% to 5.875%, there would be a cost of around $3,500-$5,000 to refinance, depending on where the property is located. To be safe, we’ll use a higher estimate for refi costs. 

The cost to “date the rate” is as follows: 

• Monthly cost: $182 

• Yearly cost: $2,184 

• Refi cost: $5,000 

• Total: $7,366 

That might seem like a lot, but the benefit of buying a home now is that your clients will see 4.1% appreciation on that $700,000 home. That means they’d gain $28,700 in appreciation over the next 12 months, and even when factoring in the cost of buying now, they’d ultimately be better off by $21,334.  

Coming Soon: No More Medical Debt on Credit Reports 

Earlier this month, the Consumer Financial Protection Bureau (CFPB) finalized its rule barring medical debt from being included on credit reports, potentially freeing up billions in credit for clients otherwise held back from homebuying due to high medical bills. 

The rule will go into effect 60 days after publication in the Federal Register, the official daily publication for rules, proposed rules, and notices of Federal agencies and organizations, as well as executive orders and other presidential documents. I’ll let you know more details when I have them! 

I’m looking forward to a great year for all of us. Call me with any questions!