Falling rates may boost home prices, and higher prices could be bigger than the savings you’d gain from the rate drop.

Are you holding off on buying a home, hoping that interest rates will drop? While this might seem like a good plan, it could end up costing you more in the long run. Waiting for rates to fall could backfire, leaving you with higher prices and more challenges.

Rising prices can wipe out savings from lower rates. Waiting for lower interest rates often increases the number of buyers, which drives up home prices due to higher demand. The resulting price rise can offset the benefit of lower rates, potentially making a home more expensive than it would have been if you had bought earlier at a slightly higher interest rate.

Appraisal gaps. Waiting to buy a home when prices are rising can lead to an appraisal gap. This occurs because appraisers base their value on past sales, making it hard to justify a quickly increasing purchase price. If a home appraises lower than the agreed-upon price, the buyer must cover the difference in cash.

Increased competition can drive prices higher. Falling interest rates attract more buyers, intensifying competition. This can trigger bidding wars and quickly drive up home prices. Consequently, despite lower interest rates, increased competition may raise your overall buying cost.

It’s important to plan carefully and make a move when you find a home that fits your needs. Even with interest rates at higher levels, you might still get a good deal if you act quickly. Talk to a real estate agent, get pre-approved for a mortgage, and look at homes now before prices rise even more. Call us at 312-818-2978 or email us at [email protected] to discuss your homebuying strategy today!

Realtor, Chicago & North Shore — a top real estate expert serving Chicago, the North Shore suburbs, and the West suburbs of Chicagoland.