Some of the advice mortgage professionals and real estate agents give their clients is dependent on market factors that change daily. It’s true — mortgage rate quotes can even change by the hour at times! However, some of the advice they offer rings true no matter how the market ebbs and flows. One of those bits of wisdom that is true whether rates are high or low is “Never try to time the market.”
Mortgage and real estate advisors don’t just say these things because they’re hungry for their next deal and not because they like to hear themselves talk, either. There is one simple principle at the heart of this advice. Home values have traditionally — except in times of extreme economic hardship (think the 1930s or right after the downturn in 2008) — done one thing: appreciate. Usually, that general trend of home value growth means that homeowners’ growing equity stake as they repay their mortgage outpaces any additional cost imposed by rate.
Simply put, in the long run, waiting a year in the hopes that mortgage rates dip a percentage point or staying out of the market for multiple years and hoping for rates to return to below 5%, doesn’t save you money at all. In fact, it costs you money. If home values continue to rise while you wait, you not only miss out on those equity gains, but you also put yourself in a situation where your monthly rent payments, which have also increased in recent years in most markets, are helping your landlord gain equity in their properties!
Consider these examples of initial principal and interest payments on a hypothetical 30-year fixed-rate mortgage of $400,000.* In the first example, we’ll compare approximate monthly principal and interest payments you may see in today’s market (6.60% as of Dec. 12, 2024, according to Freddie Mac) with a mortgage rate drop of one full point and an assumption of a 5% value increase. That’s a decent barometer for what could happen in a year’s time, but remember, both rates and home values can be affected by unforeseen events in the future none of us have control over!