5 Reasons You’ll Regret Waiting for Rates To Drop Before Buying a Home

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After hitting historic lows during the coronavirus pandemic, mortgage rates have remained stubbornly high for a number of years. This has helped contribute to something of a stalemate in the housing market, as many prospective homebuyers have chosen to delay purchasing a home in hopes that rates will eventually come down. On the surface, the strategy sounds prudent: wait for cheaper financing, then buy.

However, for many households, waiting for rates to drop is quietly becoming more expensive than buying at today’s rates and refinancing later. Between opportunity cost, inflation and rising housing expenses, delaying a home purchase can carry financial consequences that far exceed the potential savings of a future refinance.

Opportunity Cost Can Eclipse Rate Savings

Mortgage rates are obviously an important component of the total cost of a home and the high rates in recent years have pushed unaffordability to record highs. For this reason, many buyers have simply delayed purchasing a home.

But when buyers wait, they don’t just avoid higher interest payments. They also give up years of equity growth through both principal reduction and home price appreciation. Over time, that missed equity can easily outweigh the difference between a higher and lower interest rate.

According to the Federal Housing Finance Agency’s House Price Index, U.S. home prices have risen by an average of roughly 4% annually over long periods, even accounting for downturns. A buyer who delays purchasing a $400,000 home for just two years at a 4% annual appreciation rate misses out on more than $32,000 in potential home value growth and that’s money that can’t be recovered later.

Lower Mortgage Rates Don’t Always Mean Lower Home Prices

Many buyers assume that falling mortgage rates will automatically lead to lower home prices. Historically, that relationship often works in reverse, per data from Freddie Mac. Lower rates tend to increase affordability, which brings more buyers into the market. When demand increases, especially in markets with limited housing supply, prices typically go higher, not lower. 

This relationship between supply and demand means that buyers who wait for rates to fall may face higher purchase prices. This could offset much or all of the interest savings they hoped to gain.

Inflation Raises the Baseline Cost of Homeownership

Inflation continues to affect housing costs even when buyers remain on the sidelines.

Construction materials, labor, insurance premiums and property taxes have all risen substantially in recent years. According to the U.S. Bureau of Labor Statistics, housing costs remain one of the most persistent components of inflation. Inflation tends to drive home prices higher over the long run, but even if home prices remain the same — or even fall — the cost of simply maintaining a home rises over time as well. Buyers who wait will likely face higher homeowner expenses, even if prices themselves remain flat. 

Refinancing Is Temporary, but Missed Equity Is Permanent

One of the most important distinctions in the buy-versus-wait debate is flexibility. Buyers who purchase today retain the option to refinance if rates decline in the future. Refinancing can reduce monthly payments, shorten loan terms or both, depending on market conditions. But missed equity growth cannot be recaptured. Buyers who wait cannot retroactively claim appreciation or principal payments they never made. As homeowner equity has historically been one of the largest sources of household wealth in the U.S., according to the Federal Reserve Bank of St. Louis, missing the chance to participate in this equity growth can be costly. 

Rising Rents Increase the Cost of Waiting

Another potentially overlooked cost of waiting to buy a house is rent inflation. If you’re not living in a home that you own, you’re likely paying rent to live in someone else’s. According to the U.S. Census Bureau’s American Community Survey, median gross rents have risen significantly over the past decade, even during periods when home sales slowed. Every dollar you put towards rent represents additional money paid toward housing without building equity. For households planning to stay in one place for several years, rising rents can quietly erode the financial benefit of waiting.

The Bottom Line

Trying to time mortgage rates is a risky strategy, particularly when it delays a long-term housing decision. While future rates are uncertain, the costs of waiting are visible today.

Lost equity growth, higher home prices, inflation-driven ownership costs and rising rents can collectively outweigh the savings of a future refinance. In contrast, buyers who move forward now retain refinancing flexibility while capturing appreciation and building equity immediately.

For households that can comfortably afford today’s payments and plan to stay put, waiting for rates to drop may ultimately cost far more than buying now.

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