Is it a good time to buy a home in this uncertain market?

As we approach the one-year anniversary of the Fed rate hikes that began last March, inflation is not yet clearly showing a clear downward trend, and the U.S. economy is not showing clear signs of an impending recession. There is usually a lag effect from the time that interest rates are increased and how soon the economy begins to slow down in response. One of the biggest questions I get from potential homebuyers is – Where are mortgage rates going?

Mortgage Interest Rates

The markets are uncertain if rates will be dropping or rising in the next months. Some economists are predicting lower rates assuming the Fed’s strategy is working, and others are predicting higher rates assuming inflation may be stubbornly high for longer than anticipated. The single best thing any potential homebuyer can do in times of incredible uncertainty as to where mortgage rates are going is to buy a home with a 30-year fixed-rate loan that is prepayable at any time without any penalty. This protects the homeowner for the rest of their life if interest rates do go up. If rates go down, the homebuyer can refinance to a lower rate. They have 100% protected themselves from rising rates, and they get the full benefit of lower rates when rates drop. This is a win-win strategy to address the uncertainty.

We have seen a lot of market volatility in the first 2 months of 2023 and mortgage rates are about 1/2% higher than they were just a few months ago. We will continue to see fluctuation in mortgage rates until there are clear signs that the Fed rate hikes have done what they were intended to do, tame inflation. Only time will tell.

Stay tuned……..