Waiting for Interest Rates to Drop? Here’s What Arizona Buyers Need to Know
I hear it all the time:
“I want to buy a home, but I’m waiting for interest rates to come down.”
And I completely understand why. Your interest rate matters. Your monthly payment matters. Affordability matters.
But there is another side of today’s real estate market that buyers need to understand:
Right now, buyers have negotiating power.
For the past couple of years, the Phoenix-area market has shifted significantly from the frenzy we experienced when buyers were competing against multiple offers, waiving contingencies and doing almost anything they could to get a home.
Today, buyers generally have more choices and that changes the conversation.
What does “buyer power” actually mean?
Depending on the home, seller and terms of the offer, today’s buyers may have opportunities to negotiate things like:
- Purchase price
- Seller-paid closing costs
- Seller concessions that may be used toward an interest-rate buydown, subject to loan guidelines
- Repairs after the home inspection
- Closing dates and other contract timelines
- Other terms that can make the purchase work better for them
Seller credits toward closing costs can be negotiated as part of a transaction, and discount points can be used to reduce a mortgage interest rate. The exact options and limits depend on the buyer’s loan program and lender.
That is why I don’t want buyers looking at today’s interest rate in isolation.
“But what if rates come down?”
They might. They might not. And none of us can tell you exactly when or by how much.
But let’s look at the other side of that possibility.
There are many buyers sitting on the sidelines waiting for the same thing.
If mortgage rates decline enough to bring significantly more buyers back into the market, increased demand could also mean more competition for desirable homes.
And with more competition, some of the negotiating leverage buyers have today could change.
The home where a seller might consider contributing toward your closing costs today could receive multiple offers in a more competitive market.
The seller who is willing to negotiate repairs today may have less incentive to do so when several buyers are interested.
The property you have time to think about today might move much faster in a different market.
A lower interest rate sounds great — but it doesn’t automatically mean you’ll get the better overall deal.
The interest rate is important. So is the entire transaction.
Let’s say you purchase a resale home today with a rate around 7%.
Instead of focusing only on that number, we look at the entire picture.
Can we negotiate the purchase price?
Can we ask the seller for concessions?
Can those funds, if permitted by your loan program, help reduce your upfront closing costs or be applied toward a rate buydown?
Does the seller have flexibility on repairs?
Is there an opportunity to negotiate terms that would be much harder to get in a highly competitive market?
My job isn’t simply to help you find a house. It’s to look at the whole transaction and figure out how we can make the numbers and terms work in your favor.
And if the interest rate is still your biggest concern…
Let’s talk about new construction, too.
Builders frequently offer financing incentives, closing-cost assistance and promotional rates on certain homes and loan programs. Those incentives can change quickly, which is another reason it’s worth looking at your options instead of assuming you need to wait.
New construction isn’t right for every buyer, but for someone whose biggest concern is monthly payment or interest rate, it absolutely deserves to be part of the conversation.
So, when is the best time to buy real estate?
There’s an old saying:
The best time to buy real estate was 20 years ago. The second-best time was yesterday.
I don’t believe that means everyone should run out and buy a house today.
I believe the right time to buy is when the numbers, the home and your personal situation make sense.
But there’s a big difference between deciding that now isn’t right for you after looking at the numbers and sitting on the sidelines because you’re waiting for the “perfect” market.
There will always be something.
Higher rates. Higher prices. Lower inventory. More competition.
Trying to perfectly time all of those things is nearly impossible.
You don’t have to be “ready” to start the conversation.
This may be the most important part.
Your first step doesn’t have to be making an offer.
It doesn’t even have to be getting in the car and looking at houses.
Your first step can simply be a conversation.
Tell me where you are. Tell me what you’re worried about. Tell me what you’d ideally like your monthly payment to be and what you’re hoping to accomplish.
If you’re ready now, we’ll put together a strategy.
If you’re six months away, we’ll make a plan for the next six months.
If you’re a year away, we’ll figure out what needs to happen between now and then.
You don’t need to have everything figured out before you call me. That’s what I’m here for.
The market doesn’t have to be perfect for there to be an opportunity.
Sometimes the best opportunity is understanding what you can negotiate while everyone else is still waiting.
Katie Jean Busch
REALTOR® | AZ Performance Realty
Serving Arizona’s West Valley