Buying Smart in Today's Market: Stop Waiting for the Perfect Rate

Are today's interest rates really keeping buyers out of the market? Garrett and Shelby explain why waiting for lower rates can cost more in the long run and why homeownership is about building wealth—not chasing yesterday's rates.

Transcript

Speaker 1 0:00

And welcome to the Idaho Life Show, Real Estate in Community on KIDO. I'm Garrett Thill, broker of Idaho Life Real Estate here in Meridian. And as always, we have my partner in crime sitting across the table from me, Shelby Matson, who's our VP of operations and one of the top producing agents in the Treasure Valley.

Speaker 0:17

Good to be here, Garrett. And I want to say up front, today's topic is the conversation I think every buyer in ADA in Canyon County should be having right now. And almost nobody is having it.

Speaker 1 0:29

Yeah, and that's exactly where I want to start. So today we're gonna be talking about interest rates, which has been the hot topic, I think, around the kitchen table these days.

Speaker 0:36

Oh, yeah.

Speaker 1 0:37

And specifically what to do when the rates aren't the rates that people remember back from pandemic. Remember that? Oh, it's pretty nice back in 2020, 2021. And and why that's actually not the obstacle that most that most folks think it actually is.

Speaker 0:53

100%. If I had a dollar for every time someone told me I'm just waiting for rates to drop before I buy again, I could probably pay cash for a house in Eagle.

Speaker 1 1:03

Right? Honestly. Yeah, we we hear that all the time. You know, Shelby, the the low twos and the low threes that we saw during the pandemic, those are what we call once-in-a-generation thing. I mean, the Federal Reserve was pumping liquidity into the economy in response to it, it was a national emergency. And we're probably not gonna see anything like that ever happen again in our lifetimes.

Speaker 1:27

I would highly doubt that. You're right. And it left a cultural fingerprint on every buyer. The number, 3%, got baked into people's brains as what normal is supposed to look like. And historically, it's just not the case.

Speaker 1 1:42

It's not. I mean, if you pull up the long chart from the Freddie Mac, they've been tracking the average 30-year fix since 1971. So you just look that up on online. We we pulled it up here before and just kind of pulled out once in a while to remember. You know, the historical average is somewhere in the high sevens, low eights. So today's rates, I mean, they're not that high. I mean, it's their average is what we're calling regular or normal right now.

Speaker 2:04

Yeah, as a matter of fact, Garrett, my parents bought their first house at 13%. I'm not surprised. They were thrilled. I mean, they went out to dinner to celebrate that rate.

unknown 2:13

Yeah.

Speaker 2:14

Yeah.

Speaker 1 2:14

My grandparents remember them telling me that they bought in the mid-teens, and there there were stretches in the early 80s where they were being, you know, under 15% felt like they were winning a lottery, which is kind of sad, but it's true.

Speaker 2:26

It's so true. And here's the part I want listeners to really sit with. Those same people built generational wealth on those mortgages at 13%. Even with those rates. That's right. Not in spite of the rate, because of what owning the house did over time.

Speaker 1 2:41

Yeah, yeah, that makes sense. You're exactly right. And this is the difference. You own the house. You know, yes, you have a rate attached to it, but you own that home.

Speaker 2:50

That's so true. And yes, that's it right there. The rate is temporary, and in fact, you can change it. You can refinance it if rates go down, you can buy it down at closing, you can recast it later if you put extra money down. But the house, that address, the lot, the floor plan, the equity, the neighborhood your kids grow up in, that part is permanent.

Speaker 1 3:12

That right there, you hit it. Yeah. And here's the thing that kind of it gets me. The weight that buyers are in right now, the all get to it when rates drop weight, that kind of weight. For a lot of folks, that's been going on for, you know, three, almost four years.

Speaker 3:28

It really has. Four years of paying somebody else's mortgage with nothing to show for it.

Speaker 1 3:32

Yeah. So let's actually, I just was kind of curious about this, you know, earlier this morning on Saturday. Let's actually do the math out loud because I think people need to hear a number, right? To kind of put something physical to it. So a three-bedroom rental and meridian or an amp right now, let's say $2,200 a month, right? Would you agree that's fairly normal?

Speaker 3:50

I do.

Speaker 1 3:50

Some are higher.

Speaker 3:51

Yep.

Speaker 1 3:51

Two years of waiting, that's $52,800 handed to a landlord.

Speaker 3:58

Whoa. And not a single dollar of equity, right? No tax deduction, no appreciation. And the house you were going to buy went up in value the entire time you were waiting.

Speaker 1 4:09

Hurts me to even talk about it.

Speaker 4:11

Because it's painful.

Speaker 1 4:12

Which is the second half of this because in the Treasure Valley, Boise, rating equal star, you know, you know, all the way out through Nampa and Caldwell, appreciation has not stopped while folks have been on the sidelines.

Speaker 4:25

Not the wild appreciation we saw in 2020 and 2021. You know, the party's over. That's not happening. But steady, single-digit, consistent year over year.

Speaker 1 4:35

That's right. So the $400,000 home that you paid, you know, that you said no to two years ago, that that house is $440 now. It is. You know, and the loan that you'd be riding on that extra $40,000 is going to absolutely kind of dwarf and really small down that any monthly savings that you would have gotten by waiting for maybe a quarter point on that rate.

Speaker 4:58

This is where buyer math breaks down. People focus on the rate as a number, six and seven eighths, seven and one-fourths, and they never actually run the payment side by side.

Speaker 1 5:09

Yeah, or the wealth side by side, when you think about that. True. You know, because there's another piece. When you buy, you don't just stop paying rent, you start building equity into it. And that's the key thing I think people don't realize that the principal portion of every payment that you make is going into your pocket. I mean, appreciation is going right there in your in your pocket. And the mortgage interest deduction is going right in your pocket as well.

Speaker 5:32

It's so true. And the cost of waiting every single month keeps stacking on the other side of the ledger.

Speaker 1 5:39

Yes, yeah, not good. So now I want to be fair here because we're not in the business of telling people to buy when it doesn't fit, right? So if you don't have the down payment, if your job situation isn't stable, if the payment, you know, is going to wreck you, we're going to tell you that. All of our agents at Adore Life Real Estate, you know, you guys all have had that same conversation with buyers.

Speaker 6:00

It's so true. We really have, and a lot lately, all the time. Last month, I personally sat down with a young couple with their lender. They were pre-approved, ready to go. And we walked through the payment and and we actually looked at the rest of their financial picture. And I looked over at their lender and then back to them. And I said, You guys, you need six more months. Build your reserves, pay down one more credit card. We'll be here waiting.

Speaker 1 6:29

No rush at all. Whatever's right for them.

Speaker 6:31

It's got to be right.

Speaker 1 6:31

And and that's the right answer for them, right? For everyone, it's different. But for for everybody who's financially ready, who has the down payment, who has the stable income, sitting on the sidelines waiting for a rate that may or may not even come is costing them real money every single month.

Speaker 6:48

I agree. And I want to put a number on the cost of waiting the waiting piece, right? Because I think this is where it really lands. Take that same Rudy and house, $450,000 today, ballpark, and assume it goes up 4% next year. That's an $18,000 increase in price. $18,000 of equity that the buyer who waited just handed to the next seller.

Speaker 1 7:13

Yeah, that's right. And the buyer who waited didn't save $18,000 on the rate. Not even close. You know, a quarter point on a $450,000 loan is roughly about $70-ish dollars per month. So you'd have to wait 20, here's the part that I just did some quick math on here, Shelby. You'd literally have to wait 21 years for the rate savings to catch up to the equity that you missed out on from not buying.

Speaker 7:38

Isn't that crazy? It's wild. Right? 21 years. I mean, wow.

Speaker 1 7:42

Yeah.

Speaker 7:43

And meanwhile, the buyer who acted now is two years into building wealth and this at on that same house.

Speaker 1 7:49

Right, a couple years in already on the mortgage.

Speaker 7:50

Yep.

Speaker 1 7:51

So there's also a piece that nobody talks about, which is the emotional cost. And that's the constant low-grade stress of being in this kind of limbo situation of what's happening in your life, of refreshing Zillow at night, of watching the rates report every Thursday morning, or, you know, basically having that conversation with your spouse for the fourth year in a row about is it time to buy or do we continue to rent?

Speaker 8:16

Yes. And that is very real. And I see it on people's faces when they finally come in to make a move. It's relief almost, genuine relief. They have been carrying this thing, this should we, shouldn't we for years now? And the moment they actually put a plan into motion, you can see it lift right off of them. Boom.

Speaker 1 8:37

It's amazing. It's just this it's this feeling of being free. The dollars are leaving the account every single month. The opportunities is leaving every month. The market is moving every month. Waiting can actually be the most expensive decision that a lot of buyers ever make. And they admit that to us after they after they end up closing, they go, we should have done this a long time ago. But then granted, it's not for everyone at that time.

Speaker 9:00

And there is the buyer who tells themselves, well, I'll just save more for the down payment while I wait. And I get it. But the math on that is brutal too, because for every $1,000 you stack into savings, the house went up two or three, right? You are saving slower than the price is moving.

Speaker 1 9:19

You can't keep up with that. You know, and the down payment percentage is going to be roughly the same, whether the house is 450 or 480,000. You're just not going to be able to catch up and you're losing ground while you feel like you're being responsible. And I and I totally get that.

Speaker 9:34

Yeah. And here's the thing we have not even gotten to yet. And this is the move that I think 80% of buyers in the valley don't even know is on the table. There is a way to bring the rate down. You don't have to take the market rate. The seller can actually help you.

Speaker 1 9:51

I'm excited to talk about that. And that's exactly where we're going to go after the break. Concessions, buy downs, what they look like in real dollars, and why the most underused tool in the market, all that's coming up next.

Speaker 10:03

And we use it every single week with our buyers. It's not theoretical. We're writing it into contracts.

Speaker 1 10:09

Into those contracts. So stick with us. You're listening to the Idaho Life Show, Real Estate, and Community. We'll be right back.