Mortgage Rates Are Up Again. What Does That Mean If You’re Trying to Buy or Sell a Home?

If you’ve been waiting for the housing market to finally calm down, you’re probably starting to wonder exactly how long you’re supposed to wait. For years, we’ve heard some version of the same advice: don’t buy yet, prices are too high. Wait for rates to come down. Wait for the market to crash. Surely these houses can’t keep getting more expensive.

And yet here we are. The crash everyone keeps predicting hasn’t happened, the homes we thought were overpriced three years ago somehow look like a deal today, and mortgage rates have made buying even more expensive.

Now, after finally starting to come down, rates are creeping back up again. At some point, “just wait” stops feeling like much of a strategy, especially when no one can tell you exactly what we’re waiting for.

So, how did we get where we are today after another interest rate hike?

When mortgage rates started rising, the assumption was that higher borrowing costs would eventually push home prices down. But there was another side to the equation: millions of homeowners already had mortgages at 2, 3 or 4 percent and weren't particularly interested in trading them for a new mortgage at 6 or 7 percent. Many stayed put, fewer homes came onto the market, and the shortage of available homes helped keep prices higher than buyers hoped. Now more homes are making their way onto the market, but buyers are dealing with a different problem. Even when the price of a house hasn't changed, the monthly payment attached to it has.

I'm seeing a little of this play out in real time after recently listing a duplex. It has been sitting longer than I expected, and when I talked with my realtor about what she was seeing, she mentioned that four of her deals had fallen through after rates increased. That conversation put something into perspective for me: when we hear that mortgage rates moved up, we're usually talking about a percentage on a screen. In real life, it can mean someone who was prepared to buy a house a few weeks ago suddenly has to decide whether that same house still makes sense.

And when enough buyers start having that conversation, sellers feel it too.

Homes that might have disappeared from the market in a weekend a few years ago are taking longer to sell, and buyers who are still shopping have more reason to be selective. If you tried to buy during the frenzy a few years ago, you probably remember how ridiculous it could feel: tour the house, make an offer immediately, compete with a dozen other people and hope no one was willing to waive every contingency known to man. Today's market may be more expensive to finance, but less competition can give buyers something they didn't have much of then — time and, in some cases, negotiating power.

A house that has been sitting for several weeks may come with a seller who is more willing to talk about price, closing costs, repairs or other concessions. None of that makes a higher mortgage rate disappear, but it does matter when you're looking at the entire cost of buying a home. Sometimes the opportunity isn't the lowest interest rate. It may be the ability to negotiate a deal you wouldn't have been able to touch when everyone else was fighting for the same house.

Sellers are adjusting too. The pandemic era market conditioned us to think that if a house didn't sell immediately, something must be wrong. But selling a home has not historically meant listing it on Thursday and collecting ten offers by Sunday. A more cautious buyer pool may simply mean waiting longer, although “the market is slow” isn't a reason to ignore what buyers are telling you. If comparable homes are selling and yours isn't, there may still be something worth reconsidering.

Which brings us back to the advice we've been hearing for years: just wait.

Waiting may absolutely be the right decision for you, but waiting doesn't guarantee a better market. If mortgage rates fall, borrowing becomes cheaper, but some of the buyers sitting on the sidelines may come back too and suddenly you're competing with them. If rates remain higher, financing costs more, but you may have more room to negotiate. There is almost always a tradeoff.

Maybe that's a better way to approach this market. Instead of asking when everything will finally be perfect, look at what the market in front of you gives you and what it asks you to give up. The right time to buy or sell isn't determined by a headline, and it certainly isn't determined by someone on social media predicting the next housing crash. It depends on your numbers, your options and what you're actually trying to accomplish.

Because building equity isn't about perfectly timing the market. It's about understanding it well enough to recognize when an opportunity makes sense for you.