Why Waiting for Interest Rates to Drop Might Cost You More

Michael Delano | February 24, 2025

If I had a dollar for every time someone told me they’re “waiting for rates to drop” before buying a home, I’d probably own a vacation house in the Bahamas by now. (Sadly, I don’t—but hey, there’s still time…)

I get it, I really do. Interest rates are a huge factor when buying a home, and the first question that gets asked, but it is not the most important question to ask, not even in the top 3 really! No one wants to feel like they’re getting the short end of the stick. But here’s the problem: waiting for rates to drop might actually cost you more in the long run.

1. Home Prices Are Still Rising

While you’re waiting for that perfect low-rate moment, home prices are steadily climbing. Let’s say a home today is $550,000. If prices appreciate by 5% over the next year (which is conservative in many markets), that same home will cost $577,500 next year.

That’s an extra $27,500—and that’s before we even factor in higher property taxes and insurance.

2. More Buyers = More Competition

The moment rates drop, buyers will flood the market like it’s Black Friday at Best Buy. More competition means more bidding wars, which drive prices even higher. (Think $600,000 for the $550,000 today home)

We saw this happen in 2020-2021 when rates were at historic lows. Homes were selling in days, not weeks, often for tens of thousands over asking price. Waiting for lower rates might put you in a situation where you end up overpaying just to beat out the competition.

3. Refinancing Later Could Be an Option

Let’s say you buy now at a 6.9% interest rate, and in a year or two, rates drop to 5.9%. You can always refinance to the lower rate and reduce your monthly payment, but you’ve locked in that lower sales price!

You’re not competing in a crazy bidding war and you started building equity today instead of paying rent (which isn’t getting any cheaper, by the way).

Real Numbers: Buy Now vs. Wait

Let’s break it down with a real example:

Yes, the monthly payment is slightly lower if you wait—but at what cost? You paid more for the home and missed out on a year’s worth of equity growth. $300,000 swing in equity gain and rent paid! Factor in mortgage paid your family wealth accumulation is still $100,000 further along when you buy today.  

The Bottom Line

Whether you buy or rent, you are paying a mortgage, the difference is are you building wealth for your family’s future or your landlords…?

The perfect time to buy a home isn’t about timing the market—it’s about time in the market. If you can afford a home today and it fits your needs, buy now and consider refinancing later.

Thinking About Buying? Let’s Talk.

I’m here to help you make the smartest decision for your situation. If you’re on the fence, let’s chat and see if now is the right time for you. Drop a comment or send me a message—I’d love to help.

Thanks!

Scott