If you've been considering buying a home, are you better off waiting for mortgage rates or home prices to fall before jumping into the market?

In this blog post I'm going to show you which has a bigger impact in terms of your monthly mortgage payment and also reveal where to find the absolute best buying opportunities in today’s real estate market.

Watch the following video, or continue reading below, to learn more:

Without a doubt, the real estate market is full of challenges right now for anybody wanting, or considering, buying a home.

Mortgage rates are high, home prices are high, and there's tremendous uncertainty and anxiety about where the housing market is heading. As a result, I found that many buyers have adopted a wait-and-see attitude, which is completely understandable.

When faced with uncertainty, people tend to have a habit of freezing, but the truth is nobody knows where this market is heading in terms of home prices or mortgage rates.

Predictions about both have been all over the place for the last couple of years.

Mortgage Rates vs Home Prices

The vast majority of home buyers I've spoken to, who put their home buying plans on hold, have done so in the hope that home prices will fall, but is that the smartest decision?

The following chart shows the impact both mortgage rates and home prices have on your monthly mortgage payment. Using a $600,000 loan amount and a mortgage rate of 8%, I’ve circled the monthly principal and interest payment.

Assuming your home loan amount fell by 10%, due to home prices falling by 10%, here is the impact on your monthly mortgage payment:

Not bad!

A 10% decline in home prices, with all other terms remaining the same, would result in your mortgage payment dropping $441 per month.

But home prices haven’t fallen. In fact, here in Frisco, they are up 2.8% year-over-year as of October 2023.

While the focus is most often on home prices, mortgage rates are actually what move the needle more in terms of affordability.

Using the same example, and going back to the $600,000 loan amount, look at what happens to the monthly payment if mortgage rates fell by 2%:

The monthly payment is reduced by $806, almost double the savings of a 10% price reduction!

The Best of Both Worlds

Ideally, falling mortgage rates and falling home prices would create the ideal opportunity for buyers, but is that realistic?

As I mentioned above, nobody know for sure what is going to happen with mortgage rates or home prices. Many potential home buyers still believe prices are about to fall based upon projections that were made late last year, but even those expert forecasts are all being revised.

Here is a chart showing the original, and revised, expert home price forecasts:

As you can see, we went from forecasts of home prices decreasing anywhere from 0.6% to 20% in 2023, to forecasts that home prices will actually end the year up anywhere between 0% and 6%.

Frisco Home Prices Have Already Fallen

If you continue to hope that prices here in Frisco will fall, the truth is they already did.

Home prices in Frisco peaked in April 2022, declined through October 2022, stabilized, then started trending upwards again this past spring.

Best Buying Opportunities

Although home prices are not currently falling, and none of the leading indicators show price declines on the horizon, hope is not lost.

As shown above, mortgage rates move the needle more than home prices and the current market does offer unique opportunities to obtain below market financing, especially if buying new construction.

Click Here to See All Current New Construction Opportunities in Frisco

With overall sales down year-over-year, the new home builders are willing to deal to keep sales moving. In addition to often being negotiable on price, the new home builders are offering financing incentives that allow you to obtain below market fixed rate mortgages. This is especially true on close-out communities and quick move-in homes.

To learn more about the best incentives and current opportunities available, let’s Schedule a Call.