There Is a New Twist to the Cost of Waiting for Rates to Fall

I blog about the cost of waiting for rates to fall repeatedly, but now there is an entirely new twist that I will address at the bottom of the blog.

I. Homebuyers

When potential homebuyers wait for rates to fall, they do not account for all of the additional buyers who flood the market (increasing competition for homes) when rates fall even a little.

We see this play out in real time at JVM, as we get flooded with new applications and contracts when rates fall as little as 1/4%.

As many as 1 million new buyers qualify for homes when rates fall as little as 1/4%, and as many as 3 million new buyers qualify when rates drop 1/2%, per NAR, Freddie Mac, and other sources.

What is different now though compared to years past is how aware buyers are of rate-changes. We see upticks in volume immediately nowadays when rates fall 1/4% or more.

II. Refi Candidates

Interest rates never move in a straight line, and nobody can predict what rates will actually do. This is why we tell borrowers to refinance as soon as it makes sense and not to wait for rates to fall further.

Tens of thousands of borrowers got badly burned in the fall of 2024 when they did not lock in a refi when rates bottomed in September. They all heard the Fed was going to cut and rates were going to fall further… Well, the Fed did cut (a lot), but rates went way up because the Fed does not control long-term/mortgage rates.

Refi and purchase candidates alike should also remember that it is very easy to refinance into a lower rate, should rates fall again after their transaction closes.

III. The New Twist

The new twist is low comparable sales popping up that make a refi impossible.

This has now happened to us several times. We’ll quote a refi rate to a borrower that will save them thousands of dollars, but they still tell us they want to wait for rates to fall further.

Then when rates do fall far enough to meet their goal, their home no longer appraises because low comparable sales surface.

And yes, I realize this somewhat contradicts my “it’s easy to refi” comment above, but these are borrowers who bought years ago and have not refi’d for years.

Our more recent transactions rarely have appraisal issues when we refinance them.