Why Waiting For Rates To Fall Could Be A Bad Idea

It’s easy to think we can time the market. That’s true of stocks, buying and selling real estate, or timing mortgage interest rates.

The unfortunate thing is the only way you know if you bought at the bottom or sold at the top is in hindsight.

And when it comes to interest rates, it’s also easy to forget why historically low rates existed.

The Federal Reserve lowers interest rates in an effort to stimulate an economy they perceive as needing some stimulus. The hope is that lower rates will get people to get off the sidelines and buy not only a house or investment property, but all the goods and services that go with it in order to help stimulate job growth.

One of the common characteristics of an economy that needs an infusion of interest rate optimism is rising unemployment. During the second quarter of the pandemic in 2020, unemployment rates hit 13 percent.  During the Great Recession, unemployment peaked at 10% in October of 2010.

Both instances caused the Federal Reserve to lower rates.

So why didn’t everybody rush out and buy a duplex? They either had lost their job, feared losing their job, or were simply fearful of putting themselves and their families in a precarious financial position.

Too often we mistake falling interest rates for happy days when in reality, they are not a good sign.

If you’re thinking of buying a duplex, but wish rates were different, know this. Most loan products in today’s market offer a low cost refinance option in the event rates drop in a pre-determined amount of time. It may be better to shop now when you know what is actually happening in the economy, rather than speculating about what may never happen later.