LIME REALTY GROUP had an interesting conversation over the weekend with a friend who was talking about long term plans for buying a home.  Without going into too many specifics, we suggested they start looking sooner rather than later.  They thought the market would collapse again and they would get an even better deal than they would if they looked now.  And of course, with that kind of opinion, we don’t want to push anyone or force them to do something they’re not comfortable with.  But the blazing question going through my mind the whole time was…  Do you really want to take the chance?

We talked about the mortgage rate and it’s trajectory over the past year…  It’s still hoovering around 4%.  Yesterday, the rate was 4.0% and today it’s back to 3.99%.  In it’s current state, it’s not making any huge moves in either direction.  We suggested it’s movement really only had one direction to go.  Our friend responded, “That’s what they said in 2007.”  But that’s not true.  

In 2007, when the bubble was bursting, interest rates prior to the burst were going up, up, up.  Afterward, they steadily declined.  So before the crash and after, they had room to go.  Things are a little different nowadays.

Remember this dice game on Price is Right?

In a way, putting off a mortgage because you think the rates will crash again is kinda like rolling a five on this game.  Even if the market crashed again, the rate won’t go below a certain number.  That number most likely being 3%.  Any less would be pointless to a bank or lender to put out so much money.  So with the rate at 3.99% right now, you’re not looking at even a full point of movement if you’re betting the rate will continue to go down.  However, if the rate goes up…  It’s got a long way to go.  And the safe bet is that eventually, that rate’s going to go up.  We could realistically see the rate at 7% within the next two years.

Making a bet on the rate right now is a risky prospect.  If you don’t have a down payment saved, or you’re still working on your credit, you may be forced to wait.  But if you’re in a position to buy, it’s not worth the percentage to risk the rate increasing.  Sure a lower rate can save you money, but a higher rate will cost you more.  And the odds are in favor of a higher rate.

With all of this hoovering around 4%, it’s been a great year to make a move.  We can hope it continues to hold for another year or even two.  But do you really think that will happen?  

And that is why betting on the mortgage rate can be a tricky and costly bet.

Lime is the clear choice for real estate in Southern Utah.  Make the call today!