Experts are suggesting mortgage rates will likely stay above 6% for the long haul, leaving many wondering what’s next. In Sioux Falls, the real estate market often feels like a game of strategy. Will rates go up? Down? Take a detour and grab a latte? While no one can say for certain, an analysis suggests these higher rates are here to stay. What does this mean for future home buyers?
While this news might initially seem discouraging for prospective new home buyers, it presents an opportunity to reconsider what this means for the housing market and your path to homeownership. Instead of focusing on rates alone, let's explore some possible scenarios for interest rates and their impact on the home-buying process. With the uncertainty of future rate changes, it might be worth considering locking in today’s rate, especially if you're ready to make a move now.
Scenario 1: Interest Rates Drop
A decrease in mortgage rates sounds ideal for buyers and can be, but it’s important to look at the bigger picture. Lower rates often invite more buyers into the market, which increases demand and creates competition for available homes. When the competition heats up, home prices tend to rise. This could result in buyers paying more for a home, even with lower interest rates.
For example, if mortgage rates were to drop to 5% or below, increased demand could lead to bidding wars, with homes often selling above the asking price. For instance, waiting for rates to drop could mean entering a more competitive market. A home listed at $350,000 might sell for $375,000 or more as demand spikes. While a lower interest rate of 5% could save you on monthly payments, the cost of entering a bidding war could push your total investment higher over time due to upfront costs and opportunity loss.
By acting before rates drop, you might secure a home at a more favorable price, avoiding the competition and potential overpaying in a heated market. Plus, you could avoid the disappointment of losing out on "the one" due to a bidding war.
Scenario 2: Interest Rates Increase
On the surface, rising rates may seem like a deal breaker, but there’s a silver lining. Higher interest rates often cause hesitation among buyers, leading to reduced competition. This slower market commonly gives buyers an advantage, with sellers more willing to negotiate on price.
If rates were to climb to 7% or beyond, homes that might otherwise sell quickly could sit longer, presenting opportunities for deals. For many buyers, the savings from purchasing a home at a lower price could balance out the higher interest rate. It’s better to lock in today’s rates as opposed to risking them increasing. And let’s not forget, the ability to refinance down the line remains an option.
We get it. This isn’t the ideal scenario, but if you step back and look at the bigger picture, buyers who stay proactive and open to exploring their options could capitalize on less competition, find a seller looking to move fast, and lock in a great deal. It’s important not to get discouraged by higher rates—stopping your search altogether could mean missing out on opportunities that others aren't seeing. Besides, who doesn't love saying they "got a steal" on practically anything they buy?
Scenario 3: Interest Rates Stay the Same
If rates remain steady at 6% or slightly higher, as the article above suggests, the market could start to stabilize. Buyers, sellers, and even builders are adjusting to this "new normal," which could bring a sense of predictability to the housing market.
As more buyers accept these rates and jump back into the market, competition could gradually return. While this won’t create the same frenzy as a dramatic rate drop, it’s enough to make the market competitive again. Buyers may find themselves needing to act decisively to secure a home. Hesitating could mean missing out on a home you've had your eye on. With more homes becoming available in many areas, this could be a great time to jump in and take advantage of a more balanced market before things change again.
Is There REALLY A Perfect Time to Buy
No matter which of these scenarios becomes reality, one thing remains constant: you can always refinance if rates improve in the future. The ability to adjust your mortgage terms down the line provides a safeguard for buyers concerned about locking in at today’s rates.
Ultimately, buying a new home is about more than just interest rates—it’s about finding the right home at the right time for your needs. Whether rates rise, fall, or hold steady, each scenario offers unique opportunities that often balance each other out. With the unpredictability of future rates, locking in today’s rate may also be a wise move. What’s most important is making a decision based on your long-term goals.
If you’ve been watching the market or dreaming of owning a home, now might be the perfect moment to act. At Empire Homes, we specialize in new construction homes that offer customizable finishes and timeless designs, making your decision to buy one you’ll feel confident about for years to come. Our favorite part of homeownership is creating a space where life’s best moments unfold. No matter what phase you're in—whether you're just exploring, have questions, or are ready to take action—we're here to guide you every step of the way.