Should I Buy Now And Avoid Higher Interest Rates?

This is a common question I get. Potential home buyers will worry that rates are going to spike, after all, “how long can they stay this low,” goes the logic. So some buyers assume they should buy now, at any price, and avoid a future rate increase. I am not sure how long rates can stay low, they have been low for almost two decades in Japan! But, I thought for fun, we’d look at some different numbers. Keep in mind the below are based off of broad assumptions of my own:

Buying a three bedroom house today, in the Washington DC Metro area in a good neighborhood, let’s assume costs $700,000. Further, let’s say the buyer is ecstatic to get a rate of 4.875% on a 30 Year Fixed Rate mortgage, and that they have a 20% down payment. Should the buyer be ecstatic? Read the rest of this entry »