Here’s why our low interest rates mean you shouldn’t wait the market out.
Recently, a lot of clients have asked me, “Should I wait for a market crash before I buy?” Today I want to answer that question and give you an overview of where our market currently is .
Let’s take a look at an average Chicago condo to figure out what you should do. The median price for a two-bedroom, two-bath condo is currently $420,000, and interest rates are around 3.5%. If the market were to crash, we could expect a 10% drop in price, leaving that condo at $378,000.
So you should wait for a crash and save $42,000, right? Not exactly. If the market is bad, it’s very likely that interest rates will go up to compensate. Even a rise from 3.5% to 4.5% would mean you’re paying more on your monthly mortgage for the $378,000 home than the $420,000 one.
The moral of the story is this: Interest rates have a much higher impact on your buying power than prices do. None of us want to overpay, but we also can’t predict when and how a crash will happen. You could sit around waiting for prices to drop only to have interest rates sneak up on you and lower your buying power.
Appreciation has also been very consistent in recent years. Even when there’s a correction, the market adjusts, and homes continue to appreciate at a steady pace. If no market crash ends up coming, you could find yourself looking at more expensive homes and higher interest rates.
If you or anyone you know is looking for real estate-related help, please reach out to me via phone or email. I am always looking to help.