It's a popular question people are asking me these days. Here are my answers...

Will rates at some point be lower than they are today? Yes. What most people really mean when they ask me this question, though, is whether rates will go back down into the 4s and 3s. That answer is no.

Several times in the past 12 months, rates have swung up or down a full point in the span of just 30 days. In an industry where the typical transaction takes 41 days to complete, you can see how "timing the market" is typically a losing battle.

If you're day trading stocks that's one thing, but you're talking about a long-term investment acquisition. Better to lock in an investment purchase with a strong cap rate when you can, knowing that you can reduce financing costs in the future and will begin reaping the benefits of owning the investment property now as opposed to some undetermined time in the future.

As for waiting for prices to fall, you might be waiting a long time. Values in the Chicagoland metro area have flattened out on a 12-month average due to the last 4 months being down a hair (1-2%) compared to the same months the year prior. But at the same time there is an all-time record low number of homes available in this marketplace and it would take quite a bit more dropoff in demand to allow prices to fall by any noticeable amount. And the opposite is what's actually happening - the spring seasonal buyer bump is pushing us back into multiple offer, above-asking scenarios as the norm.

Buy a property that makes enough sense today to get into it, and know that you will benefit from near-term appreciation due to low inventory and can refinance sometime in the future at a nominal cost to improve net cash flow. It does help to talk to your lender about temporary (2-1 and 3-2-1) and permanent rate buydowns, evaluate other possibilities such as the 5/1 ARM, and keep an eye out for other creative financing options to make the most of the current environment. But don't try to time the mortgage market like you would time a day-trade; it just doesn't work out well.

Chicago, Illinois

5 Votes