The Conversation I Overheard on the Blue Trail

I was out at Point Defiance last week — the blue trail, my go-to stretch of maintained trail in Tacoma — and I passed two people deep in a conversation about real estate. One of them was making the case that right now, it's smart to wait for lower rates before buying.

I kept walking. It wasn't my place to butt in. 

But I've been thinking about it ever since. So I'll lay out my case here.

The appeal of waiting is obvious. Rates sit at 6.30% today. Many think they'll drift lower — possibly into the high 5s by the end of the year. Why buy at 6.30% when you might get 5.9% in six months? It sounds like prudent patience.

Here's the problem with that reasoning: it assumes the price of the house stays the same while you wait.

It almost never does.

When rates drop, buyers who've been sitting on the sidelines come back to the market. More buyers chasing the same houses means prices go up. It's not a complicated mechanism — it's just supply and demand doing what supply and demand does.

Right now, Pierce County has about 20% more inventory than it did a year ago. Sellers are negotiating - not in every case, but in many.   Buyers have leverage today that they simply won't have in a lower-rate environment when more buyers come back to the market.

Let's look at the actual numbers. On a $485,000 Tacoma home with 20% down, your principal and interest payment at today's 6.30% rate is about $2,400 a month.

Now say you wait seven months, rates drop to 5.9%, and home prices tick up a modest 4% — which is plausible if demand picks back up. Your payment? Around $2,393. You've saved nine dollars a month — and you need to bring an extra $3,900 to closing to cover the higher purchase price.

What if prices hold completely flat? Then you save about $100 a month. But you've paid seven months of Tacoma rent in the meantime — call it $15,000 or so — and at $100 a month in savings, it takes you nearly thirteen years just to break even on the waiting.

The math doesn’t point to the “wait” strategy as the winning choice.

The other thing people forget: if rates drop significantly after you buy, you can refinance. People do it all the time. What you cannot do is go back and retroactively negotiate a lower purchase price after home values have climbed. The rate is adjustable, in a sense. The price you paid is not.

I'm not pretending to know exactly where rates land by December. Nobody knows that — there's enough uncertainty in the world right now to humble even the most confident prognosticators. But the waiting strategy only works cleanly if you assume prices stay put. And that's a big assumption.

The Takeaway: Buying when inventory is high and sellers are negotiating is a better position than buying when rates are low and everyone else is competing for the same house. The blue trail is excellent for thinking these things through. Less excellent for explaining mortgage math to strangers.

If you're trying to work out what these numbers look like for your specific situation — your price range, your down payment, your timeline — we're happy to run through it. No pressure, just arithmetic.

Tom Hume is a Realtor with the Hume Group at Windermere Professional Partners in Tacoma, WA.