Mortgage rates are the highest they’ve been since the Great Recession. Current 30-year fixed rates hover in the 6 to 7% range. Historically speaking, that’s nowhere near the highest they’ve been (that title belongs to the average in October of 1981 at a sickening 18.82%. Yikes!), but current rates are coming off all-time lows in 2020 and 2021. 

With home prices higher than ever, it is no surprise that homebuyers are waiting patiently for mortgage rates to come down and ease sticker shock. After all, the higher the asking price, the more the percentage matters.

But is it wise to wait for rates to drop?

We think not. As real estate investors, you risk more in the wait than in taking the chance in the market as it is. Here’s why:

5 Risks of Waiting for Mortgage Rates to Drop

Risk #1 – Market Timing

Predicting mortgage rate movements accurately is challenging, even for experts. So many factors are involved that there’s no easy way to guess, let alone guess accurately! Waiting for rates to drop could mean missing out on potential investment opportunities in the present. Additionally, consider pent-up demand. Plenty of people, investors and average homebuyers alike, are waiting for favorable mortgage rates. That means that any rate reductions will reignite buying demand.

And what happens when demand increases, especially in our market with notoriously tight inventory? Prices go right back up – effectively negating the potential benefits of a lower rate.

Trying to time the market? Here’s why it poses a BIG challenge to investors.

Risk #2 – Opportunity Cost

While waiting for rates to drop, you might miss out on valuable investment opportunities. Real estate markets can be dynamic, and properties that meet your criteria may become less available or more expensive over time. It’s so important to invest early and often. Buy-and-hold investing demands time to fully pay off. You can think creatively about this. Buy down your rate. Negotiate. Investigate markets with advantages relative to your financial situation and local market. 

There are ways to make SFR investing work for you, regardless of home prices and interest rates.

Risk #3 – Income Generation Delay

Every month you delay purchasing an investment property is a month of potential rental income lost. The longer you wait, the longer it takes for your investment to generate returns and build equity. If you have ambitions of creating a significant real estate portfolio, you can’t afford to wait. That cash flow is essential; your properties need time to appreciate and maximize equity.

Risk #4 – Potential Rate Increases

Mortgage rates are influenced by various economic factors and can change quickly. Waiting for rates to drop carries the risk of them increasing instead! We don’t know when, how much, or if interest rates will go down meaningfully. You could be stuck waiting for much longer than expected and thus lose out on investment income.

Risk #5 – Market Uncertainty

Economic conditions, housing market trends, and regulatory changes can all impact mortgage rates. Trying to time the market perfectly based on rate movements alone can be risky, as other factors may influence your investment decision. As a long-term, buy-and-hold investor, don’t trap yourself in this cycle of market predictions. The long view makes these minute changes less earth-shattering. You’re not relying on a quick sale or the perfect conditions to buy – which should be freeing!

Why Buy Anyway?

Properties can always be refinanced down the line. There’s room for negotiation. There’s no guarantee that rates, if they drop, will significantly affect the affordability of investment properties. 

Instead of waiting for mortgage rates to go down, focus on the overall affordability of an investment market and properties therein based on your financial situation. Search out ideal market conditions for you and the opportunities that favor your short- and long-term investment goals.

We simply don’t have time to wait. Savvy investors can make the market work for them, even when conditions seem adverse. Keep an open mind and search out opportunities, even if you think they aren’t there!

There are great SFR investment opportunities at your fingertips. Check out REI Nation’s property listings across eleven great markets.

Our Portfolio Advisors at REI Nation make investing in real estate stress-free. Tap the button below to start!