Should You Wait for Rates to Drop to Buy in Phoenix?

Waiting on interest rates might be the wrong question entirely. Two better questions will tell you whether now is your time to buy.

If you’re waiting for interest rates to drop before you buy a home in the Phoenix area, I want to offer you a better question, two of them, actually. My team and I have sold homes for 25 years, and I’ve ridden this market up and down through everything. We had years of low rates that people got used to, then rates climbed quickly and have stayed up. 

So the natural question: should I just wait for them to come back down? I won’t be one of those Realtors who say it’s always a good time to buy and that real estate only goes up. That’s not true. 

Let me walk you through the two questions I actually encourage our clients to ask. The first is completely emotional. The second is pure math.

Start with the emotional question: what do you actually want? Do you want to own or rent? There are real upsides in the feeling that this place is yours to make your own. And real downsides, because everything that breaks is now your problem, not the landlord’s. But we often underweigh the emotional side. We tend to over-index on the math instead of thinking through what’s best for my family. 

When we bought our home about a year ago, rates were high, and it was a big payment to stomach. But as I weighed it and prayed about it, I landed on this: it’s going to be an awesome place to raise my family, and I haven’t regretted it a single day. Even when that big payment comes due, it’s okay, because I love being there. So my first piece of advice is always to ask what your life is telling you. Over long periods, home prices go up anyway, and there’s enormous value in buying a place you truly love.

Then comes the math: it’s not really about interest rates. It’s about home prices. First, can you manage the payment? Let’s assume you can, that it’s maybe similar to renting, maybe a little more, but not wildly out of line. If the payment works, the decision comes down to this: am I buying a sinking ship, or one that’s rising with the tide? 

The good thing about rates is that whatever you get today is the highest you’ll ever pay on that loan. Unless you take an adjustable-rate mortgage, which I’m not sure I’d do right now, your rate can only get better, since you can always refinance. 

So you marry the house price, and you date the rate. The dating part you can change later. What you’re marrying is the price of the home.

The real question: will your home be worth more or less a year from now? That varies a lot across the Valley. The market is fairly easy to predict six months to a year out; past that, it’s a guess. New builds in Goodyear, Buckeye, or Casa Grande could be worth less a few months from now, while prices in Paradise Valley or Scottsdale have been climbing for a while. The tool we lean on is the Cromford Market Index, a Phoenix-area index we pay to access as Realtors. It boils the market into a single number: 100 is the baseline, with appreciation around 2% to 3%. Above 100, prices are rising; below 100, they’re falling. 

Tell us where you’re thinking of buying, and we can check the Cromford Index for that area and tell you where you’ll likely stand a year out.

So don’t fixate on interest rates. Focus on whether values are going up or down in your part of town, and do some honest soul-searching about what’s right for you. If you’d like us to check the Cromford Index for your area, or help you find a property with a little work so you build in equity from day one, we’d be glad to. 

Drop a comment, email me at john@gluchgroup.com, call us at 480-378-6700, or visit gluchgroup.com.