What Home Buyers Should Know Before Waiting for Lower Mortgage Rates

Should you buy now, or wait for a better time?

I hear this question from buyers in Livingston and Millburn all the time, and I understand why you'd ask it. Putting your money into a home is a huge decision, and nobody wants to look back and wish they'd waited for a lower rate or a better price.

A study by AD Mortgage looked at 23 years of housing data across all 50 states and DC, comparing what happened when buyers purchased right away against what happened when they waited two years. 

Buying now won in 61% of those scenarios.

I want to walk you through what this study found and what it could mean for your own decision.

What the Study Actually Found

AD Mortgage compared two paths for every state and year from 2000 to 2022: buy a home now, or wait two years and buy later. For each scenario, they compared the same core numbers:

• The home price

• A 15% down payment

• The monthly mortgage payment at that year's average rate

• For the waiting scenario, two years of savings set aside at 10% of household income each year

Whichever path cost less overall counted as the winner for that state and year. Across every state and year combination, buying now came out ahead 61% of the time.

The win rate wasn't the same everywhere. Here's how two very different markets compared:

• California and Florida: buying now won 74% of the time, the highest in the study

• West Virginia: buying now won only 39% of the time, the lowest in the study

Based on AD Mortgage’s state-level data summary, buying now beat waiting in NJ 65% of the time from 2000 to 2022. And in 2022, buying now beat waiting in every state. 

Why Waiting for Lower Rates Doesn't Always Pay Off

Ask any buyer why they want to wait, and rates usually come up first. And it makes sense on the surface: if rates drop, a home costs less to finance, so waiting should pay off if there’s good reason to believe rates will be dropping soon.  

The study found two stretches where that assumption fell apart. Here's what happened in both:

• From 2000 to 2002, the average rate fell from 8.05% to 6.54%, and buying now won only 34% of scenarios

• From 2013 to 2015, the average rate moved from 3.98% to 3.85%, and buying now in 2013, the higher-rate year, won 84% of scenarios

A lower rate two years from now doesn't erase what happens to home prices and your savings in the meantime. 

Both examples show the same pattern: the math depends on more than the rate alone.

The Winning Strategy Changed Almost Every Year

If you're hoping for a clear signal on when to buy, the data won't give you one. The strategy that won flipped again and again over the 23 years in this study. Here's how the win rate for buying now moved over the years:

• From 2003 to 2005, buying now won 94% to 100% of scenarios

• From 2007 to 2010, waiting won every single year, tied to the housing crash

• From 2015 to 2017, buying now won 92% to 100% of scenarios again

• In 2018, buying now won only 2% of scenarios, tied to rates falling fast into 2020 before home prices caught up

• From 2020 to 2022, buying now won 100% of scenarios, all three years

No economist called these swings ahead of time. Waiting for the market to send a signal means betting on something nobody, not even professional forecasters, can predict with confidence.

The Real Question is Whether You’re Ready

This study leaves out a few things on purpose: home equity, price appreciation, property taxes, insurance, and maintenance costs. It's a straight comparison of purchase and financing costs, not a full picture of owning a home.

Prices and rates will keep moving whether you buy now or later, and nobody can tell you exactly where they'll land in two years.

What you can control is your own readiness. Readiness comes down to a few things:

• Your savings

• Your budget

• How comfortable you feel with the numbers in front of you

Financial readiness predicted good outcomes more than market timing did, across the full 23 years.

So, I'd encourage you to ask yourself one question instead of watching rates or prices: does a home fit your budget today?