Why a 7% rate might be the best deal buyers have had in years

If you’re heading out to model homes or open houses this weekend, I’m guessing the rate is the thing making you nervous.

Mortgage rates are sitting at 7%. Ouch. It feels expensive. I get it.

The Fed just raised rates for the first time in three years, and every headline makes it sound like the worst possible time to buy.

Before you walk into a single model home, I want you to look at this a different way.

You can refinance a rate. You can’t refinance the price.

Let me show you two buyers, same house.

Buyer A bought in 2022. The house was listed at $550,000. There were multiple offers, so Buyer A went over asking and paid $580,000. The rate was 3.25%. With 20% down, that’s a $464,000 loan and a payment of about $2,020 a month.

Buyer B is buying that same house this fall. It’s listed at $550,000, but it’s been sitting, so Buyer B negotiates it down to $530,000. The rate is 7%. With 20% down, that’s a $424,000 loan and a payment of about $2,820 a month.

Yes, Buyer B’s payment is higher. About $800 a month higher. That’s real, and if it breaks your budget, that matters.

But look at what else is in there.

Buyer B paid $50,000 less for the same house. Put $10,000 less down. And got to do an inspection, ask for repairs, and take their time, which nobody could do in 2022.

And here’s the part that matters most. Buyer A is stuck with that $580,000 price forever. Buyer B isn’t stuck with 7%. If rates come down to 6%, Buyer B can refinance and the payment drops to about $2,540. The price stays $530,000 no matter what.

The rate is temporary. The price is permanent.

7% isn’t the weird number. 3% was.

I’ve been selling homes in this valley for more than twenty years. When I was selling at CityCenter in 2007, rates in the sixes and sevens were completely normal. Nobody thought twice.

The 3% years were the exception. Those rates didn’t come from a healthy market. They came from emergency policy, and they caused bidding wars, waived inspections, and people paying tens of thousands over asking just to get in.

If you’re waiting for 3% to come back, you’re waiting for an emergency.

And the price cuts are happening right now

This isn’t just theory.

Yesterday I wrote about two brand new single story homes at KB’s Cloudbreak Ridge in Summerlin West that just dropped their prices by about $55,000 each. You can read that post on my blog.

And I just released a video on a Taylor Morrison home at Ashland, also in Summerlin West. It’s ready now, and it’s $150,000 off the price. You can watch the full tour on my YouTube channel.

Across the valley, almost half the homes for sale have cut their price, and about 7,590 single family homes are sitting with no offer at all.

That’s leverage buyers haven’t had since before the pandemic.

What to ask at the model this weekend

If you’re walking into new construction, don’t just ask about the price. Ask about all of it.

Ask if they have standing inventory. Finished homes are where builders are most flexible, because every month a home sits costs them money.

Ask what they’ll do on the rate. Builders can buy your rate down, sometimes a lot. Right now, builders across the valley are offering rate buydowns, closing cost help, and price cuts, especially on homes that are already finished.

Ask about closing costs and design credits.

And ask whether they’d rather move the price or the rate. The answer tells you a lot about how much room you have.

One more thing before you sign in anywhere

Builder registration rules vary by builder. In many communities, once you sign in on your own, your options for having your own agent represent you can get complicated. And nobody explains that at the door.

The builder’s sales agent works for the builder. That’s their job, and many of them are great at it. But you should have someone on your side too.

Builders are ready to make deals

As we head into the fourth quarter, builders are ready to make deals. They want homes closed before the end of the year, and standing inventory is at the top of their list.

That could make this your moment.

Just don’t buy for this year. Buy for the next ten. The rate can change. The price and the home you pick will stay with you a lot longer.

Play the long game.

Need to work it out? Let’s talk.

Every buyer’s numbers are different. What makes sense for you depends on your budget, how long you plan to stay, and which communities you’re looking at.

If you’re shopping this weekend and want to work out your numbers first, book a call with me at jennifergraffrealtor.com, or call or text 702-335-4779.