Rising rates v. falling prices. To buy, or not to buy?

[scorpio]

OK, I'm looking for a little bit of advice here.

We've been hunting for a house for about a year now. We backed off one purchase in March, when we decided that we didn't want the payments that came with the house. In May, we declined to pay $560K for a house that listed for $525K, for basically the same reason. (The house then sold for $585K at the end of the bidding war). Both properties were around 1900sqft and in a residential area within walking distance of downtown and Capitol Hill. This is the size/location of property we want to buy. We are picky on both location and quality.

Here's the rub. I'm "locked in" on a 6.125% mortgage rate but the lock expires mid-July. The new (current) rates will be closer to 7%. We're going to take out a 90/10 or 85/15 type mortgage, depending on the purchase price.

If I wait to buy a $550K house until after the rate lock expires, I'm looking at another $150-200/month in payments.

So --- which will make more of an impact on my ability to get the house I want --- the presumably falling prices coming at the end of the summer, or, the reduced house purchase price available to me at the presumably increasing interest rates?

One other wrinkle: we can stay in our apartment through the end of August. After that, we have the option to live rent free during the winter, thus increasing how much we can save toward a house.

In other words, I have a (very) short-term incentive to buy something and close before mid-July --- the low interest rate on the loan. But waiting brings the incentive of potential rent-free living and waiting until the fall inventory gives us even more buying options.

[deejayoh]

Depends on your long term view of interest rates vs. housing prices and how long you want to stay in the house.

you can refinance your loan later. you can never rebuy your house.

[S-Crow]

[synthetik]