A lot of buyers right now are sitting on the sidelines waiting for rates to come down.
The thinking sounds reasonable: rates are higher than buyers want, so wait until they drop, buy at a lower rate, save money.
It’s not crazy logic. But when you actually run the math out, waiting one year usually costs the buyer more than buying today — even if rates drop exactly the way they’re hoping.
Here’s the honest breakdown.
The Two Scenarios
Let’s use the same buyer in two timelines:
- Home price today: $800,000
- Down payment: 20% ($160,000)
- Today’s rate: 6.5%
- Current rent: $3,500/mo
- Hoped-for future rate (a year from now): 5.5%
Now let’s compare what happens in each timeline.
Scenario A: Buy Now at 6.5%
The buyer closes today on the $800,000 home. The loan is $640,000 at 6.5%, giving a principal-and-interest payment of approximately $4,041/mo. With property taxes and insurance added, total monthly housing cost is roughly $4,860.
Over the first 12 months of ownership, two things happen that don’t show up on a monthly payment statement:
- Principal paydown: approximately $7,250 in equity built just from making the monthly payments. That’s money the buyer didn’t have in liquid savings, but is now sitting as equity in the home.
- Appreciation: if the California market appreciates a modest 3% during the year, the home is now worth $824,000. That’s another $24,000 in equity.
Total wealth created in year one of ownership: approximately $31,000.
Cash out the door for housing in year one: approximately $58,000 total payments.
Net cost of owning for one year: roughly $27,000 — and the buyer owns the home.
Scenario B: Wait One Year, Then Buy at 5.5%
The buyer pays rent for 12 months instead. At $3,500/mo, that’s $42,000 paid to the landlord — and 100% of it goes to the landlord’s net worth. Zero equity, zero principal paydown, zero appreciation captured.
Then assume the buyer actually gets the future they’re hoping for: rates drop to 5.5%, and they buy.
But here’s the part most “wait for rates” calculations skip: home prices probably moved too.
If California prices appreciated 3% during the wait, the same home is now $824,000. The buyer needs about $5,000 more for the same 20% down. The loan is now $659,200 at 5.5%, which works out to $3,744/mo P&I.
Compared to buying now at $4,041/mo, the buyer saves $297/mo going forward. Over the remaining 359 months, that’s about $107,000 in lifetime savings — assuming rates actually drop, the buyer follows through, and they hold the loan to term.
The Side-by-Side
Here’s where the comparison gets uncomfortable for the wait-and-see camp:
After 12 months:
- Bought now: owns a home, $31,000 in built equity, locked in at today’s rate
- Waited: rented for $42,000, zero wealth built, no home, still hoping the rate drops
The buyer who waited spent $42,000 on rent and has nothing to show for it. The buyer who bought spent $58,000 on housing but got $31,000 of that back as equity. The “saved monthly payment” the waiting buyer earns going forward needs to recoup roughly $73,000 of foregone wealth ($42K rent + $7K principal + $24K appreciation) before the strategy actually pays off.
At $297/mo in savings, that recovery takes about 20 years — and that’s only if everything goes exactly as hoped.
The Three Things That Have to Be True for Waiting to Win
For the “wait one year” strategy to come out ahead, all three of these have to happen:
- Rates actually drop. Not might. Not probably. Actually drop. Nobody knows where rates will be in a year. Predictions in this industry have a poor track record.
- Home prices stay flat or go down. California has historically appreciated even in flat-rate environments. If prices rise, the buyer’s lower future rate is offset by a larger loan amount.
- The buyer actually follows through. Most people who say they’ll buy “once rates drop” don’t, because by then they’ve gotten used to the rent, or life changed, or they’ve found a new reason to wait.
If any one of those three fails, waiting loses.
When Waiting Actually Does Make Sense
I’ll be honest about this part because not every situation is the same:
- Down payment isn’t quite there yet. If the buyer needs another year of saving to hit a healthy down payment with reserves left over, that’s a real reason. Don’t stretch into a home with no cash cushion.
- Job or life situation isn’t stable. Buying with the wrong job, wrong city, or wrong relationship situation is a much more expensive mistake than waiting on rates.
- Credit needs another six to twelve months of work. A meaningful score improvement can be worth more than a rate move.
- Local market is genuinely overpriced. A few CA pockets are seeing real price weakness right now. If the buyer is in one of those, patience can be rewarded.
But “I’m just waiting for rates to drop” by itself is rarely the strongest reason.
The Bottom Line
Buyers who wait are betting on a future they can’t control. Buyers who purchase now are locking in a known cost today and starting the wealth-building clock immediately.
If rates drop in two years, refinancing is always available — and the equity built in the meantime stays in the home. There’s no version of waiting that captures that benefit.
If you want to see what these numbers look like for your specific price point, your specific rent, and your specific time horizon — I’m happy to run it side by side with you. No pressure, no pitch. Just the math.
Sometimes the math says wait. More often, it says the cost of waiting is higher than buyers realize.
Garry McDonald
Loan Officer | Tried & True Home Loans
(949) 534-6686 | gmcdonald@triedandtruehomeloans.com
DRE# 01781703 | NMLS# 1922072