Should We Still Marry The House And Date The Rate?

It’s pretty cool to have a written record of the stuff that gets said in the wild and online. 

Today, we take you back to a Juice we published more than a year ago and trace the evolution of one of the most dangerous and irresponsible pieces of flat-out toxic advice at least some real estate agents have been giving would-be homeowners during this persistent high-interest rate environment. 

Marry the house and date the rate. How has that worked out for you?

From the above-mentioned, March 16, 2023 Juice:

According to Redfin, the typical U.S. homeowner’s monthly payment hit a record high of $2,563 last week. 

That’s up 29% from a year ago, thanks largely to mortgage interest rates still hovering around 7% and housing prices that, despite the recent cooldown, remain high. 

If your housing budget is $2,500 a month, you can afford a $376,000 home, down from the $400,000 crib you could’ve snagged last year. 

Now, remember that’s 2023 data! 

Let’s fast forward to 2024 and see what the monthly payment landscape looks like. Using the same Redfin data, the typical monthly payment hit an all-time high of $2,721, as of the week ending March 24th. 

Bookmark these numbers while you read another excerpt from the 2023 Juice: 

To entice would-be homebuyers to take the plunge, they’re using the pickup line, “Marry the house, date the rate.” 

Cute talk to say you can get the house you love today at a high rate and refinance later at a lower rate. 

But it’s not that simple. 

First, what if rates don’t come down anytime soon? Prior to spring 2022, we enjoyed nearly three years of sub-4% rates on a 30-year mortgage. In the previous decade, a rate of around 5% was more common.

And rates have not “come down anytime soon.”

In fact, as of the end of last week, they’re a bit higher than they were last year. On a 30-year mortgage, you’re looking at an interest rate of 6.91% today versus 6.60% at this time a year ago. 

As we have chronicled in The Juice, housing prices haven’t exactly come down in any meaningful way. The only meaningful move they’re making across the nation is on an upward trajectory. 

To put all of the above into clear context, consider the following numbers via Bill McBride’s Calculated Risk housing blog:

The percent of outstanding loans under 4% peaked in Q1 2022 at 65.3% (now at 58.1%), and the percent under 5% peaked at 85.6% (now at 77.0%) …

The percent of loans over 6% bottomed in Q2 2022 at 7.2% and has increased to 13.4% in Q4 2023.

We can’t help but think that some portion of the 13.4% of loans with interest rates higher than 6% came as a result of people following the marry the house, date the rate advice. 

All else equal, this “advice” has not worked out. 

The $2,721 figure is based on a median home price of around $400,000. So, obviously on, say, a $1,000,000 home, the payment at a near 7% interest rate moves into territory around $7,000 a month.

If you’re stretching yourself to make either payment in anticipation of rates coming down, you could be in a world of hurt. Not only is the payment potentially difficult to continue to absorb, but there’s also no guarantee that rates will come down anytime soon. And, once they do, you can’t just snap your fingers and refinance a young loan. It will take time and, quite possibly, cost a few bucks up front. 

Of course, all isn’t equal. Never is. The conundrum people who really want to buy a home face is if I wait for rates to come down, will prices soar as tons of buyers like me jump into the housing market? We’re on record as saying we think this will happen, leading to record high prices (again), if not in 2024, almost definitely in 2025. 

The Bottom Line: We wish we had an answer to this problem. It comes down to your individual situation. But, whatever you do, don’t let a real estate agent do you dirty. You’re better off renting comfortably than you are throwing your budget out of whack with a payment you have no business making. Quality of life is about more than home ownership. 

The Juice doesn’t sound alarms simply because we like to hear ourselves talk. The proof — as evidenced in this look back to 2023 — is in the pudding.

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