I keep hearing the same question: should I wait until rates drop back into the 3s, or should I buy now? And honestly, I get it. When mortgage rates jump from 3.125% to over 7% in 18 months, it feels like you're adding a car payment on top of your housing costs. But here's the thing, waiting might cost you way more than you think.

Last week I sat down with Ryan Friend from Nations Lending to walk through the actual numbers. Not national housing crash headlines. Not what's happening in New York or LA. We're talking about what's happening right here in Southern Oregon , Jackson and Josephine counties, and what buyers and sellers should expect between now and the end of the year. We looked at a real listing in Grants Pass, ran the math on rent versus own, and broke down what happens if you wait three years versus buying today.

Spoiler: the difference is over $100,000. And that's using conservative appreciation numbers, not the wild double-digit gains we saw in 2021. So if you've been sitting on the fence wondering whether this is the right time, this one's for you.

Table of Contents

• Southern Oregon: Inventory Down, Demand Still Strong
• The Real Cost of 7% Rates (And Why Waiting Might Cost More)
• Rent vs Own: A Grants Pass Example
• What Happens When Rates Drop?
• Conclusion

Southern Oregon: Inventory Down, Demand Still Strong

Let me start with what happened last week. For the week ending July 25, 2023, we had 95 new listings hit the market across Jackson and Josephine counties. That's down from 119 the week before, and it's the lowest we've seen in a while. Inventory dropped to 1,109 homes, still higher than we've been, but we're starting that seasonal slide that typically happens right around late July or early August.

Here's what stood out: 122 homes went pending last week. That's strong buyer demand, even with rates over 7%. We also had 78 closings and 24 that expired, withdrew, or canceled. When you do the math, about 10% of inventory went pending in one week. That's just over 2 months of supply, and a balanced market is usually 6 months. So on paper, we're still very much in favor of sellers, especially under $400,000 to $500,000.

Now, does it feel as hot as it did in 2021? No. But it's not a buyer's market either. I'd say it feels closer to balanced depending on your price point, but the data says otherwise. And that's important because people keep asking me if home values are going to drop. I don't see it. We're not seeing appraisals come in low very often, most are hitting value or slightly over. I've seen a few exceptions lately, which has been interesting, but homes are holding their values right now.

Why? Supply and demand. Inventory is going down, not up. And as long as we're under 2.5 months of supply, sellers still have leverage. Add in the fact that we're so close to California, and you've got a steady stream of buyers relocating here who are used to much higher prices. Southern Oregon is a microcosm, national reports about home price declines don't apply here the way they do in other markets.

One more thing: life events don't stop because rates are high. People are still having babies, getting divorced, dealing with deaths in the family. Those are the transactions that happen regardless of where rates sit. So even though some buyers are sitting on the sidelines waiting for rates to drop, there's still a baseline level of activity that keeps this market moving.

Mortgage Rates: From 3% to 7% in 18 Months

Let's talk about what everyone's feeling. Eighteen months ago, you could get a conventional mortgage at 3.125%. Today, rates are over 7%. That's a massive swing, and it's happened faster than anyone in the industry has seen in decades. Ryan's been doing this for 10 years, and he said this is the quickest rate increase he's ever witnessed. People he knows who've been in lending for 30 years say the same thing.

So what does that actually mean for your payment? If you're buying a $350,000 house, the difference between a 3.125% rate and a 7.125% rate is hundreds of dollars per month. It's like adding a car payment to your mortgage. And that's why so many buyers feel stuck. They think they missed out, and now they're either waiting for rates to come back down into the 3s or waiting for home values to drop.

Here's the reality: rates aren't going back to 3% anytime soon. Could they drop to 6% or 5.5%? Maybe. The Fed is meeting today, and the speculation is they'll raise rates another quarter percent. But here's what most people don't understand, lenders have already priced that in. When the Fed announces rate hikes ahead of time, lenders build that expectation into their quotes. So unless the Fed does something unexpected, you're not going to see a huge swing in mortgage rates tomorrow.

Think of it like a gas station owner who expects to pay $3.50 per gallon from his supplier, but it only ends up being $3.30. He doesn't pass all that savings on to you, he keeps some of it as profit. Same thing with lenders. If the Fed raises rates less than expected, rates might actually come down a bit because the expectation was already priced in.

The other thing to know: the Fed rate and mortgage rates aren't the same thing. The Fed controls short-term rates, but mortgage rates are tied to long-term bonds. So when people hear "the Fed is raising rates" and panic, thinking their mortgage rate is about to spike, that's not how it works. In fact, I've seen Fed meetings happen and mortgage rates actually drop because the market had already anticipated the move.

Appraisals and Market Strength

I mentioned this earlier, but it's worth repeating: appraisals are mostly coming in at value or slightly over. I've seen a few recent exceptions, and I'm not entirely sure what caused those, but they're outliers. The fact that homes are appraising at or above contract price tells you the market is still strong. Buyers aren't overpaying, values are holding.

And that's important because it means if you buy today, you're not buying at an inflated price that's going to crash next year. You're buying at market value in a market that's still under-supplied. So when people ask me if they should wait for values to drop, I tell them: I don't think that's going to happen. Not here. Not in Southern Oregon .

The Real Cost of 7% Rates (And Why Waiting Might Cost More)

Okay, so rates are high. We've established that. But here's the question nobody's asking: what's the cost of waiting?

Most buyers are focused on the short term. They see that higher rate, they feel like they're getting a bad deal, and they decide to sit tight until things improve. But they're not thinking about what they're missing out on by not owning the house now.

Let me give you a real example. Ryan pulled up one of my listings, 480 Levitt Lane in Grants Pass. It's listed at $450,000. It's a 1-bedroom with a giant bonus room that could be used as a guest bedroom, office, whatever you need. It sits on 5 acres, and it's well-priced for what it is.

We ran the numbers on what happens if you buy that house today versus waiting. And we used conservative appreciation numbers, not the 10%+ we saw in 2021. We used 4.7%, which is the historical average for this area. We also looked at a blended forecast of 8.5%, which factors in projected growth.

Here's what we found: if you buy that $450,000 house today with 20% down (that's a $90,000 down payment), and you hold it for 7 years, you'll realize a net gain of $208,000 using the historical 4.7% appreciation rate. That's just for owning the house. You're not doing anything special, you're just living there, making your payments, and letting the market do its thing.

That's $30,000 a year in equity gain. And that's using the conservative number. If appreciation comes in closer to the 8.5% forecast, your realized gain jumps even higher.

Now, why 7 years? Because that's the average length of time people either refinance or sell. Life happens. You have another kid. You get a new job. You downsize. Whatever the reason, most people don't hold a 30-year mortgage for 30 years. They move or refi within 7 years.

So if you're thinking about buying in the next year or two, you need to ask yourself: what's the cost of waiting? Because if you wait, you're not building that equity. You're paying rent, and rent increases an average of 6% per year locally. So not only are you not building wealth, you're paying more every year to live in someone else's property.

Homeowner Net Worth vs Renter Net Worth

There's a stat I heard a long time ago, and I had to look it up again because it's so striking: homeowners have a median net worth 40 times that of renters. Forty times. And when you look at the numbers we just walked through, it makes sense.

If you own a home for 7 years and you gain $208,000 in equity, that's wealth you can use. You can pull cash out and put it toward your next house. You can rent the property out and generate passive income while someone else pays your mortgage. You can sell and take that equity with you.

If you rent for 7 years, you have nothing. You've paid your landlord's mortgage, and you're starting from zero when you finally decide to buy.

Rent vs Own: A Grants Pass Example

Let's zoom in on a shorter timeline, 3 years instead of 7. Because I know some of you are thinking, "Okay, but what if I'm not ready to commit to 7 years? What if I just want to see what happens in the next couple years?"

Fair question. So Ryan put together a rent-versus-own comparison using that same $450,000 listing in Grants Pass. Here's how it breaks down.

If you rent a comparable property, you're paying $2,442 per month in rent, plus maybe $37 a month for renters insurance. Rent increases 6% per year on average. So in year one, you're paying $2,442. In year two, it's $2,589. In year three, it's $2,744.

Add it all up, and over 3 years, you've spent close to $100,000 in rent. That money is gone. It went into your landlord's pocket, and you have nothing to show for it.

Now let's say you buy that house instead. You put 20% down, you get a mortgage at today's rates, and you make your payments. After 3 years, the estimated value of your house is $558,000 (using that 8.5% appreciation forecast). You've paid down your mortgage, and you've built equity through appreciation.

The net difference between renting and owning over those 3 years? $108,000. That's how much more wealth you've built by owning instead of renting.

And here's the kicker: if you have to move after 3 years, you can sell that house, take your equity, and put it toward your next home. Or you can rent it out and let your tenant pay your mortgage while you build even more equity. You have options. Renters don't.

The Affordability Question

I know what some of you are thinking: "But Brian, I can't afford a 7% rate. The payment is too high."

Okay, I hear you. And that's where negotiation comes in. That's where working with a good agent and a good lender becomes critical. Because there are ways to make this work.

One option is a rate buydown. Instead of paying 7%, you can negotiate with the seller to cover the cost of buying your rate down to 5% or 5.5% for the first couple years. It's called a 2-1 buydown, and it's a tool that not enough buyers know about. You start with a lower rate, and it gradually increases over time. By the time it hits the full rate, you've hopefully had a chance to refinance into something better.

Another option is seller concessions. If the seller is motivated, and a lot of them are, especially in the fall when inventory sits longer, they might be willing to cover some of your closing costs or help with the rate buydown. You won't know unless you ask.

The point is, if affordability is your concern, there are solutions. But you have to have the conversation. You have to talk to a lender like Ryan and figure out what's possible. Because sitting on the sidelines waiting for rates to drop isn't a strategy, it's just hoping things get better while you lose out on equity.

What Happens When Rates Drop?

Let's say you're right. Let's say rates do drop over the next 6 to 12 months. Maybe they go from 7% down to 6% or even 5.5%. What happens then?

Here's what I think: home values go up. Because if rates drop, more buyers enter the market. And if more buyers enter the market without a corresponding increase in inventory, prices go up. It's supply and demand again.

So let's say you wait until next year to buy because you want that lower rate. Great, you got the lower rate. But now that $450,000 house is listed at $468,000 because it appreciated 4% while you were waiting. The difference in your payment from the lower rate is going to be offset by the higher purchase price. You might even end up paying more.

But here's the real loss: you missed out on a year of equity. If you had bought today, you'd have that appreciation working for you. Instead, you're starting from zero next year, and you're paying more for the same house.

Now, if rates do drop and you already own the house, you can refinance. You get the lower rate, you keep all the equity you've built, and you're sitting pretty. That's the scenario I'd love to see play out for buyers who take action now.

The Fall Buying Window

If you're thinking about buying, I'd say the window between now and the end of the year is your best opportunity. Here's why: there's less competition in the fall. Most people don't want to move during Thanksgiving or the holidays. So if a house is listed in October or November, there's usually a reason. The seller needs to move. They're motivated. And that gives you leverage to negotiate.

You're also not competing with as many buyers. The spring market is when everyone comes out of hibernation and starts house hunting. Fall is quieter. You have more time to look, more room to negotiate, and a better chance of getting a deal.

So if you've been kicking this around, now's the time. Reach out to me or Ryan, let's have a conversation, and let's figure out what makes sense for your situation. Because the cost of waiting is real, and it's bigger than most people think.

Conclusion

Look, I'm not going to sugarcoat it, 7% rates are tough. They add hundreds of dollars to your monthly payment compared to what you could have gotten 18 months ago. But here's what I want you to take away from this: waiting for rates to drop or home values to fall isn't a strategy. It's a gamble. And in Southern Oregon , the odds aren't in your favor.

We're under 2.5 months of inventory. Homes are holding their values. Appraisals are coming in at or above contract price. And buyers are still competing for properties under $500,000. This isn't a market that's about to crash, it's a market that's holding strong despite higher rates.

If you rent for the next 3 years, you'll spend close to $100,000 with nothing to show for it. If you buy, you'll build over $100,000 in equity. That's the difference. And if rates drop next year, you can refinance and keep all that equity you've already built.

So if you're thinking about buying a home in Southern Oregon , let's talk. I'm not here to pressure you, I'm here to give you the information you need to make the best decision for your situation. And if that means waiting, fine. But at least make it an informed decision, not one based on fear or headlines that don't apply to our local market.

Call or text, and we'll set up a time to talk through your options. Let's figure this out together.