Why Waiting for 3% Mortgage Rates May Keep You from Ever Buying a Home

A recent survey by BMO shed light on shifting mindsets among potential U.S. homebuyers, and some of the findings are downright shocking. It’s no surprise that nearly 70% of respondents said high mortgage rates are impacting their homebuying plans. For those who remember the 1980s and 1990s, rates hovering around 7% or 8% are nothing new, yet many younger buyers are holding off. What stood out most is that over a third of respondents said they'd only consider buying if mortgage rates dropped to 3% or lower, a level that is historically rare and, frankly, unlikely to return anytime soon.

To put this into perspective, mortgage rates below 3% only existed briefly during the COVID-19 pandemic between July 2020 and August 2021, when massive government stimulus and near-zero interest rates made such loans possible. Before that, the lowest rates seen were around 4% following World War II. The long-term average for 30-year fixed mortgages sits closer to 7.75%, which makes today's ~7% rates relatively normal. Buyers waiting for 3% might be setting themselves up for disappointment because those conditions were the exception, not the rule.

Another eye-catching finding is the waning appeal of the “starter home” strategy. According to the BMO survey, 58% of respondents feel that buying a smaller home to upgrade later is an outdated model. While this may reflect fears of falling prices in the short term, especially in markets where the Cromford® Market Index (CMI) is below 90 the long-term value of getting into the housing market shouldn’t be underestimated. History shows that owning property, even if modest, is often a key step in building long-term wealth.

In my view, once the CMI crosses back above 100 or shows signs of rising, the ladder becomes stable again, and that first step into a starter home could once again make smart financial sense. Waiting for perfect conditions like 3% rates or market bottoms often leads to missed opportunities. If you're serious about buying, it's time to stay grounded in market reality and focus on long-term strategy rather than waiting for another unicorn market.

“Duty, honor, country: Those three hallowed words reverently dictate what you ought to be, what you can be, what you will be.”
— General Douglas MacArthur

Have a great week, everyone!