The “Marry the House, Date the Rate” Dilemma: A San Diego Perspective
In the ever-evolving world of real estate, catchy phrases often emerge to simplify complex decisions. One of the most popular in recent years has been “marry the house, date the rate.” This adage encouraged homebuyers to focus on finding their dream home and not to be deterred by high interest rates, with the assumption that they could always refinance to a lower rate in the future. However, a recent article from Realtor.com, titled “The ‘Marry the House, Date the Rate’ Strategy Is Backfiring on 2025 Homebuyers,” sheds light on the potential pitfalls of this approach and offers a valuable lesson for anyone navigating the current San Diego real estate market.
The article highlights a crucial reality: the anticipated drop in mortgage rates has not materialized for many who purchased homes in the last couple of years. With the average 30 year mortgage rate still hovering well above the historic lows we saw in 2020 and 2021, the opportunity to refinance and significantly lower monthly payments has become elusive. The piece cites a new analysis from Neighbors Bank, which found that for most homeowners, a rate drop of at least 0.75 percentage points is needed to make refinancing worthwhile. This is a far cry from the minor fluctuations we have seen recently.
For us in San Diego, where home prices are among the highest in the nation, this is a particularly salient issue. The allure of “marrying the house” is strong here, as finding a property that meets all your needs in our competitive market can feel like a monumental achievement. However, the financial implications of “dating the rate” can be significant. A high interest rate on a large loan can translate into a substantial monthly payment, and if the anticipated refinancing opportunity does not come to fruition, it can put a strain on a household’s budget.
The Realtor.com article points out that while every state eventually reaches a breakeven point on a refinance, the timeline can vary dramatically. In California, the analysis shows a breakeven point of 2.8 years with a 0.5 point rate drop, which is one of the faster timelines in the country. This is due to our higher loan amounts, which means that even a small rate reduction can result in significant savings over time. However, as financial expert Bobbi Rebell notes in the article, “The math on that doesn’t always work because rates don’t always move as much as needed in a meaningful timeline.”
So, what is the takeaway for San Diego buyers and sellers? The “marry the house, date the rate” strategy is not inherently flawed, but it requires a healthy dose of realism and a solid financial plan. Here is my advice:
For Buyers:
•Focus on Affordability Today: Do not buy a home based on the hope of a future refinance. Make sure you can comfortably afford the mortgage payment at the current interest rate. Use a mortgage calculator to run the numbers and be honest with yourself about your budget.
•Build a Strong Financial Foundation: A larger down payment can help to offset a higher interest rate. Work on improving your credit score to ensure you qualify for the best possible rate.
•Consider All Your Options: An adjustable rate mortgage (ARM) might be a good option for some buyers, as they often have a lower initial interest rate. However, it is crucial to understand the terms of the loan and the potential for future rate increases.
For Sellers:
•Be Aware of Buyer Sensitivity: Buyers are more rate sensitive than ever before. This means that pricing your home competitively is crucial. Overpricing your home can lead to it sitting on the market for an extended period.
•Highlight the Value: In a market where buyers are carefully scrutinizing their finances, it is important to highlight the features of your home that add the most value. This could be a new kitchen, a spacious backyard, or energy efficient appliances.
•Be Prepared to Negotiate: The days of multiple offers well above the asking price are becoming less common. Be prepared to negotiate with buyers on price and terms.
The San Diego real estate market remains a desirable and dynamic one. By approaching it with a clear understanding of the current realities and a sound financial strategy, you can still achieve your homeownership goals. The “marry the house, date the rate” dilemma serves as a valuable reminder that in real estate, as in life, it is always wise to hope for the best but to be prepared for the reality of the present.
Reference
1.The ‘Marry the House, Date the Rate’ Strategy Is Backfiring on 2025 Homebuyers: https://www.realtor.com/advice/finance/marry-the-house-date-the-rate-strategy-backfiring/?cid=eml__1946:671fdfdc1a4446d4e6c1b034:rm202508301300_Marketing_Consumer_Weekly_EditorialNewsletter