Here’s my argument for buying low price/high rate:
1. Assuming the same dollar amount of a down payment (say $200,000), and the same house selling at a lower price, you can have more equity in the same house right from the start. This might enable someone to get a 15-year loan instead of a 30-year, ultimately saving quite a bit over time.
2. With a low price/high rate purchase, there is much less risk of being underwater or losing equity because when rates are highest, they can only go down over time, making the payments more affordable for the new buyers, which will push prices up over time.
When you buy during a high price/low rate environment, rates are far more likely to rise over time, making payments much less affordable for future buyers, which is likely to cause prices to fall.
Although many of us would like to think we’re buying our “last” house, life has a tendency to be unpredictable, and any number of events — like changes in family formation (marriage, divorce kids, in-laws, etc.), job loss or transfer, etc.– might force someone to have to sell. Better to have bought near the low, so that you are always able to sell at any point in the future.
