The hidden cost of waiting for mortgage rates to change

The Hidden Cost of Waiting to Buy: What Delaying Your Home Purchase Could Really Cost You in 2026

January 28, 2026•17 min read

Why waiting for the "perfect" moment might be the most expensive decision you make

"I'll just wait until rates come down."

"Maybe prices will drop next year."

"I want to see what happens with the market first."

If you've said any of these things in the past year, you're not alone. Across Michigan, thousands of potential home buyers are sitting on the sidelines, waiting for conditions that feel "perfect" before they make a move.

But here's what most people don't realize. Waiting has a cost. And in today's Michigan housing market, that cost is often far higher than the price of buying now and adjusting later.

This isn't about pressure or urgency. It's about understanding the real financial impact of delay so you can make an informed decision based on facts, not assumptions.

The Math Behind the Wait

Let's start with what the data actually shows about Michigan's 2026 housing market, because the numbers tell a story many buyers aren't expecting.

According to recent market analysis, Michigan home prices increased 8.3% year over year in January 2025, with the median home price reaching $246,400. Multiple forecasting sources, including the National Association of Realtors and Freddie Mac, project continued price appreciation in Michigan through 2026, with estimates ranging from 1% to 4.5% depending on the region.

Here's what that means in real dollars for a typical Michigan home purchase.

Scenario: A $250,000 Home in Southern Michigan

If you buy today at $250,000 with current mortgage rates around 6.5%, your monthly principal and interest payment (assuming 20% down) would be approximately $1,265.

If you wait one year and home prices appreciate just 3% (a conservative estimate based on multiple forecasts), that same home will cost $257,500. Even if mortgage rates drop to 6% as some experts predict, your monthly payment would be $1,234.

You save $31 per month. But you paid an extra $7,500 for the house.

That $7,500 price increase would take you 20 years to recover through the lower monthly payment. And that calculation assumes prices only rise 3%, when many Michigan markets are seeing appreciation above that rate.

The Real Kicker: You Lost a Year of Equity Building

While you were waiting, the person who bought that $250,000 home today built approximately $4,800 in equity through principal paydown in year one, plus benefited from any price appreciation on their purchase price, not the higher price you'll pay later.

Sources: Michigan housing market data from the National Association of Realtors, Houzeo market research, and Freddie Mac; mortgage calculations based on Freddie Mac rate averages

The Rent Trap: Money You'll Never Get Back

If you're currently renting while you wait for the "right time" to buy, let's talk about what that's actually costing you.

According to market research, the average rent in Michigan varies by location, but in many markets across the Southern Michigan corridor, renters are paying $1,200 to $2,000+ per month. Let's use $1,500 as a conservative middle ground.

One Year of Waiting While Renting:

Monthly rent: $1,500
Annual cost: $18,000
Equity built: $0
Tax deductions: $0

One Year of Homeownership:

Monthly mortgage payment: ~$1,265 (principal and interest on $250,000 home)
Approximately $4,800 goes toward principal (equity you own)
Mortgage interest tax deduction potential (consult your tax advisor)
Property appreciation benefit

Every month you rent while waiting for the perfect moment is $1,500 you will never see again. It doesn't build equity. It doesn't reduce your principal. It doesn't benefit from property appreciation. It simply... disappears.

Over the course of a year, that's $18,000 that could have been working toward ownership instead of funding someone else's investment property.

The Competition Factor: What Happens When Rates Drop

Here's the scenario many buyers are banking on. Mortgage rates drop significantly, making homes more affordable, and then they'll jump in.

The problem? So will everyone else.

Industry experts, including those at the National Association of Realtors and housing economists, consistently warn about this dynamic. When mortgage rates decrease, competition surges. More buyers qualify. More people who were sitting on the sidelines jump back in. Demand spikes.

And what happens when demand spikes in a market that already has limited inventory?

Prices rise. Often quickly.

We've already seen this pattern play out in Michigan markets. According to recent data, Michigan's housing inventory remains below pre-pandemic levels, with months of supply still constrained in many areas. The competitive markets see homes going under contract in as little as 8-19 days depending on the region.

When rates drop, you get:

More competition for fewer homes
Multiple offer situations
Homes selling above asking price (23.4% of Michigan homes sold above list price according to recent data)
Less negotiating power
Potential for bidding wars

You might get a better rate, but you'll likely pay more for the house and have far less leverage in negotiations.

Sources: National Association of Realtors 2026 housing predictions, Michigan market data from Houzeo and local MLS reports, housing economist forecasts

The Opportunity Cost of Perfect Timing

Since World War II, U.S. home prices have increased in approximately 91.6% of all years. That's not a typo. In roughly one year out of every twelve, prices decline. The rest of the time, they go up.

If you're waiting for that one down year, history suggests you're playing a very low-probability game. And while you wait for prices to drop, you're experiencing several opportunity costs:

Lost Equity Building: Every month of homeownership builds equity through principal paydown, even before considering appreciation.

Missed Appreciation: If you buy a $250,000 home that appreciates 3% in year one, you've gained $7,500 in property value. The person who waited doesn't benefit from appreciation on that original $250,000 purchase price. They'll benefit from future appreciation, but on a higher starting point.

Continued Rent Payments: As discussed, every month of rent is money that builds no equity and provides no financial return.

Higher Purchase Price Later: Even modest appreciation means paying more later for the same or similar home.

The Refinance Option: This might be the most important point. If you buy today at 6.5% and rates drop to 5.5% next year, you can refinance. You lock in today's price and get tomorrow's rate. If you wait for tomorrow's rate, you're stuck with tomorrow's higher price.

According to Freddie Mac and industry analysts, refinance activity is expected to increase significantly in 2026 as homeowners who purchased at higher rates seek to lower their payments. Refinancing is a proven strategy that gives you the best of both scenarios.

Sources: Historical housing data analysis, Freddie Mac mortgage rate forecasts, National Association of Realtors 2026 predictions

Michigan-Specific Market Dynamics

The Michigan housing market has specific characteristics that make the "wait and see" approach particularly costly in 2026.

Limited Inventory in Key Markets: Despite some improvement, housing inventory across Michigan remains constrained. Markets like Ann Arbor, Grand Rapids, and parts of metro Detroit continue to see tight supply, which supports prices. According to recent forecasts, Bay City alone is expected to see 4.5% price growth by the end of 2026.

Strong Fundamental Demand: Michigan benefits from diverse economic drivers including healthcare, technology, education, and manufacturing. Major employers like Spectrum Health, university systems, and Fortune 500 companies provide employment stability that translates to housing demand.

Migration Patterns: Southern Michigan continues to attract buyers from higher-cost markets and out-of-state relocators seeking affordability and quality of life. This migration supports sustained demand.

New Construction Lag: Construction activity, while improving, still hasn't caught up with demand in many markets. This supply-demand imbalance supports price appreciation.

Regional Strength: Markets across the Southern Michigan corridor from Jackson to Ann Arbor, Chelsea to Dexter, are projected to see continued price growth in 2026 according to multiple forecasting sources.

The combination of these factors makes Michigan a market where waiting often costs more than buying strategically now.

Sources: Michigan housing market reports from the National Association of Realtors, Houzeo, Steadily, and local MLS data; Michigan Association of Realtors market analysis

The Financial Reality Check: What "Affordable" Really Means

Many buyers are waiting because they want housing to become "more affordable." But what does that actually mean in practice?

Scenario A: You Wait for Rates to Drop from 6.5% to 5.5%

On a $200,000 loan (assuming 20% down on a $250,000 home), dropping from 6.5% to 5.5% saves you approximately $124 per month.

But if the home price increased from $250,000 to $257,500 (just 3% appreciation), your loan amount is now $206,000 instead of $200,000.

At 5.5%, your payment on the higher loan amount is approximately $1,170. At 6.5% on the original lower price, your payment was approximately $1,265.

You're saving about $95 per month. But you paid $7,500 more for the house and lost a year of equity building.

Scenario B: Current Purchase with Future Refinance Option

Buy the $250,000 home today at 6.5%. Payment: ~$1,265/month.

In year one, you:

Build approximately $4,800 in equity through principal paydown
Benefit from any price appreciation on your $250,000 purchase price
Get tax benefits from mortgage interest deductions (consult your tax advisor)
Stop paying $18,000 in annual rent

If rates drop to 5.5% in year two, you refinance your remaining balance. Now you have today's purchase price with tomorrow's rate, plus a year of equity building behind you.

The math clearly favors the "buy now, refinance later" strategy over the "wait for perfect conditions" approach.

Sources: Mortgage calculations based on current market rates; refinancing strategy supported by industry expert recommendations from NAR and Freddie Mac

What About Market Corrections?

The question many buyers have. "What if I buy now and the market corrects?"

First, let's understand what a housing correction actually requires. According to market analysts, a true housing crash needs:

Oversupply of homes: We currently have the opposite in Michigan with inventory below pre-pandemic levels
Mass foreclosures or distressed sales: Current foreclosure rates are historically low, and most homeowners have substantial equity
Loose lending standards: Today's lending standards are significantly tighter than pre-2008 levels
Economic shock: While possible, current economic indicators don't suggest the type of shock that triggers housing crashes

The 2008 financial crisis, the worst housing downturn in modern history, required a perfect storm of subprime lending, overleveraged buyers, and a global financial meltdown. Those conditions don't exist today.

More importantly: Even in 2008, buyers who purchased homes and held them for 5-7 years typically recovered and saw appreciation. The people who got hurt were those who needed to sell during the downturn or who were overleveraged.

The Current Reality: Most forecasts for Michigan show continued modest price appreciation, not decline. The National Association of Realtors projects 4% national price growth with Michigan markets following similar trends. Fannie Mae predicts continued appreciation in the 3-4% range.

A "correction" in 2026 is far less likely than continued slow, steady appreciation. And if you're buying a home to live in for 5+ years (which is the recommended minimum timeline for homeownership), short-term fluctuations matter far less than long-term trends.

Sources: Historical housing market analysis, 2026 forecasts from NAR, Fannie Mae, and housing economists; lending standards data from mortgage industry reports

When Waiting Actually Makes Sense

To be clear, waiting isn't always wrong. There are legitimate situations where delaying a purchase is the smart financial move.

You should wait if:

You're Not Financially Ready: If you don't have a stable income, adequate emergency savings (3-6 months of expenses), or a down payment saved, waiting while you build financial stability makes sense.

You Have Significant Debt: High debt-to-income ratios make qualifying difficult and expensive. Paying down debt before buying often results in better loan terms and more financial breathing room.

Your Life Situation Is Uncertain: If you might relocate for work, your relationship status is changing, or major life events are imminent, the flexibility of renting might outweigh the benefits of ownership.

Your Local Market Shows Clear Weakness: If your specific market shows increasing inventory, declining prices, and extended days on market, waiting might provide better opportunities. However, this isn't the case in most Michigan markets currently.

You're Only Waiting for Rates: If your only reason for waiting is hoping for lower mortgage rates while you're otherwise financially ready and committed to the area, the math rarely supports the delay given current price appreciation trends.

The key distinction is between waiting because you need to prepare versus waiting to time the market perfectly. The first is financial prudence. The second is speculation that often costs more than it saves.

The Hidden Costs Beyond the Numbers

The financial calculations are important, but there are non-financial costs to waiting that don't show up in spreadsheets.

Instability and Uncertainty: Renting means landlords can choose not to renew your lease, raise your rent significantly, or sell the property. Homeownership provides stability and control over your living situation.

Limited Personalization: Renters face restrictions on modifications, renovations, and personalization. Homeowners can create spaces that truly reflect their needs and preferences.

Community Investment: Homeownership often leads to deeper community connections, neighborhood involvement, and local roots that matter for quality of life.

Delayed Life Milestones: For many people, starting a family, getting a pet, or pursuing hobbies requires the space and permanence that homeownership provides.

Mental and Emotional Cost: The constant waiting and watching, the anxiety about missing opportunities, and the frustration of seeing prices rise while you stay on the sidelines has a real psychological impact.

These factors won't show up in a cost-benefit analysis, but they're real and they matter to your overall life satisfaction and well-being.

How to Make the Decision That's Right for You

Instead of trying to time the market perfectly, focus on what you can control and what actually matters.

Financial Readiness Checklist:

✓ Stable employment with consistent income
✓ Emergency fund covering 3-6 months of expenses
✓ Down payment saved (even if less than 20%, many programs exist)
✓ Debt-to-income ratio under 43% (preferably under 36%)
✓ Credit score above 620 (higher is better)
✓ Understanding of full homeownership costs (insurance, taxes, maintenance)

Market Understanding Checklist:

✓ Research completed on your target area's price trends
✓ Understanding of current inventory levels in your price range
✓ Realistic expectations about condition and location trade-offs
✓ Knowledge of comparable sales in your target neighborhoods
✓ Awareness of seasonal market patterns in your area

Personal Readiness Checklist:

✓ Plan to stay in the area for at least 5 years
✓ Comfortable with the responsibilities of homeownership
✓ Clear on your must-haves versus nice-to-haves
✓ Prepared for the home search and buying process
✓ Realistic about trade-offs between location, size, and condition

If you check most of these boxes, the data suggests buying now and refinancing later typically costs less than waiting for perfect conditions that may never arrive.

Sources: Financial readiness guidelines from mortgage industry standards; homebuying timeline recommendations from NAR and consumer finance experts

The Home 1st Approach: Informed Decisions Over Market Timing

At Home 1st Real Estate, we don't pressure anyone to buy before they're ready. We also don't tell you to wait for conditions that data suggests won't materialize.

What we do is provide the information you need to make decisions based on your specific situation, not market speculation.

Our commitment to you:

We aren't a national franchise. We are a network of local experts connected by one mission: putting your home first, from the Lakes to the D. We know the Southern Michigan corridor.

We understand Michigan-specific market dynamics because we live here, work here, and invest our own lives in these communities.

We provide honest analysis of whether buying now makes sense for YOUR situation, not a generic sales pitch.

What we can help you understand:

Current pricing and appreciation trends in your specific target area
True cost comparison of buying now versus waiting in your price range
Financing options that might make homeownership more accessible than you think
Realistic expectations about what you can afford and what trade-offs might be necessary
How to position yourself to move quickly when the right opportunity appears

Free resources available to you:

Home Valuation Tool to understand current market values
Mortgage Calculator to run your own numbers on different scenarios
First-Time Homebuyer Guide with comprehensive information on the purchase process
Communities Guide with detailed information on Southern Michigan neighborhoods
Market Reports showing current trends in real-time

What to Do Right Now

If you've been waiting for the "right time" to buy, here are concrete steps you can take today to position yourself for success whether you buy now or later.

Step 1: Get Pre-Approved

Even if you're not ready to buy immediately, getting pre-approved shows you exactly what you can afford and identifies any credit or financial issues to address. Pre-approval letters also position you to move quickly when the right property appears.

In competitive Michigan markets where homes can go under contract in 8-19 days, having pre-approval ready means the difference between securing your home and losing it to another buyer.

Step 2: Run the Real Numbers

Stop speculating and start calculating. Take a specific home or price range you're considering and run these scenarios:

What does it cost to buy today at current rates?
What would it cost if prices appreciate 3% and rates drop 0.5%?
How much are you currently paying in rent annually?
How much equity would you build in year one of ownership?

Our mortgage calculator can help you run these scenarios with actual numbers.

Step 3: Define Your Must-Haves

Create a clear list of what you absolutely need versus what would be nice to have. Understanding your priorities helps you recognize the right opportunity when it appears and avoid letting perfect be the enemy of good.

Step 4: Talk to a Local Expert

Generic national market predictions don't tell you what's happening on the specific street where you want to live. Connect with an agent who knows your target area intimately and can provide specific, actionable information about your options.

Step 5: Make an Informed Decision

Whether you decide to buy now or wait, make sure it's based on facts about your specific situation and market, not fear or speculation about what might happen.

The Bottom Line: The Cost of Waiting Is Real

The question isn't whether waiting has a cost. It does. The question is whether the cost of waiting exceeds the cost of buying now and adjusting later.

For most buyers in Michigan's 2026 market, the data clearly shows that waiting for perfect conditions typically costs more than buying strategically now.

What the research tells us:

Home prices in Michigan are projected to continue appreciating in 2026, not decline
Current inventory remains below historical averages, supporting continued price growth
Every month of rent is money that builds no equity and provides no financial return
The refinance option allows you to lock in today's price and get tomorrow's rate if rates drop
Competition increases when rates drop, often offsetting the benefit of lower borrowing costs

What this means for you:

If you're financially ready, planning to stay in the area for 5+ years, and comfortable with homeownership responsibilities, the math and market data suggest buying a home you can afford at a fair price makes more financial sense than waiting for perfect conditions.

If you're not financially ready, that's a different conversation, and waiting while you build stability is the right move.

The key is making your decision based on YOUR readiness and YOUR situation, not on speculation about perfect market timing that historical data suggests rarely works out as planned.

Ready to Make an Informed Decision?

Whether you're ready to start your search today or you're still gathering information for a future purchase, we're here to provide honest guidance based on your specific needs.

Call Home 1st Real Estate at 517.780.8090to schedule a no-pressure conversation about your home buying goals. We'll discuss your specific situation, provide local market insights, run the numbers on your potential purchase, and help you understand whether buying now or waiting makes more sense for YOU.

Or contact us online and one of our Michigan-based agents will reach out within 24 hours.

We're not trying to pressure you into buying. We're trying to make sure you understand the real costs of both options so you can make the best decision for your life and finances.

Because here at Home 1st Real Estate, we believe informed decisions beat perfect timing every single time.

Learn more about buying a home in Michigan: