Why you shouldn't wait for lower rates to buy a home: Economist

Redfin chief economist Daryl Fairweather joins Wealth! to break down the state of the housing market and its outlook as the Federal Reserve kicks off its rate easing cycle.

"The housing market has been in a freeze for the last two and a half years, and these rate declines are bringing buyers back to the market. Before they were sitting on the sidelines waiting for rates to come down. Rates started to come down, and they were a bit slow to react. But now that it's all over the news that the Fed has cut, we're seeing more buyers interested in touring homes and getting ready for that next spring season," Fairweather tells Yahoo Finance.

As mortgage rates have fallen, she notes that the average homebuyer in the US will end up paying $400 less on their mortgage. Meanwhile, on the West Coast, homebuyers are saving about $1,000. She believes that the rates have fallen enough to make a difference for homeowners and buyers. However, she explains, "It's just that people are still waiting for rates to drop more. They're waiting for more inventory. So there's no real fire under people."

She continues, "There's still time, but the longer people wait, the more they're going to end up competing against other buyers because if you're an early bird, you're going to be more likely to catch that worm."

Fairweather adds that in most markets, it's still more affordable to rent. "But the thing is that rents are likely going to keep going up, home prices will keep going up. So if you don't lock in with that home price now, you may be paying a lot more later. But it's a hard trade-off," she says. For people who will likely move a lot over the next five years, she recommends renting. However, for those ready to settle down, she believes that buying a home will be better financially in the long term.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Melanie Riehl