How’s this for an if/then proposition?: If mortgage rates go down, mortgages become cheaper, then more people borrow to buy a home. Makes sense, right?

Well, maybe not. 

The Mortgage Bankers Association reported this week that the average rate on a 30-year fixed dropped to 6.5%, the lowest level in well over a year. Yet weekly mortgage applications actually declined to their lowest level since February.

Some homebuyers are eagerly anticipating the Federal Reserve’s September interest rate cut that looks like it’s on its way, but that could be the first of many cuts over many months. So if you’re a buyer, do you wait?

Southern California real estate agent Kama Burton has noticed a change in the attitudes of the first-time homebuyers she often represents. “I’m seeing that buyers are more on the fence, and they’re also a little bit more apprehensive of making offers,” she said.

Burton said she gets lots of buyers asking whether they should just hold off on the biggest purchase of their life until mortgage rates drop some more.

She first tells them, “No one really knows what the future holds.” And then gives them the horror story of what it was like to buy a house a couple of years ago, when interest rates were incredibly low.

“It was absolutely bananas. We were literally standing in line to get into an open house. No chance at all to get properties,” she said.

It’s unlikely mortgage rates will get back to that 3%-ish range that partly caused all those bidding wars and led many people to waive home inspections.

But Sean Park at Fitch Ratings said even if rates do tick down in the next few months, you won’t see a flood of homebuyers immediately enter the market.

“Even if the rates drop by, like, 1%, that’s great news for homebuyers. However they may want to wait and see if the mortgage rate comes down further,” he said.

That’s partly why last month, existing home sales were down 2.5% year over year, and down 40% from peak frenzy in 2021. Meanwhile, the number of homes actually for sale has finally started picking up.  

Sabrina Brown, a real estate broker in Fresno, California, said that while homebuyers may have the luxury of waiting, her home seller clients often can’t. Life just forces them to give up a very cheap mortgage.

“Someone passed away, the trustees are now selling the property. So I’m dealing with that right now. And then also I have another one, they’re going through a separation,” she said.

You can lock in a mortgage rate, but you can’t lock in what the future holds.