The average interest rate on a fixed 30-year mortgage in the U.S. reached 5.53% this week, more than double its level from a year ago. Although that could lift the cost of purchasing a home beyond the means of many aspiring buyers, some house-hunters are likely to benefit, according to Erin Sykes, chief economist at Nest Seekers International.
Demand for properties tends to soften as mortgage rates climb, eventually leading to a decline in home prices. If mortgage rates continue rising to 7%, Sykes estimates home prices in some parts of the U.S. could fall as much as 40%.
“You might, depending on your situation, actually have a better shot at getting a home at an affordable price with these higher rates,” she told CBS News.
Sellers in Florida are already starting to lower their prices because of climbing mortgage rates, said Sykes, who believes prices nationwide may soon follow — although it will take a few months. Mid-summer might be the most opportune time for homebuyers, she said.
For now, mortgage rates are rising at the same time as residential real estate prices continue to increase. That’s pushing thebeyond the grasp of many middle-class Americans, who must also compete with investors and higher-income buyers. Surging inflation, which , is making it even harder for homebuyers to save for a down payment, Sykes said.
Higher mortgage rates add thousands of extra dollars in payments to the homebuyer over the life of the loan. A $429,000 house — the median price of a home, according to the St. Louis Federal Reserve Bank — will cost roughly an additional $5,750 per year at today’s rates.
Mortgage rates dropped to some of their lowest marks ever during the, but they have lifted off since the Federal Reserve announced in March that it was raising its benchmark .