The average interest rate on a 30-year fixed mortgage in the United States hit 5.53% this week, more than double its level a year ago. While this may increase the cost of buying a home beyond the means of many potential buyers, some house hunters are likely to benefit, according to Erin Sykes, chief economist at Nest Seekers International.
Demand for properties tends to decline as mortgage rates rise, eventually leading to lower house prices. If mortgage rates continue to rise to 7%, Sykes estimates that home prices in parts of the United States could fall by as much as 40%.
“You might, depending on your situation, have a better chance of getting an affordable home with those higher rates,” she told CBS News.
Sellers in Florida are already starting to lower prices due to rising mortgage rates, said Sykes, who thinks nationwide prices may soon follow — although it will take a few months. Midsummer could be the most opportune time for homebuyers, she said.
For now, mortgage rates are rising as residential real estate prices continue to rise. It’s pushing theout of reach for many middle-class Americans, who must also compete with higher-income investors and buyers. Galloping inflation, which makes it even harder for homebuyers to save for a down payment, Sykes said.
Higher mortgage rates add thousands more in payments to the buyer 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 about $5,750 more per year at today’s rates.
Mortgage rates fell to some of their lowest levels on record during thebut they have taken off since the Federal Reserve announced in March that it was raising its benchmark .