3 Benefits of Buying a Home When the Interest Rates are High

Is There an Actual Benefit of Buying a Home When the Interest Rates are High?

High mortgage interest rates may seem like a major red flag for most homebuyers, but there’s actually a lot more to the story than meets the eye. In fact, purchasing your dream home during a higher-interest rate environment may offer unique opportunities that are overlooked when the housing market is booming at a lower rate.

Let’s explore some real advantages of buying a home when interest rates are higher–and why it may be wiser than waiting for them to drop.

What Makes Interest Rates Rise?

The Federal Reserve’s monetary policy directly influences interest rates, inflation trends, and the basic ebb and flow of the U.S. economy. When the economy is hot and inflation is elevated, the Fed typically increases interest rates to “cool” things down. On the surface this may not exactly sound favorable for homebuyers, but there’s more to it.

Here are 5 benefits of buying a home when the interest rates are high:

1. Equity Starts Growing From Day One

If you’re renting, 100% of your monthly payment goes to the landlord with zero equity or appreciation, with little long-term benefit. When you own (even at a high interest rate) you’re actually building equity with each payment you make. What’s more, most homes continue to appreciate over time, so your net worth only grows.

The Homeowner Equity Report (HER) released by CoreLogic for the fourth quarter of 2024 showed average U.S. homeowners saw equity increases by $4,100 between 2023 and 2024 alone, attesting to how homeownership can be a means of building wealth in a big way.

2. Slower Growth in Home Prices Leads to More Open Negotiations

For the most part, demand usually cools when interest rates rise–which can benefit the potential homebuyer. With home prices high in many markets, price rate growth is slowing, due mainly to increased borrowing costs, slashing the pool of qualified/interested buyers, making sellers cut back on their expectations or just keeping their homes longer on the market.

For the buyer, this could mean more to bargain with when it comes to repairs of closing costs. Sellers are also more willing to offer concessions, which in 2021’s overheated market was almost unheard of. 

However, you should also be aware of some mistakes to avoid when purchasing a home; one error can change the outcome of the entire buying process! Contact Realtor Linda Moore if you have any questions about buying a home.

3. Higher Inventory = Less Buyer Competition

When interest rates rise, it can push some potential homebuyers to wait it out on the sidelines, but it can also offer opportunities for others. Redfin shows that new listings increased by 7.4% year over year at the end of February 2025, the highest level since 2022.

What this could mean for the homebuyer:

• Greater options and choices across various neighborhoods/price points.
• With more time on the market, there’s less pressure to make immediate (or rash) decisions.
• Finding a hidden gem is more likely given the market has cooled, and it may not be as easily overlooked.

When the heat is off to compete with other buyers and one can shop more confidently due to an increase in supply, things are definitely more in the homebuyer’s favor.

4. A Decrease in Long-Term Buyer Risk

During the frenzied pandemic-era market, some buyers felt compelled to waive inspections and purchased many homes sight unseen, offering way above asking prices in the hopes of just securing the deal. Post-pandemic? Mass buyer’s remorse and an aftermath of ugly, costly mistakes.

With a higher-rate market, the homebuyer can take things slowly and look into scheduling a thorough home inspection. Also, a home needing only minor fixes where equity can be built through renovations can become more of a valid option over paying top dollar for someone else’s upgrade.

5. You Can Refinance Later

“Marry the house, date the rate”–in other words, high interest rates are not forever. If you find a home that fits your needs at today’s prices, it’s possible to refinance later when rates fall, without being sucked into an unnecessary bidding war. 

Take a home purchased for $350K at 7%, if that rate drops to 5% within two years, you may be able to refinance and save thousands while reaping the benefits of a lower home price.

Want to Buy a Home in Encinitas?

High mortgage rates may look extremely discouraging at first, but they can also create some unique opportunities if you’re willing to explore them. Thankfully, you don’t have to navigate through it all alone, you can start the buying process by contacting Realtor Linda Moore for assistance. It can be simpler than you think to find a Realtor in Encinitas!