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Mortgage rates took a slight dip below 7% after a better-than-expected economic report showed inflation was easing. One financial pro says the dip is an opportunity prospective homebuyers shouldn’t miss out on.

“Millennials should jump at a 6% mortgage like bears grabbing for honey,” Bill Smead, founder and chairman of Smead Capital Managment, told MarketWatch.

“The spread in the 10-year Treasury
rate and the 30-year mortgage rate has reached a ridiculously high level. It’s unusual for a 3% spread to exist,” Smead added.

In the U.S., there are 50 million people between the ages of 28 and 38, of whom some are likely to be potential homeowners, according to the Mortgage Bankers Association. For people under 35, the homeownership rate is only 39%, the MBA said, while it is 61% for people ages 35 to 44.

The cost of living in the U.S. is finally showing signs of slowing, according to a November report, with annual price increases for consumer goods and services cooling from 8.2% in September to 7.7% in October. Reacting to the inflation data, mortgage rates fell from 7.22% on Nov. 9 to 6.62% on Nov. 10, according to Mortgage News Daily.

Home-builder stocks have suffered from the sharp rise in mortgage rates, Smead noted.

Many home builders have expressed low confidence given the decrease in buyer traffic. Builder confidence fell in October for the 10th month in a row, the National Association of Homebuilders reported, and, with the exception of the period at the start of the pandemic, buyer traffic fell to the lowest level in 10 years.

One analyst told MarketWatch earlier this month that buyers were dropping out of contracts to purchase new homes from builders at a much higher rate than before.

“Regardless of what people think the Fed is going to do, the peak of consternation on mortgage rates, relative to the rest of the interest rates set by the Fed, was about a month ago,” Smead said. “There was severe pessimism attached to these home-builder stocks. They’re in much better shape than the last time the economy went through difficulty. It was wrong to treat them that way.”

The macro trends lay out a solid runway for builders and for sellers, Smead added.

“We know there’s a huge pool of home buyers. We know people are willing to move an average of 50 miles away from where they live to buy a house,” he said. “Those dynamics will get kicked into gear if those mortgage rates get moved back to historical levels relative to the 10-year Treasury.”