As the spring home buying season approaches, mortgage rates continue to rise, reaching 7.17% for the week ending April 25th, according to Freddie Mac data via the Federal Reserve. Home buyers and sellers may not find any relief soon, as experts predict the Federal Reserve will hold rates steady in their meeting this week and only trim borrowing costs in the second half of the year. Matthew Walsh, assistant director and economist at Moody’s Analytics, predicts the first rate cut in July.
Mortgage rate volatility is causing uncertainty in the housing market. While some buyers have adjusted to 7% interest rates, the volatility is having a significant impact. Nicole Bachaud, a senior economist at Zillow Group, notes that buyers may find they cannot afford the same property from one week to the next, as rates bounce around. This volatility is keeping both buyers and sellers on their toes.
For example, a homebuyer seeking a $400,000, 30-year fixed-rate mortgage might have gotten a rate of 6.82% in early April. Two weeks later, rates were at 7.10%, adding $75 to the monthly mortgage payment and $27,000 over the life of the loan. Jacob Channel, a senior economist at LendingTree, emphasizes that even a one-percentage-point difference can mean almost $200 more on a monthly mortgage payment.
Mortgage application demand dropped 2.7% for the week ending April 19th, as average 30-year fixed-rate mortgages increased to 7.24% from 7.13%, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. Despite the higher rates, some areas are experiencing more sales as buyers adjust and find ways to make it work. Bachaud predicts more sales will happen at the end of May and early June, when sellers tend to get the best prices.
In 2023, homes listed in the first two weeks of June sold for 2.3% more, a $7,700 boost on a typical U.S. home, according to a Zillow analysis. Bachaud anticipates a later spring season this year due to the uncertainty in the market.
