As spring approaches and the housing market picks up, buyers and sellers are closely monitoring the fluctuating mortgage rates. According to Freddie Mac data via the Federal Reserve, the average 30-year fixed-rate mortgage rose to 7.17% for the week ended April 25th, up from 7.10% the previous week. There is uncertainty surrounding when the Federal Reserve might implement its first rate cut, with experts predicting a hold on rates for the time being and potential cuts in the second half of the year.
Matthew Walsh, Assistant Director and Economist at Moody’s Analytics, anticipates a rate cut in July. Until then, average mortgage rates are expected to fluctuate between 6.5% to 7.5%. Nicole Bachaud, a senior economist at Zillow Group, emphasizes that the volatility of rates is a significant factor impacting the housing market. The frequent changes in rates can make it challenging for buyers to determine affordability and for sellers to gauge market demand accurately.
The shifting mortgage rates have a direct financial impact on potential homebuyers. For example, a slight increase from 6.82% to 7.10% on a $400,000, 30-year fixed-rate mortgage could add $75 to the monthly payment or $27,000 over the life of the loan. Jacob Channel, a senior economist at LendingTree, highlights that even a one-percentage-point difference can result in a significant increase in monthly payments, which may deter some buyers from entering the market.
The recent data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey revealed a 2.7% drop in mortgage application demand for the week ending April 19th, coinciding with the rise in 30-year fixed-rate mortgages to 7.24%. Despite this, some areas are seeing an uptick in sales as buyers start adjusting to the higher mortgage rates. Bachaud notes that more sales are projected to occur towards the end of May and early June, traditionally a period that yields higher prices for sellers.
Drawing from past analyses, homes listed in the first two weeks of June tend to sell for 2.3% more, translating to a $7,700 increase on a typical U.S. home. Bachaud predicts a delayed spring season this year, indicating that buyers and sellers may need to navigate the market longer than usual. The evolving dynamics of the housing market, influenced by interest rates and buyer behavior, are shaping the trajectory of the real estate industry in the coming months.
The impact of rising mortgage rates on home buyers and sellers is multifaceted, encompassing financial considerations, market responses, and seasonal trends. As the housing market continues to adjust to fluctuating rates, both buyers and sellers are advised to stay informed and proactive in their decision-making processes to navigate the evolving landscape successfully.