Homebuyers and sellers are closely looking at the mortgage rates in the spring housing market.
Average 30-year fixed-rate mortgage rates in the US have increased to 7.17% for the week ending April 25. This number is up from 7.10% the previous week, according to Freddie Mac data reported by the Federal Reserve.
Mortgage Rates in the Spring Housing Market
Buyers and sellers might not get any relief in the mortgage rates in the spring housing market. It is still not clear when the Fed might lower rates. Experts predict that the Fed will keep rates unchanged in this week’s meeting and might reduce borrowing costs later in the year.
Matthew Walsh, an economist at Moody’s Analytics who discussed mortgage rates in the US, said that the first rate cut will likely happen around July.
Until then, average mortgage rates in the US could range between 6.5% to 7.5%, according to Walsh. He added that there might not be significant rate drops until later in the year.
What the Economists are Saying
Nicole Bachaud, a senior economist at Zillow Group, said that the main concern with mortgage rates in the US is their unpredictability. He added that while some buyers have accepted 7% interest rates as mortgage rates in the spring housing market, the fluctuation in rates will affect the housing market the most.
She explained that when mortgage rates in the US fluctuate week to week, a potential buyer might find that the house they could afford one day becomes unaffordable the next.
She added that fluctuating rates will keep both buyers and sellers alert for a long period. For example, a buyer looking to buy a house for $400,000 could have secured a 30-year fixed-rate mortgage at around 6.82% in early April.
This comes out to a monthly payment of about $2,613. However, two weeks later, rates increased to 7.10%, increasing the monthly payment by $75 or $27,000 over the loan’s lifespan.
Jacob Channel, a senior economist at LendingTree, said that people are noticing the 1% interest change could have in the long term, as it could mean nearly $200 extra on their monthly mortgage payments.
This can be seen in recent trends. Mortgage application demand has decreased by 2.7% for the week ending April 19. This might be due to the increase in average 30-year fixed-rate mortgage rates in the Spring housing market from 7.13% to 7.24%.
Bachaud added that the spring housing market’s mortgage rates are slowly returning to normal.
Bachaud added that more sales might occur toward the end of May and early June. During this period, sellers often get better prices. For instance, in 2023, homes listed in the first two weeks of June sold for an average of 2.3% more, equivalent to a $7,700 increase for a typical U.S. home, based on a previous Zillow analysis.
Bachaud also said that he expected the spring housing market season to extend into later months this year.
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