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Prices will keep 'buyers and sellers on their toes'
“The biggest thing when we look at mortgage rates right now is volatility,” said Nicole Bacho, chief economist at Zillow Group.
While some buyers have settled for 7% interest rates, price volatility is “actually the thing that's going to impact the (housing) market the most,” Bacho said.
When prices rise from week to week, a buyer looking for a home one day may not be able to purchase the same property the next, she said.
Bacho explained that the seesaw movement in interest rates “will keep buyers and sellers on their toes for a longer period than expected.”
For example, a home buyer hoping to get a $400,000, 30-year fixed-rate mortgage might have earned an interest rate of about 6.82% in early April, according to Freddie Mac and the Federal Reserve data. This results in a monthly mortgage payment of about $2,613. Two weeks later, interest rates were hovering at 7.10%. This slightly higher rate adds $75 to your monthly mortgage payment, or $27,000 over the life of the loan.
Even a difference of one percentage point may not seem like a lot, but it could mean an increase of about $200 on your monthly mortgage payment, said Jacob Channel, chief economist at LendingTree.
Potential buyers care about the math. For the week ending April 19, demand for mortgage applications fell 2.7% compared to the previous week, as the average for 30-year fixed-rate mortgages jumped from 7.13% to 7.24%, according to recent data from the Weekly Survey of Mortgage Applications Conducted by the Mortgage Bankers Association. .
Spring housing market 'returns to normal'
“This spring the housing market is returning somewhat to normal,” Bacho said.
She said some areas are seeing more sales as buyers get used to the high prices and look for ways to make it work.
However, more sales are expected at the end of May and early June, she added.
This is also when sellers tend to get the best prices. To that point, in 2023, homes listed in the first two weeks of June sold for 2.3% more, representing $7,700 more than a typical American home, according to a previous Zillow analysis.
“I would say we might also see a later spring season this year,” Bacho said.
