The current average 30-year, fixed-rate mortgage has risen to 7.17% as of the week ended April 25, according to Freddie Mac data reported by the Federal Reserve. This represents a slight increase from the previous week’s rate of 7.10%. With the uncertainty surrounding future rate cuts by the Federal Reserve, potential home buyers and sellers are closely monitoring the situation. Experts predict that the Fed will maintain steady rates during this week’s meeting and may consider lowering borrowing costs in the latter part of the year. According to Matthew Walsh from Moody’s Analytics, the first rate cut is expected to occur in July. Until then, average mortgage rates are likely to fluctuate between 6.5% and 7.5%.
Nicole Bachaud, a senior economist at Zillow Group, highlights the significance of rate volatility in the housing market. While some buyers may have adjusted to the idea of 7% interest rates, the frequent fluctuations in rates can disrupt their financial planning. The uncertainty created by these fluctuations can lead to challenges for buyers and sellers in the real estate market. For instance, a slight increase in rates can translate into a significant difference in monthly mortgage payments over the life of the loan. Jacob Channel, a senior economist at LendingTree, emphasizes that even a small percentage change can result in a substantial increase in the total amount paid towards a mortgage.
The impact of rising mortgage rates is evident in the recent data on mortgage application demand. In the week ending April 19, mortgage applications dropped by 2.7% compared to the previous week, coinciding with an increase in average 30-year fixed-rate mortgages to 7.24%. However, despite these challenges, the spring housing market is gradually returning to normalcy. Some buyers are adapting to the idea of higher mortgage rates and are exploring options to make it work. As a result, certain areas are witnessing increased sales activity, with buyers looking to capitalize on the current market conditions.
Looking ahead, industry experts anticipate a surge in sales towards the end of May and early June, when sellers traditionally receive the best prices for their properties. Historical data from Zillow suggests that homes listed during this period tend to sell for a premium, reflecting the seasonal trends in the real estate market. Nicole Bachaud predicts that the spring season this year may extend further than usual, indicating a shift in the timing of peak sales activities. Despite the challenges posed by fluctuating mortgage rates, both buyers and sellers are adapting to the evolving market dynamics to capitalize on potential opportunities.