Mortgage rates have fallen in seven of the last eight weeks. The downward-trending graph for interest on new home loans has got to be at least a little encouraging for buyers and sellers heading into spring.
This week, the average 30-year fixed-rate mortgage did edge up marginally to 6.65%, according to Freddie Mac. Still, that’s down from the most recent peak of just over 7% in mid-January. Remember, the rate topped 7.75% in 2023 as inflation spiked and the Federal Reserve hiked short-term rates.
What’s behind the latest easing of mortgage rates? And how’s that — along with other market dynamics, like high home prices — likely to impact the spring housing market? Depends whom you ask.
“When we asked people to describe their local housing market: ‘doomed,’ ‘inflated,’ ‘crazy,’” said Erika Giovanetti at U.S. News & World Report, which just released its spring homebuyers survey.
What’s most striking?
“The disconnect between where homebuyers want rates to be and where rates actually are,” she said. “It is just simply unaffordable to buy at current rates and home prices for many, many people.”
Mortgage rates have edged down lately, said Zillow economist Orphe Divounguy. Plus, “buyers have more options than they had a year ago — and it’s the most homes for sale of any February since 2020,” he said.
But, remember, all real estate is local.
“What we’re seeing here: a frenzy of activity, very limited inventory and multiple offers, said Israel Hill, a broker in Portland, Oregon. “Those that can afford it are just saying, ‘OK, you know what, I’m going to make my move, I’ve been waiting for too long.”
But at the national level, the U.S. News survey found 4 out of 5 buyers won’t act until rates fall further.
“A quarter of those who are waiting want to see rates below 5%. That is not forecast to happen at all in 2025,” said Giovanetti at U.S. News.
“It’s challenging, to say the least, to figure out what direction mortgage rates will move in,” said Guy Cecala at Inside Mortgage Finance.
He said right now, mortgage rates are falling for a not very favorable reason: “The stock market tanking, as a result of the Trump administration’s economic moves, particularly the tariffs.”
He said any improvement in the economic outlook could push mortgage rates up again. His best guess is that rates settle close to 6% later this year.
And as for holding out for the rates we saw a few years ago?
“Three or four percent mortgages? I don’t think we’re going to see that,” Cecala said, in the foreseeable future.
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