Spring is usually considered prime time for the housing market. The winter weather is finally thawing out, the sun is starting to shine more regularly and everything is looking greener and rosier. But this year, some unanticipated challenges are threatening to upend what is usually the busy season for both buyers and sellers.
Due to the war with Iran, the “cost of oil is shooting higher, leading to rising inflation and causing the Fed to reconsider” its previously planned rate cuts, said CNBC. In turn, “U.S. bond yields are rising, with mortgage rates following suit.” With rates steadily increasing week by week and waning affordability continuing to squeeze budgets, the question arises: is this spring the right time to make homebuying moves?
What is next for mortgage rates?
In March, mortgage rates steadily climbed. The month saw a “three-week climb” that marked the “steepest such rise in more than a year and a half,” said Realtor.com, citing Freddie Mac data. As of the week ending March 27, the “contract rate on a 30-year, fixed-rate mortgage rose 14 basis points to 6.57%,” said U.S. News & World Report.
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So, will that ascent continue? “While there’s a slight possibility of rates easing downward, they are more likely to remain in the low-6% range for the near term,” said MarketWatch, citing Jen Poniatowski, the SVP of mortgage growth and market development at Key Mortgage.
However, the trajectory will ultimately depend on factors that are hard to predict with any certainty, particularly oil prices. “If oil prices retreat closer to $70 per barrel, then mortgage rates may return closer to 6%. If oil prices reach $100, then mortgage rates may rise to 6.7% to 7%,” said Lawrence Yun, the chief economist and senior vice president of research at the National Association of Realtors, to MarketWatch.
How could rising rates affect the spring housing market?
Higher mortgage rates have already “proved a deterrent for some potential home buyers,” said NerdWallet. And then there is the added layer of “higher costs for basic household goods, food and gas,” which “could scuttle more folks’ plans.”
This hesitancy is showing up in the market. “The number of homes for sale is climbing not because there are so many more sellers, but because the homes on the market are sitting,” said CNBC. This is giving buyers a bit more leverage, though, as “sellers entering the market appear to be moderating their price expectations, with the typical asking price running nearly 2% below year-ago levels,” said Realtor.com.
Is this spring still a good time to buy or sell?
Both buyers and homeowners “should be prepared for continued rate volatility and avoid making decisions based solely on short-term market movements,” said Kiplinger. Really, what it comes down to is “how a housing decision fits into your broader financial picture, including your income stability, long-term plans and comfort with monthly costs,” rather than what is going on with the market at any given moment.
Zooming out for some broader context can also be helpful. While rates are high, and rising, “they’re still notably lower than at the same time last year,” said NerdWallet.