Mortgage interest rates edged modestly lower this week as the Iran ceasefire was extended. Day-to-day we've seen rates rise and fall, but the moves have been small enough that rates are more or less stable.
The average rate on a 30-year fixed-rate mortgage fell to 6.10% APR in the week ending April 23, according to rates provided to NerdWallet by Zillow. We calculate our weekly average using daily APRs recorded over the last five business days.
Even though rates are lower than they were a month ago, with the war in Iran unresolved and economic uncertainty souring consumer sentiment, this spring may not feel like a good time to buy a home. Here's where mortgage rates may be headed and how the spring market's shaping up so far.
Fed unlikely to influence mortgage rates
Next week's meeting of the Federal Reserve shouldn't affect mortgage rates. For one, markets widely expect the central bankers to hold the federal funds rate steady. Two, the Fed doesn't set mortgage rates. Its decisions around short-term borrowing are like regular check-ups on the economy, and mortgage rates may rise or fall depending on the prognosis. But with the Fed in wait-and-see mode, there's no pressure in either direction.
Mortgage rates have been heavily influenced by the Iran war since its onset, as bond markets — which mortgage rates track — have struggled due to inflation fears. Mortgage interest rates rose steadily throughout March, as investors' anxieties about rising fuel prices boosting inflation made bonds' stability less attractive. (Bonds offer fixed payouts, and if money's worth less, so are those returns.) We've seen some relief in April as the bond market has calmed, though daily ups and downs continue to be dictated by the headlines coming out of the Middle East.
That level of uncertainty makes it harder to predict where mortgage rates are headed on any given day. But bear in mind that so far in April, average APRs have stayed within a roughly 30-basis-point range. (A basis point is one one-hundredth of a percentage point.) That not-quite-third of a percentage point isn't likely to make or break a home buyer's decision.
That said, the perception that mortgage rates are high might. While the average 30-year APR is actually down 90 basis points compared to this week last year, potential home buyers are probably using a more recent frame of reference. In the days before the Iran war began, sub-6% APRs were making headlines. Even if we're only 10 basis points above that 6% threshold now, a rate that starts with 5% feels a lot lower.
Why buyers remain hesitant
To be fair, no matter where mortgage rates are, it's hard to commit to a massive decision like a home purchase when it feels like the fate of the free world could be hanging by a social media post. “People are much more careful in pulling the trigger” on a home purchase, said Melissa Cohn, a regional vice president at William Raveis Mortgage, via email. “I have a large number of people who continue to extend their preapproval letters,” signaling that even folks who are actively house-hunting are reluctant to commit.
Recent data from the National Association of Realtors show more reasons buyers might balk. At $408,800, the median sale price for existing homes hit a record high for the month of March. A lack of homes for sale continues to keep prices high. Inventory has risen from its 2022 nadir, but it's still well below pre-pandemic norms.
"If you've been waiting for the market to flood with options, that might not happen," said Mike Miedler, president and CEO of Century 21 Real Estate in an emailed commentary. But, he continued, "buyers who show up prepared are finding opportunity — and sellers who are more willing to work with them."
Miedler also emphasized that national numbers may not reflect buyers' on-the-ground realities, depending on their location. "A buyer in Connecticut is in a completely different market than one in Houston or San Antonio," he said. (Coincidentally, I’m in Connecticut and my editor is in Houston; we can both vouch for this.)
If buying a home makes sense for you emotionally and financially, daily headlines shouldn't be the deciding factor. A lackluster spring homebuying season may mean fewer options, but it could also give you a lot less competition. That said, if you're feeling unsure, it's also completely reasonable to hold off for now.
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The article Mortgage Rates Idle While Spring Homebuying Season Stalls originally appeared on NerdWallet.