Mortgage rates have remained persistently high -- currently hovering just below 7% -- and leading to the largest annual drop in home prices since 2012, according to real-estate brokerage Redfin. But, despite lower prices, housing affordability remains a major obstacle for prospective home buyers.
In March, the median US home sale price fell by 3.3% to $400,528. A lack of home buyers in many markets is behind this downturn in once-booming real estate cities like Boise, Idaho; Austin, Texas; and Sacramento, California. This cooling-off led to 28.5% of US homes selling for more than the list price in March, about half of the 54.1% from last year, according to Redfin.
"This year's spring home buying season is lackluster," said Redfin Chief Economist Daryl Fairweather. "There are some signs of the typical seasonal uptick -- homes are selling faster than they were in the winter -- but that's partly because there are so few new listings. Normally we see home buyers come out in throngs at this time of year, which isn't happening."
Rates for 30-year and 10-year mortgages remain higher than in recent years as the Federal Reserve continued to raise rates in March to combat inflation. Higher interest led to fewer buyers as well as fewer sellers listing their homes, causing a drop in pending home sales to 26.6% on a seasonally adjusted basis, which is the lowest since the start of the pandemic.
Here's what to know if you're in the market to buy a house
With mortgage rates still high, falling home prices can make buying a home a little less expensive. But mortgage rates still hold the key to improved affordability. And experts are predicting that mortgage rates will remain high for now, making a monthly mortgage payment more expensive.
While locking in a lower home price may seem tempting, it's still important to shop around to make sure you can secure the lowest mortgage rate possible. Taking steps like working on your credit score, shopping around for different mortgage lenders and saving for a down payment can increase your odds of qualifying for the lowest rate available.