Mortgage rates tick down — but will the drop entice buyers? 

Mortgage rates have continued to make steady downward progress, but it remains to be seen whether this will jumpstart what has been a slow spring buying season.

The 30-year fixed-rate mortgage averaged 6.76% this week, according to Freddie Mac. That's down from 6.81% a week ago, and down significantly from the 7.22% average of a year ago. However, rates have not yet dropped to the average of about 6.6% that was reached before the Trump administration's tariff announcements on April 2.

The ongoing uncertainty about tariffs and concerns about the economy at large make it difficult to predict where mortgage rates will go next. Mortgage News Daily, which uses a different criteria to determine rates, showed the 30-year fixed-rate mortgage up slightly on May 1 at 6.83%.

"Homebuyers would like to see rates come down further, but it is becoming more likely that they will remain in the high 6% range this spring," said Lisa Sturtevant, chief economist at Bright MLS.

Pending sales bump indicates buyers are watching rates

Real estate agents received some slightly encouraging news earlier this week involving home purchases. Pending sales were up 6.1% in March compared to February, but down 0.6% compared to a year ago, according to the National Association of Realtors.

Given that mortgage rates were hanging around 6.6% at that time, March's rise in pending sales was a sign that homebuyers were "acutely sensitive to even minor fluctuations in mortgage rates," said Lawrence Yun, NAR's chief economist.

Affordability woes persist

Home affordability continues to be a key factor for the subdued market. According to Redfin's latest report, the median U.S. monthly housing payment hit $2,870 — an "all-time high" — amid mortgage rate volatility and increasing home prices.

The past five years have shown just how difficult it has become for buyers. A U.S. household needed to earn $114,000 a year to afford a median-priced home last month — an increase of more than 70% compared to 2020, according to Realtor.com.

Meanwhile, touring activity remains fairly strong as more homes hit the market. Redfin estimates new listings are up 6.1% year-over-year, while active listings increased 13.7% in its rolling four-week report.

Realtor.com's April estimates indicated active listings were up 30.6% compared to a year ago, putting the total ahead of the last five Aprils but still about 16.3% below typical pre-pandemic levels. This suggests the market still has a ways to go in terms of growing inventory.

Despite higher mortgage rates, "the silver lining is that the market is starting to rebalance," said Danielle Hale, chief economist at Realtor.com. "This could create opportunities for buyers who are prepared." 

Economic concerns leave mortgage applications 'subdued'

Mortgage applications remained sluggish at the end of April, according to the Mortgage Bankers Association. Overall applications for the week ending on April 25 were down 4.2% from the week before. Purchase applications were down 4% week-to-week, but were 3% higher than at the same time a year ago.

"Mortgage application activity, particularly for home purchases, continues to be subdued by broader economic uncertainty and signs of labor market weakness, dropping to the slowest pace since February," said Joel Kan, MBA's vice president and deputy chief economist.