March mortgage dip: A sign of what’s to come?

Stable interest rates during March contributed to improved housing affordability, as buyers had to come up with 1.4% in their monthly principal and interest payment versus February, the Mortgage Bankers Association found.

In March, the national median payment fell to $2,173 compared with $2,205 for the prior two months, which had been the highest level since last October. The Purchase Application Payment Index declined to 164.1 for March compared with 166.5 one month earlier.

For March 2024, the median payment was $2,201 and the PAPI was 174.2.

Why March’s mortgage rates mattered

With the conforming 30-year fixed rate mortgage spending the month between 6.6% and 6.7% (according to Freddie Mac), the increased affordability drove home sale activity, said Edward Seiler, the MBA’s associate vice president, housing economics, and the executive director of the Research Institute for Housing America, in a press release.

But so far in April, after an initial bump from President Trump’s tariff announcement, the 10-year Treasury has generally been on the upswing, and the spread between it and mortgage rates has been widening. It was at 242 basis points as of April 22, a gain of 13 basis points over a four-week period, according to Optimal Blue.

Some rate data providers have reported the 30-year FRM flirting with or even going above the 7% mark. This includes Zillow’s rate tracker, which has the 30-year FRM at 7.02% on Thursday morning.

How economic uncertainty impacts affordability

Escalating rates, of course, aren’t good for home sales activity in the near term.

“Despite improving conditions in March, the outlook in the upcoming months is cloudier,” Seiler said. “Ongoing affordability concerns, declining consumer confidence, and volatility in the financial markets could all put downward pressure on homebuyer demand.”

March’s national median mortgage payment for conventional loan applicants was $2,200, down from $2,226 in February and $2,222 in March 2024. For consumers taking out Federal Housing Administration loans, it was $1,872 for March, versus $1,907 the prior month and $1,898 one year ago.

The million-dollar entry-level home

Meanwhile, rising home prices have increased the number of cities where a starter home costs over $1 million to 233, compared with 85 five years ago, Zillow said. At the start of this year, 239 cities had starter prices over $1 million.

Most of those high-priced pockets are in California (113 cities). The New York City metro area (including parts of New Jersey and Pennsylvania) has the highest concentration of municipalities where starter homes are priced over $1 million at 48. San Francisco and Los Angeles follow at 43 and 34 respectively.

The nationwide average is a mere $192,514.

“First-time buyers are facing a market where prices that once seemed unimaginable have become reality,” said Kara Ng, senior economist at Zillow.

The good news is, Ng said, “With more homes hitting the market, listings lingering longer, and sellers cutting prices at record rates, buyers are starting to regain some negotiating power.”