Weekly Mortgage Rates Creep Up; Are Lower Home Prices Coming?

Weekly mortgage rates continued to inch upwards for the third consecutive week. The average rate on a 30-year fixed-rate mortgage went up three basis points to 7.04% in the week ending May 22, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

Average 30-year mortgage rates have hovered around 7% for most of the year. If a borrower were to buy a $414,000 home (the national median sales price, according to the latest data from the National Association of Realtors) at this week’s rate of 7.04% with a 10% down payment, just their monthly principal and interest payment would be nearly $2,500.

For anyone following national real estate trends over the past decade, rising home prices may seem as inevitable as death and taxes.

Home prices, like costs for most tangible goods, are primarily driven by supply and demand. When there are more buyers in the market than houses available, those homes can command higher sale prices (and vice versa). Since the construction industry never fully recovered from the 2008 financial crisis, the country’s been in a long-term housing deficit — and an undersupply of available homes has driven up costs.

In the years since mortgage rates spiked from pandemic lows, average monthly mortgage payments are regularly breaking their own record highs. It’s been an all-around terrible time to be a home buyer. But some signs point to buyers potentially reclaiming a bit of power at the negotiating table.

New builds are waiting to be sold

Emerging data shows the tide may be turning in the housing market. Home builders applied for far fewer permits last month; in a recent report, Wells Fargo economists Charlie Dougherty and Ali Hajibeigi cited “high mortgage rates, an elevated inventory-to-sales ratio and increased policy uncertainty” as the causes. Basically, builders don’t want to invest in new homes if they aren’t selling enough of the ones they’ve already got and are uncertain about the direction of the market.

This could indicate that mortgage costs have hit a ceiling. And if rates won’t fold (the Federal Reserve currently isn’t predicted to change the federal target rate next month), then the only way to bring buyers back is to lower listing prices.

Zillow expects to see falling home prices

A new Zillow report predicts that home values will drop this year, while sales will rise. Housing prices are expected to fall 0.9% between April 2025 and April 2026.

The National Association of Realtors reports that housing inventory rose 20.8% in April from the previous year. With 1.45 million homes on the market, buyers haven’t had this many options since September 2020. That was a completely different economic climate, with once-in-a-lifetime low interest rates sparking fierce competition.