Mortgage rates have dropped to their lowest level since 2022, raising hopes for a more active spring homebuying season.
During the last week of February, the average rate on a 30-year mortgage fell to 5.98%, according to Freddie Mac. That's the first drop below 6% in three and a half years.
While falling rates are welcome news, housing experts say affordability remains a complex challenge for many buyers — especially renters hoping to become homeowners.
"It is kind of frustrating for renters, especially if their rent is higher than their potential mortgage payment," said Miranda Marquit, a consumer advocate for the moving platform MovingPlace.
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MovingPlace recently analyzed the 28/36 rule — a guideline used by mortgage lenders to determine how much house a buyer can afford.
Under the rule, buyers should spend no more than 28% of their monthly income on housing and no more than 36% on total debt, including housing. But MovingPlace found that only three of 150 ZIP codes reviewed met the mortgage-to-income ratio below 28%.
They include:
- 30349 near Atlanta, GA
- 75217 near Dallas, TX
- 60617 near Chicago, IL
That means homebuyers often spend more than they intended, bypassing the simple rule of thumb.
Marquit reminds buyers that the true cost of homeownership goes beyond the mortgage itself.
"It's not just your mortgage and interest payment. It's not just the down payment that you're saving up for," she said. "You're also going to have to think about things like, 'Well, if I'm in a bigger place, is it going to cost more for electricity and for heating.'"
Experts with Bankrate suggest buyers looking to improve their debt-to-income ratio consider paying down debt before buying, looking at less expensive homes or locations, and checking whether they are eligible for down payment assistance.
On the bright side, higher inventory should give buyers more breathing room when searching for a home.
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Joel Berner, senior economist at Realtor.com, said the so-called "lock-in effect" — where homeowners felt reluctant to sell because of favorable financing on their existing homes — is beginning to ease.
"Before, where people felt locked into their low rate, feeling like it's not really worth it to buy a new home because they've got such favorable financing on the home they already own, that effect is starting to degrade," Berner said.
Homes in the U.S. are selling for a median sale price of about $420,000.
J.P.Morgan expects prices to stall this year, with no change in housing costs, while the real estate company Redfin reported sale prices were up just over 1% year over year in January.
