Home values slipped for the second consecutive month as mortgage costs continue to sideline buyers, according to Zillow®’s latest market report¹. Affordability is driving market momentum: Low-cost markets remain competitive while prices drop the fastest in both the most expensive markets and those that witnessed the strongest appreciation during the pandemic.

n addition to affordability challenges, recent volatility in mortgage rates is making it difficult for many borrowers to qualify for a loan or even plan for their purchase.

“Substantial day-to-day and week-to-week rate movements mean that many potential buyers are able to qualify for a loan one week, but not the next, or vice versa,” said Skylar Olsen, chief economist at Zillow. “Even buyers able to afford a house at current rates could feel frozen, waiting for mortgage rates to fall dramatically again, like they did from the end of June to mid-July, when rates dropped 50 basis points in just two weeks.”

As the share of median household income needed to pay monthly mortgage costs now stands beyond the 30% level considered to be a financial burden, uncertainty itself could be holding up a large population of buyers who could otherwise still afford to move forward with a loan. It’s likely that this problem will continue until markets stabilize and return to some semblance of normalcy, Olsen said.

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