Real estate technology company Zillow has now dropped a key prediction on mortgage rates and housing market sales. This includes a report on the advantages (even amid rising costs) of renting versus buying a home.
“We expect sales to remain lower than last year through the fourth quarter,” Zillow wrote.
“However, it’s not out of the question that rates will decline as rapidly as they rose, which would bring both buyers and sellers back to the market. At this point in the calendar, the question is whether they would sit out until next spring.”
High mortgage rates and typical fall seasonality combined to slow home sales in September, according to Zillow’s latest report.
Preliminary data shows closed sales fell 2.5% year over year, while pending sales dropped 8.5%.
Here is where Zillow’s observation about renting versus homebuying comes into play.
“The for-sale market’s slowdown was predictable given where mortgage rates currently stand, but the continued strength in the rental market is more surprising,” said Mischa Fisher, chief economist at Zillow.
“Buyers on the margins are finding the monthly savings for renting too good to pass up, even if their long-run goal is still to purchase a home.”
Mortgage rates may decline
“Mortgage rates actually fell today — something they’ve done only 7 times since August 25th,” wrote Matthew Graham of Mortgage News Daily (MND) on Oct. 6. “While the outright levels remain near the highest since 2003, they’re near the lowest in just over a week with top-tier 30-year fixed rates down to 7.56% for the average lender.”
Graham adds a couple of questions about mortgage rates.
“What gives? Is this a sign that recent upward momentum is starting to wane?” Graham wonders. “It’s too soon to conclude such things, but it is somewhat encouraging that yesterday’s long-term high was basically right in line with the high seen on September 30th (7.61 vs 7.60). This is the sort of ‘double top’ behavior that some analysts look for when trying to identify momentum shifts.”
“Bottom line: it’s too soon to start celebrating. But it’s better than the average day of late.”
Freddie Mac reported the weekly 30-year fixed-rate mortgage (FRM) clocked in at 7.28% in an Oct.1 statement.
“With mortgage rates on their current trajectory, the housing market continues to be supported by favorable economic conditions,” said Sam Khater, Freddie Mac’s Chief Economist.
Zillow clarifies home-renting trends
As buyers back away from purchasing homes, increased demand in the rental market is driving up prices.
“The typical U.S. rent rose 2.7% year over year in September, the biggest annual gain since April 2025,” Zillow explained. “Annual rent growth has accelerated every month since April and is widespread, rising for both multifamily and single-family homes.”
More on housing market:
- Lennar delivers harsh reality check for housing market
- How Fed rate hikes impact home sellers (and how to navigate the shift)
- Zillow predicts mortgage rate, housing market change
To attract tenants amid rising costs, property owners are increasingly offering concessions, with 39.6% of Zillow rental listings featuring a concession in September — a slight uptick from 39.3% in August and a notable climb from 37.4% a year earlier, according to Zillow.
Rental concessions are temporary discounts or perks — such as free rent, waived fees, or gift cards — offered by landlords to attract prospective tenants and quickly fill vacant apartments.
Zillow forecasts a major shift in the housing landscape, projecting key changes to mortgage rates that could impact buyers and sellers in the coming months.
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Redfin, Fed weigh in on mortgage rates, Fed interest rate action
Rates face continued upward pressure as bond market investors grapple with the same concerns that have already pushed mortgage rates up by 1.5 percentage points this year.
“Last week’s main economic data and news all reduced the probability of a Fed rate hike in October,” wrote Redfin’s head of economic research Chen Zhao. “They took some pressure off expectations for cumulative hikes through the end of 2027, but mortgage rates still ended the week up modestly.”
“The biggest development was a weak jobs report that, despite some noisy statistical issues, indicates no pressing need for the Fed to hit the brakes further.”
Investors must wait another week for the upcoming inflation report, which will play a critical role in shaping the Federal Reserve’s policy decision at its Oct. 28 meeting.
On Sept. 16, the Federal Open Market Committee raised the target rate for the federal funds rate by 25 basis points to 3.75% to 4%.
“Economic activity is expanding at a solid pace,” wrote the Board Governors of the Federal Reserve System in a statement. “While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
“Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.”
