Zillow: Many Home Buyers Aren’t Rate Shopping

(Image courtesy of Efrem Efre/pexels.com)

Zillow, Seattle, found almost 70% of mortgage shoppers submit only one application.

Under current conditions, reducing a mortgage rate by 50 basis points on the typical U.S. home would save a buyer about $1,100 a year. Such savings would have made 22,000 more homes on the market nationwide “affordable” to a median-income household.

Zillow based these estimates on the average 30-year fixed rate in November–6.24%.

The markets in which a drop of 50 basis points on a mortgage rate would have made the largest number of homes affordable were Dallas, Atlanta, Houston, Miami and Phoenix.

In terms of where a 50-basis point reduction would save buyers the most money, buyers in San Jose,, Calif., would see $4,752 in annual savings at a 5.74% mortgage rate instead of 6.24%.

San Francisco buyers would see $3,360 in savings, Los Angeles buyers would see $2,868, San Diego buyers would see $2,808 and Seattle buyers would see $2,256.

While 50 basis points is a large range, Zillow noted that in a 2019 analysis it found spreads of 90 to 130 basis points when comparing lenders for individual buyers.

“Buyers often spend months finding the right home, but only minutes comparing lenders,” said Kara Ng, senior economist at Zillow Home Loans. “Even a small difference in rate can meaningfully shrink a monthly payment and expand the number of homes within reach. Affordability is tough enough today that buyers shouldn’t overlook any potential savings.”