BAM Key Details:
- With Zillow’s newest filter—now available on the Zillow app and coming soon to Zillow.com—buyers looking for homes can now search based on monthly payments.
- The new filter uses up-to-date information on mortgage rates and housing prices to calculate monthly housing costs and suggest affordable options.
Zillow’s newest home search filter aims to alleviate the frustration of homebuyers who are struggling to determine their affordable price point amidst fluctuating mortgage rates.
With the new filter, buyers can now search based on monthly payments—including principal and interest, with estimates for insurance costs, taxes, and HOA fees also factored in.
Buyers can start the process by using Zillow’s affordability calculator to determine the monthly payment they can afford. The monthly filter can then use that to eliminate all housing options which (for that day, at least) come with a higher monthly price tag.
Shoppers looking at list prices struggle to figure out what they can really afford, because the mortgage rate is what makes or breaks a monthly payment. Adding in costs like taxes, insurance and HOA fees can quickly bust a shopper’s budget. This new search tool does the math, so shoppers can confidently jump into finding a home they love and can afford
Volatile mortgage rates change what buyers can afford week to week
Buyers searching homes by list price are having to adjust their price point week by week to accommodate fluctuations in mortgage rates.
Zillow’s property listings have included an “estimated payment” to approximate the buyer’s monthly costs associated with the home (assuming the home doesn’t sell for more than the asking price) — with the caveat that their estimate doesn’t take into account factors such as a buyer’s credit score, down payment, and repayment length.
Zillow’s affordability calculator, on the other hand, takes into account the buyer’s income, down payment, and debts to calculate the maximum monthly payment they can afford—with all the costs included.
Once a buyer knows that, they can then use Zillow’s new “monthly” filter to pinpoint housing options with monthly costs at or under that amount, and including the principal, interest, estimated insurance costs, taxes, and HOA fees.
Source: Zillow app
Once the buyer sets their monthly payment parameters on the app, they can also use the drop-down menu to select their down payment amount. From there, they can use other filters (bedrooms, bathrooms, etc.) to narrow down their options.
Today’s mortgage rates have nearly doubled monthly payments since 2020
Today’s volatile mortgage rates, combined with the annual appreciation in home values, have nearly doubled monthly mortgage costs compared to 2020.
The monthly payment on a home priced at the Zillow Home Value Index for the U.S., assuming a 5% down payment, at the average mortgage rate for the month—and not including insurance and taxes—is $431 higher now than in March 2022.
Fast-rising mortgage rates last year pushed monthly costs up with unprecedented speed, dragging affordability to its lowest point in more than 20 years. Beyond the high costs, volatile mortgage rates have made it extremely difficult to plan and budget to buy a house.
Monthly mortgage costs and affordability are the top two challenges for buyers
That said, with rates bouncing the way they have, buyers are seeing their price point bounce right along with it, which makes this new monthly payment filter all the more timely.
As updated mortgage rates feed into the monthly filter, Zillow modifies its search results as rates and home price cuts change the math from one week (or day) to the next.
According to a new consumer survey from Zillow Home Loans, the top three biggest challenges for prospective home buyers when it comes to financing a home purchase are—
- Understanding all the costs associated with a monthly mortgage payment
- Figuring out how much home they can realistically afford
- Researching mortgages and rates
This new monthly payment filter—available now on the app and coming soon to Zillow.com—is the newest Zillow technology helping prospective home buyers better understand the fluctuating market and how it impacts them.
Zillow also has down payment assistance built into its listings—directing home shoppers to resources available where they’re looking—along with its mortgage and affordability calculators, all of which aim to demystify the home buying process and can even make it more affordable.
While typical home prices peaked in June 2022 before tapering off, mortgage rates that soared to 20-year highs later in the year sent monthly mortgage payments climbing to a peak in October. And low inventory is driving prices further up—especially in popular migration destinations.
Top takeaways for real estate agents
Zillow’s new monthly filter makes it easier to quickly identify housing options based on the monthly payment your client can afford. But, it doesn’t eliminate the need to review all the costs associated with being a homeowner. Make sure every buyer you work with understands everything that goes into the monthly mortgage payment.
Encourage prospective buyers in your community to take advantage of this and other tools designed to help them weed out the options that, at least for now, cost more than they can realistically afford.
And don’t overlook options like down payment assistance, which could expand the list of affordable housing options for your client.