The Mortgage Rate Shift That Could Change the Housing Market
Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content.
Owning a home remains prohibitively expensive for many Americans, but experts believe a modest decline in mortgage rates could inject much-needed momentum into home sales and help revive the broader U.S. housing market.
According to recent analysis from the National Association of Realtors (NAR), were mortgage rates to drop to 6 percent, an additional 5.5 million households would be able to afford a home, including 1.6 million renters.
Why It Matters
Affordability remains one of the key issues threatening the stability of the U.S. housing market. As experts have warned, the rising costs of buying a home—which have dragged ownership rates to a post-pandemic low this year—are exacerbated by persistently high borrowing costs, preventing a large number of Americans from entering the property market.
Economists have recently pointed to higher-than-usual mortgage rates as a critical drag on the U.S. housing market, and others are now dubbing a possible drop to 6 percent as a "magic" figure that would expand the number of Americans who are able to buy.
What To Know
According to data from key organizations within the housing and mortgage markets, including the Mortgage Bankers Association (MBA) and the Federal Home Loan Mortgage Corporation (Freddie Mac), 30-year fixed mortgage rates are currently hovering at around about 6.75 percent.
While these are below the levels seen in October 2023, when 30-year rates surged to around 8 percent, they are a far cry from the lows of under 3 percent during the pandemic.
The rates have pushed homeownership out of reach for many. According to Realtor.com's Housing Market Trends Report for June, the number of homes for sale in the U.S. rose nearly 30 percent year over year, marking the 20th straight month of increases. The latest market report from Zillow similarly showed that housing inventory hit a five-year high in June.
In an aerial view, single family homes on April 19, 2025 in Thousand Oaks, California.
In an aerial view, single family homes on April 19, 2025 in Thousand Oaks, California.NAR's research found that even a modest drop in rates to 6 percent would boost home sales by an estimated 3 percent in 2025 and by 14 percent in 2026. It added that approximately 10 percent of the additional households now able to buy would do so over 12 to 18 months.
According to Mortgage News Daily's loan calculator, a 6 percent rate on 30-year mortgages would lower the monthly payment on a $300,000 loan to $1,799 from $1,946 at today's rates.
NAR said that Atlanta, Dallas, Minneapolis, Cleveland, and Kansas City would see the greatest increase in home sales activity if rates dropped to 6 percent.
Susan Wachter, an economist and professor of finance and real estate at the University of Pennsylvania's Wharton business school, told Newsweek that 6 percent could prove "a magic mortgage number that will push Americans to buy."
However, she added that this will depend on the direction of inflation, and the Federal Reserve's response in the form of lower interest rates.
What People Are Saying
Alexei Morgado, real estate agent and founder of Lexawise, told Realtor.com: "Many of my clients tell me the same thing: They want to buy, but they feel that mortgage rates are holding them back."
"And it's not just about the number itself," he continued. "What I hear most often is the fear of making a bad decision, of getting into something they can't sustain or that will later make them think, 'I rushed into it.' That feeling of paying more for the same thing is frustrating, discouraging, and puts them on hold."
Susan Wachter of the University of Pennsylvania's Wharton School told Newsweek: "Six percent could be a magic mortgage number that will push Americans to buy, but only if it comes about because inflation declines, bringing interest rates down, without a recession. The fear of buyers' remorse in a housing slowdown is sidelining buyers, including those who would newly qualify for a mortgage with rate drops."
NAR Chief Economist Lawrence Yun, speaking to real estate professionals at the Residential Economic Issues & Trends Forum last month, said: "Your past clients are all happy. But for new homebuyers, their monthly payment obligation has increased, and this is what's killing the housing market. Mortgage rates are the magic bullet, and we're waiting and waiting until those come down."
What Happens Next?
NAR Chief Economist Yun forecasts that mortgage rates will average 6.4 percent in the second half of 2025, and 6.1 percent next year.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Axios
20 minutes ago
- Axios
Turns out the vibes were actually right this time
On Friday, the government's jobs report confirmed what Americans have been saying all year: The labor market isn't good. Why it matters: Call it a victory for vibes. The big picture: For years, consumer surveys about the economy, and even some "soft" data indicators, failed to predict what's actually happening in the real economy. The so-called vibecession predicted a recession that never came. But with this latest unemployment report, there's a sign that people are in touch with reality — at least when it comes to the job market. Americans know a stinker when they're living with it. Catch up fast: Job growth was anemic in July, worse than previously realized for the past few months, according to the closely watched Labor Department data released Friday. The numbers surprised the markets. Only 106,000 jobs were added to the economy over the last three months — the lowest since 2020, when the pandemic cratered employment. The resilient labor market was a "mirage," as Axios' Courtenay Brown writes. Zoom in: That would've been less of a shock if you'd been following the "anec-data," that is surveys and stories from the real world about the state of the job market. Glassdoor, the jobs site, has been tracking declining " employee confidence" all year. In May and June, it hit record lows — with a sinking share of workers reporting a positive business outlook for their employer. By the numbers: In June, only 43% of workers reported an upbeat outlook, the lowest since Glassdoor began tracking in 2016. Mention of "uncertainty" in Glassdoor job reviews spiked this spring. 66% of consumers surveyed in March said they expected more unemployment over the next year — the highest level in a decade, per University of Michigan data analyzed by Bank of America Institute. Unemployment, meanwhile, is still relatively low, but once you lose a job it's grown harder to find another. The share of Americans continuing to receive unemployment insurance has soared this year. Zoom out: Reports of a white-collar recession, and tales of professionals' struggles to land jobs have been growing. CEOs have been talking about workers being replaceable all year — a sign that they're not in desperate need of employees. Workers' pay expectations have been diminishing, too. The lowest wage Americans would be willing to accept for a new job fell sharply this year to $74,236 from a record high $82,135 in 2024, per a survey from the New York Federal Reserve on the so-called "reservation wage." Reality check: If you have a job, you're probably relatively OK — though it's become difficult to job hop. Layoffs are still relatively low. " Companies are holding onto workers since it was hard to hire them and then train them in the first place," Rick Rieder, BlackRock's chief investment officer of global fixed income, said in a Friday note about the jobs report. They still feel like things could improve, and will need staff going forward.
The Hill
20 minutes ago
- The Hill
Jury orders Tesla to pay $329M in Autopilot crash case, opening it up to other costly lawsuits
MIAMI (AP) — A Miami jury ordered Elon Musk's car company on Friday to pay $329 million to victims of a deadly crash involving its Autopilot driver assist technology, opening the door to other costly lawsuits and potentially striking a blow to Tesla's reputation for safety at a critical time for the company. The federal jury held that Tesla bore significant responsibility because its technology failed and that not all the blame can be put on a reckless driver, even one who admitted he was distracted by his cell phone before hitting a young couple out gazing at the stars. The decision comes as Musk seeks to convince Americans his cars are safe enough to drive on their own as he plans to roll out a driverless taxi service in several cities in the coming months. The decision ends a four-year long case remarkable not just in its outcome but that it even made it to trial. Many similar cases against Tesla have been dismissed and, when that didn't happen, settled by the company to avoid the spotlight of a trial. 'This will open the floodgates,' said Miguel Custodio, a car crash lawyer not involved in the Tesla case. 'It will embolden a lot of people to come to court.' The case also included startling charges by lawyers for the family of the deceased, 22-year-old, Naibel Benavides Leon, and for her injured boyfriend, Dillon Angulo. They claimed Tesla either hid or lost key evidence, including data and video recorded seconds before the accident. Tesla has previously faced criticism that it is slow to cough up crucial data by relatives of other victims in Tesla crashes, accusations that the car company has denied. In this case, the plaintiffs showed Tesla had the evidence all along, despite its repeated denials, by hiring a forensic data expert who dug it up. Tesla said it made a mistake after being shown the evidence and honestly hadn't thought it was there. It's not clear how much of a hit to Tesla's reputation for safety the verdict in the Miami case will make. Tesla has vastly improved its technology since the crash on a dark, rural road in Key Largo, Florida, in 2019.
New York Post
20 minutes ago
- New York Post
Corporation for Public Broadcasting — which funds PBS, NPR — to close after federal aid cut
The Corporation for Public Broadcasting — which distributes money to NPR and PBS — will shut down after the loss of federal funding, the nonprofit said on Friday. The Republican-controlled House of Representatives passed a $9 billion funding cut to public media and foreign aid last month. This included the elimination of $1.1 billion earmarked for the CPB over the next two years. 3 The House passed a $9 billion funding cut to public media and foreign aid last month, including the elimination of $1.1 billion earmarked for the CPB that distributes funding to National Public Radio and Public Broadcasting Service. AFP via Getty Images 3 President Trump argues that financing public broadcasting is an unnecessary expense and that its news coverage suffers from an anti-right bias. Getty Images 'Despite the extraordinary efforts of millions of Americans who called, wrote, and petitioned Congress to preserve federal funding for CPB, we now face the difficult reality of closing our operations,' CPB President and CEO Patricia Harrison said. CPB informed its employees that the majority of its staff will be let go as of September end, except a small transition team that will remain through January 2026 to ensure closeout of operations. Created by Congress in 1967, the CPB distributed more than $500 million annually to the PBS, NPR and more than 1,500 locally operated public radio and television stations. 3 Since 1967, CPB has distributed more than $500 million annually to the PBS, NPR and more than 1,500 locally operated public radio and television stations. Rafael Henrique – President Trump and many of his fellow Republicans argue that financing public broadcasting is an unnecessary expense and that its news coverage suffers from an anti-right bias. The Trump administration has also filed a lawsuit against three board members of the CPB who have not left their posts despite Trump's attempt to fire them.
