WASHINGTON — Mortgage rates have been moderating in recent weeks, and the 30-year fixed-rate mortgage could dip to 6% in the new year, if real estate predictions hold.  That would be a notable decrease from the 7% rates seen at the start of 2025 – and it could unleash a group of home buyers who had been sidelined in the market.

According to National Association of Realtors® research, a 1% decrease in rates could add about 5.5 million households, including 1.6 million renters, to the pool of potential buyers.

“Lower rates will bring more buyers back to the market,” says Nadia Evangelou, senior economist and director of real estate research at NAR.  She says hopeful first-time buyers may stand to benefit the most, especially those who’ve been squeezed by rising rents.  Also, rate declines could spark confidence among current homeowners, who’ve been locked in with lower rates, to sell and relocate – which would further improve housing inventory.  “These relatively lower rates will help both first-time buyers and current homeowners take the next step,” Evangelou says.

NAR is forecasting that rates could fall to 6% in 2026.  That outlook factors in several influences on rates, including the Federal Reserve’s recent cuts to its short-term interest rates, ongoing inflation trends, the federal deficit and national debt, the impact of tariffs, quantitative tightening and movements in the 10-year Treasury yield.

Mortgage rate sensitivity

The U.S. housing market is slowly transitioning out of one of its most affordability-challenged periods in years, and besides higher home prices, elevated mortgage rates have been blamed for keeping many would-be buyers out of the market.  Consider that between mid-2022 and late-2023, surging rates – from 3% averages to above 7% – pushed the typical mortgage payments up by more than $1,000 per month compared to pre-pandemic levels.

“That combined with low housing inventories froze many would-be buyers in place,” Evangelou says.  While 6% rates are far from the ultra-low rates during the 2020 and 2021 timeframe, a one percentage point drop in rates compared to earlier in the year would be notable for the housing market.  “It would be a huge shift in who can realistically afford to buy,” she says.

For example, on a $500,000 home with a 30-year mortgage at 7% with a 10% down payment, a borrower would pay $3,895 per month.  A drop to 6.25% – at which rates have been hovering lately – has caused the monthly payment to fall to $3,672.  That is a $223 per month difference, says Matt Schulz, LendingTree’s chief consumer finance analyst.

Already, Brad O’Connor, chief economist at Florida Realtors®, notices a trend – when rates drop, the market moves.  Florida home sales have seen about a 10% year-over-year surge this fall, coinciding with a drop in mortgage rates, O’Connor said during NAR’s recent virtual “Real Estate Forecast Summit: The Year Ahead. ”That momentum appears to be continuing with pending home sales for single-family homes in Florida up by 23% from a year ago in October – a month where mortgage rates averaged 6.25%.  “We’re encouraged by how we see people are responding to lower interest rates already,” he says.

Ryan Price, chief economist at Virginia Realtors®, also said during the NAR webinar that he’s seen a similar trend play out with home sales in his state in unleashing pent-up demand in the housing market.  “It’s early glimmers of hope,” he said.  “We saw an uptick this fall in sales that coincided with mortgage rate improvements in September. It’s an early sign of potentially what we could see in 2026.”

What could happen in your market?

NAR’s analysis of the data shows that if mortgage rates drop to 6%, that shift could unleash millions of potential buyers who were sidelined previously due to affordability constraints.  The metro areas that could stand to benefit the most from a 1% drop in mortgage rates from 7% to 6% are:

Kalamazoo-Portage, Mich.: an 8% increase in households who would qualify to buy

• Yuma, Ariz.: 7.5%
• Racine, Wis.: 7.5%
• Hilton Head Island-Bluffton, S.C.: 7.4%
• Rochester, Minn.: 7.4%
• Olympia-Lacey-Tumwater, Wash.: 7.2%
• Wilmington, N.C.: 7.2%

See NAR’s map to find out how many potential buyers could qualify if rates dropped to 6% in your market.

© 2025 National Association of Realtors® (NAR)

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