Agents and home buyers, take note: The 30-year fixed-rate mortgage averaged 5.98% this week—its lowest point in three-and-a-half years. The drop could potentially unlock millions of new buyers who had been sidelined by affordability constraints when rates hovered around 7% just over a year ago.
“Mortgage rates falling below 6% is a big psychological and financial milestone—the first time we have seen that since September 2022,” says Nadia Evangelou, principal economist and director of real estate research at the National Association of REALTORS®. “That's a confidence trigger for buyers, especially those who have been holding out for rates to start with a five again.”
Evangelou notes that on a $400,000 home, today's rates bring the monthly mortgage payment down to about $1,910. “That's a significant improvement from a year ago and puts about $2,000 back into a buyer's pocket annually,” Evangelou says.
Sam Khater, Freddie Mac’s chief economist, also called the rate move into the 5% range a milestone—even more significant than last week’s news-triggering headline of 6.01% rates.
“This rate, combined with improving availability of homes for sale, is meaningful and will drive more potential buyers into the market for the spring home buying season,” Khater says.
Where the Most New Buyers Could Emerge
An analysis of National Association of REALTORS®’ Metro Market Dashboard shows that an additional 5.5 million households now stand to qualify for a mortgage—households that couldn’t qualify when rates were near 7%. That includes 1.6 million renters who could become first-time buyers.
The metro areas that could see the largest increase in qualified households from a 1% drop in mortgage rates (from 7% to 6%) include:
- Kalamazoo-Portage, Mich.: an 8% increase in households
- 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%
Hover over your metro area to see how many potential buyers could qualify in your market.
Still, most newly qualifying households do not tend to act immediately when rates drop, Lawrence Yun, NAR’s chief economist, recently stated. Based on historical data, about 10% are likely to enter the market, which could still add about 550,000 new home buyers to the market this year compared with last year, he notes.
Mortgage Rates This Week
Freddie Mac reported the following national averages with mortgage rates for the week ending Feb. 26:
- 30-year fixed-rate mortgages: averaged 5.98%, down from last week’s 6.01% average. A year ago, rates averaged 6.76%.
- 15-year fixed-rate mortgages: averaged 5.44%, rising slightly from last week’s 5.35% average. Last year at this time, rates averaged 5.94%.
