Buyers May Have Accepted a New Norm on Rates

CHICAGO — Mortgage rates are hovering in the high 6% range, pressing buyers’ budgets. Economists have blamed elevated mortgage rates for curtailing what is typically an active selling season.

But despite the higher borrowing costs, some indicators show more buyers emerging, drawn by the higher inventory of For Sale signs in their markets and potential for more bargaining power with home sellers.

Jessica Lautz, deputy chief economist at the National Association of Realtors®, noted at a July 16 Real Estate Forecast Summit that first-time buyers comprised 30% of home purchases in May. While that percentage remains below their historical norm of 40%, it does indicate progress, particularly from their record low share last year of 24%.

Home buyers seem to be adjusting to rates in the mid- to high-6% and finally accepting that the 3% rate days in the early days of the pandemic are long gone, she notes. “Having a more predictable interest rate may have given first-time buyers the confidence to enter the market” and explore the greater number of choices in homes for-sale, she says.

Although buyers remain nervous – mortgage applications fell 12% in the latest week on slightly higher rates – last week’s number is still 13% higher than the same week a year ago, the Mortgage Bankers Association reports.

“It’s a little light at the end of the tunnel that more people are taking out mortgages for a home,” Lawrence Yun, NAR’s chief economist, said at the Real Estate Forecast Summit on Wednesday. “These are serious, potential buyers.” For the first half of this year, mortgage applications for home purchases have persistently been above year ago levels. “The desire to enter the market has turned positive,” Yun said. “It’s just a matter of when mortgage rates come down so we can have an increase” in home sales.

NAR launched this week a member exclusive – an interactive Metro Market Statistics Dashboard – that tracks housing and economic data in more than 200 metro areas. Besides searching for affordability or economic conditions and homeownership demographics, the dashboard allows users to see how lower mortgage rates could impact home buying demand and affordability conditions in their market. The dashboard reveals that if mortgage rates dropped to 6% – as NAR is forecasting for 2026 – home sales could surge highest in places like Atlanta, Dallas, Minneapolis, Cleveland and Kansas City, Mo.–Kan.

Mortgage rate averages this week

Some prospective buyers may be holding out for lower rates. But others may be tempted by rising housing inventories, which have swelled by 20% nationwide, recognizing that with more choice may come more bargaining power.

“While overall affordability headwinds persist, rate stability coupled with moderately rising inventory may sway prospective buyers to act,” says Sam Khater, Freddie Mac’s chief economist.

Freddie Mac reports the following national averages with mortgage rates for the week ending July 17:

• 30-year fixed-rate mortgages: averaged 6.75%, rising from last week’s 6.72% average. A year ago, 30-year rates averaged 6.77%.
• 15-year fixed-rate mortgages: averaged 5.92%, up from last week’s 5.86% average. Last year at this time, 15-year rates averaged 6.05%.

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