Are mortgage rates about to drop below 6%?
Rates fell to 6.01% this week, the lowest level in more than three years. But homebuying activity remains sluggish even as affordability steadily improves.
Key points:
- Pending sales were down in January, and some economists are already tempering home sales forecasts for the year.
- But the 30-year fixed-rate mortgage fell again this week, hovering just over 6% — if rates continue to trend downward, buyers may be motivated to enter the market this spring.
- Affordability is also improving as price growth slows, but if buyer activity heats up, home prices could climb.
It was another week of steadily improving market conditions for homebuyers — but there's still no sign that they're ready to come off the sidelines.
Sales activity stays cool
Buyer reluctance was most apparent in the pending sales numbers from January. Signed purchase contracts were down 0.8% compared to December and down 0.4% from a year ago, according to the National Association of Realtors — though it's worth noting that the 30-year mortgage rate was in the 7% range at that time.
A possible silver lining? Supply is continuing to build ahead of the spring homebuying season, which could be good news for the buyers who do enter the market in the coming months. More inventory means more options, and it may also prevent prices from rising as quickly as activity increases, said Sam Williamson, senior economist at First American.
"Even with a slow start to the year, we remain cautiously optimistic that lower rates, improving supply, and cooler price growth will make 2026 more constructive for buyers," Williamson said.
Some economists are tempering their home sales forecasts, however. In its February report, Fannie Mae's Economic and Strategic Research group estimated total home sales will rise just 5.1% this year. It's the second time the group has revised its 2026 forecast downward. In September, Fannie Mae predicted a more bullish 9.2% jump in sales, and in January, that dropped to 6.9%.
Falling mortgage rates could motivate buyers
The 30-year fixed-rate mortgage averaged 6.01% this week, according to Freddie Mac's weekly survey. That's down from 6.09% a week ago and is at its lowest level since September 2022.
If rates dip below 6%, that could provide the psychological push some buyers are waiting for — but the lack of home sales activity suggests they're looking at more than just borrowing costs, said Lisa Sturtevant, chief economist at Bright MLS.
"Inventory is still limited in many local markets, particularly in the Midwest and Northeast," Sturtevant said. "Consumer confidence is low, as many individuals and families are dealing with higher prices for everything from groceries to cars. The weather also held back prospective homebuyers, as snow and chilly weather has impacted markets as far south as Florida."
Refinance activity is up
Newer homeowners, on the other hand, have been taking advantage of the downward trend in mortgage rates. Refinance applications for the week ending Feb. 13 were up 7% compared to the week before and a whopping 132% higher than a year ago, according to the Mortgage Bankers Association.
But purchase applications remained sluggish: The seasonally adjusted purchase index fell 3% from the previous week, although it edged up 8% year-over-year.
The affordability factor
With mortgage rates at a three-year low, home prices may be the biggest hurdle for buyers this spring. While growth has slowed, prices were still up 1.1% year-over-year in January, according to Redfin — but wages have risen 3.7% over the same period and mortgage rates have trended down, so affordability is improving.
The Redfin report estimates that it took 66 days for a house to sell last month, the slowest January pace in a decade.
It's shaping up to be a battle of wills this spring: Will sellers hold firm, or will buyers be successful at negotiating lower prices? The number of new listings could be a key factor.
"Without a significant return of supply through the easing of the mortgage 'lock-in effect,' lower rates may simply reignite competition and spike prices, erasing the affordability relief buyers are hoping for," said Jake Krimmel, senior economist at Realtor.com.