Key findings
Only 4% of US adults would realistically consider purchasing a home at a 6% mortgage rate. But if mortgage rates fell to 4% or below, half would consider it. Roughly three in ten (29%) US adults say there is no mortgage rate that would allow them to realistically consider homebuying or refinancing. Aside from mortgage rates, 45% of Americans say lower home prices would play a role in their decision to purchase a home. More than half (53%) of US adults have encountered some sort of obstacle outside of the housing market to homebuying in the past years, with 36% identifying inflation as a primary factor.A recent CNET survey found that half of US adults say lower mortgage rates would make them realistically consider purchasing a house. If average mortgage rates were to fall to 4% or below, that rate could potentially unlock the housing market.
Except bargain mortgage rates aren't likely in the near term. And experts say it would take a severe economic downturn for mortgage rates to reach the record lows we saw during the pandemic.
After peaking above 8% in late 2023, average mortgage rates have been in the mid-6% range for a while. They could drop close to 6% by the end of the year, but that's still not enough to draw buyers off the sidelines. A mere 4% of US adults would realistically consider purchasing a home or refinancing their mortgage at a 6% rate.
Now that the Federal Reserve has started reducing its benchmark interest rate, there's a chance we'll see mortgage rates fall one percentage point or more later next year. Yet even then, the CNET survey found that only 9% of US adults would consider purchasing a home or refinancing at a 5% rate.
Today's housing affordability crisis goes beyond just high mortgage rates. Homebuyers, as well as homeowners looking to refinance existing home loans, need relief from rising home prices and the overall high cost of living.
Good news, despite limited optimism
CNET's survey found that 40% of US adults are either somewhat or highly pessimistic about mortgage rates becoming affordable by the end of this year. In 2023, housing affordability hit its lowest point in nearly 40 years.
There is, however, some reason for optimism in the long term. Now that inflation has cooled significantly, the Fed made its first interest rate cut since 2020 at its September Federal Open Market Committee meeting. The central bank is likely to make more rate reductions over the next 18 months.
The Fed's pivot toward gradual and slow rate cuts -- after having hiked interest rates aggressively over the course of 2022 and 2023 -- marks a turning point for the housing market, which is especially sensitive to rising borrowing rates. Mortgage rates are expected to fall, but it won't be linear or quick.
Factors affecting housing affordability
An expensive mortgage market isn't the only obstacle for homebuyers. Rising home prices and limited inventory are also making homeownership out of reach and widening the generational wealth gap.
Nearly half (45%) of US adults say that lower home prices would also influence their financial decision to purchase a home. Since 2020, home prices have increased more than 40%, which also makes it difficult for prospective buyers to save for a big enough down payment.
In addition to home prices coming down, 31% of survey respondents said that getting a raise or having higher wages would have a significant impact on their decision to purchase a home. When the cost of living goes up, but wages don't keep pace, it's harder for people to save for other costs associated with homeownership, like insurance.
Key obstacles to homebuying
Over one-third (36%) of Americans said that inflation and/or the high cost of consumer goods and services have been the biggest obstacles to purchasing a home. Inflation has made basic goods and services more expensive, decreased the value of the dollar and diminished consumer purchasing power.
The bottom line
Both weaker inflation and interest rate cuts from the central bank should translate to lower borrowing costs on home loans. That won't offset today's high home prices and limited supply of homes for sale. But it's a step in the right direction for the millions of Americans who have been priced out of the housing market.
Lower interest rates will motivate more homeowners to list their properties for sale, allow homebuilders to fund more construction and make it easier for prospective buyers, especially first-timers, to get their foot in the door of a new home.
More homebuying advice:
Methodology: All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,368 adults. Fieldwork was undertaken August 19-21, 2024. The survey was carried out online. The figures have been weighted and are representative of all US adults (aged 18+).