Mortgage Rates and Home Prices Are Changing

Housing costs in the U.S. are set to stabilize — but not because of the deep price declines or sharp drops in mortgage rates many buyers have been hoping for. Instead, the Mortgage Bankers Association (MBA) expects a more balanced market ahead, with mortgage rates remaining above 6% and national home prices holding steady through 2027.

A Shift Toward Balance

After years of soaring prices and ultra-low inventory, buyers may finally gain the upper hand. “Staying in the low sixes…is certainly better than the 7’s and 8’s that we saw over the past couple of years,” said MBA Chief Economist Mike Fratantoni. “Housing costs are going to be more level over the next several years.”

The association’s forecast projects fixed 30-year mortgage rates will hover between 6.1% and 6.4% through 2026, with only mild price movements expected. A growing supply of homes from both builders and existing homeowners should give buyers more options and moderate price growth.

More Inventory, More Leverage for Buyers

During 2023 and 2024, the story was clear: plenty of would-be buyers, but few homes to purchase. That dynamic is now changing. Builders are ramping up new construction, and more owners are putting homes on the market, giving buyers increased leverage in negotiations.

The MBA expects small home price declines of less than 1% in late 2026 and early 2027, which would mark the first modest reset in years. Regional dynamics remain key: prices are likely to hold up better in the Northeast and Midwest, where construction has lagged behind demand, while Sunbelt markets could see more softening due to higher supply.

Adjustable-Rate Mortgages Are Back

As the yield curve steepens, more borrowers are exploring adjustable-rate mortgages (ARMs). More than 10% of home loan applicants in October applied for an ARM, according to MBA data. The average rate on a 5/1 ARM is now 5.55%, compared with 6.37% for a conventional 30-year fixed loan.

These products, which fix rates for five to seven years before adjusting, appeal to buyers who expect to refinance once long-term rates drop. “The market does fine and will move along at six-and-a-half or even seven, but really takes off below six percent,” said BTIG analyst Eric Hagen.

Builders Offering Incentives Again

In many high-supply markets, builders are offering “rate buy-downs” — incentives that permanently lower a buyer’s mortgage rate — to keep sales flowing. For homeowners looking to sell in those areas, that means sharper pricing and creative offers may be required to compete.

The Bottom Line

The housing market of 2025 looks very different from the frenzy of 2021. Mortgage rates will likely stay in the 6% range, but increased supply, stable prices, and creative financing options could finally restore balance. For buyers, the takeaway is clear: the window to reenter the market is slowly reopening.