Home Sales Are ‘Primed to Pop,’ If Mortgage Rates Fall to This Level

The 30-year mortgage rate measured weekly by Freddie Mac has averaged about 6.8% so far this year (Joe Raedle/Getty Images)

Key Points

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• National Association of Realtors anticipates home sales boost if mortgage rates drop to 6%, potentially increasing sales by 10% to 15%.
• Lawrence Yun expects mortgage rate declines if inflation improves and the Federal Reserve signals rate cuts in 2025 and 2026.
• Roughly six million households priced out by higher rates could afford homes at 6%, with a potential 10% sales conversion.

Home sales could take off if mortgage rates fall to around 6%, the National Association of Realtors’ chief economist said Monday. That level no longer looks like quite as much of a reach as it did a couple months ago—though it will take better reads on inflation to get there.

Lawrence Yun, the National Association of Realtors’ chief economist, sees further mortgage rate declines coming if inflation numbers improve and the Federal Reserve signals it will cut rates in 2025 and 2026.

Sales in 2026 could rise by between 10% and 15% from this year’s levels if mortgage rates fall to around 6%, the economist said. That kind of a boost in sales “is not common but after three years of super-low sales, it is primed to pop,” Yun noted in a post on LinkedIn.

Roughly six million households who had been priced out by higher rates could afford to buy a home if mortgage rates fell to around 6%, Yun said in an interview with Barron’s, citing the trade group’s analysis of U.S. income distribution. Not all six million would ultimately decide to buy, but it’s reasonable to expect that about 10% of them would, Yun says. That expectation brings the economist to a “conservative” estimate of a 10% to 15% increase in sales, assuming 2025’s total is about flat with last year.

Key to that prediction is a downward trend for mortgage rates, which largely follow the 10-year Treasury yield and is based on future expectations for the economy and monetary policy. The 30-year mortgage rate measured weekly by Freddie Mac has averaged about 6.8% so far this year, and existing-home sales are on course to end 2025 near the roughly 30-year low they reached in both 2023 and 2024.

A few things will have to go right for 6% rates to come into view: the Federal Reserve will have to cut interest rates two or three times in 2025, and throughout next year, Yun says. For that to happen, inflation readings monitored by the central bank will have to improve, he adds.

A recent decline in mortgage rates has made 6% feel much closer than it did a few months ago. Mortgage News Daily on Monday pegged the 30-year fixed rate at 6.25%, the lowest level since last autumn.

The decline has drawn some buyers back into the market—though it will take months for today’s general interest in buying a home to translate into tomorrow’s home-sale data. Early indications of future sales, such as Redfin’s pending home sales measure, shows contract signings about flat with the year prior during the four weeks ended Sept. 7—though signings climbed between about 7% and 11% in Cleveland, Chicago, West Palm Beach, Fla., and Pittsburgh.

With another few months left in the year, economic data continues to be a wild card for mortgage rates—as will be any forward-looking projections or commentary issued by the central bank. Investors should keep their eye on the 10-year Treasury yield, which could move—in either direction—in response to Wednesday’s summary of economic projections or Fed chair Jerome Powell’s commentary following the Federal Open Market Committee meeting.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com