US Mortgage Rates Fall Below 6% for First Time Since 2022

The drop to 5.98% for a 30-year fixed mortgage marks a significant shift from the peak of nearly 8% seen in October 2023. For historical context, the all-time low was a mere 2.65% in January 2021, while the average rate since 1971 hovers around 7.69%. While the Federal Reserve's benchmark rate influences borrowing costs, mortgage rates are more directly correlated with the yield on 10-year Treasury notes. Recent cooling inflation data and investor shifts toward safer assets like bonds have helped push Treasury yields down, providing relief for mortgage rates. This rate drop has a tangible impact on buying power. A median-income U.S. household can now afford a $331,483 home, which is a $30,302 improvement in their budget compared to a year ago and the strongest buying power since March 2022. However, affordability remains constrained by more than just mortgage rates. Surging property taxes and homeowners insurance costs in many regions continue to elevate the total monthly cost of ownership, offsetting some of the benefits of lower interest rates. Nationally, home price growth is expected to be muted in 2026. Zillow's latest forecast projects a modest 0.9% rise in U.S. home values between January 2026 and January 2027, a downward revision from earlier estimates. J.P. Morgan research similarly sees prices stalling at 0% growth for the year. The national forecast masks significant regional differences. Zillow projects home prices in Hartford, CT, to appreciate by 4.1%, while markets like New Orleans, LA, and Austin, TX, are expected to see declines of 4.1% and 2.9%, respectively. The increase in housing inventory is not from a surge of new sellers, but rather from homes staying on the market longer. The median days on market has lengthened to 78, closer to the pre-pandemic norm, as sellers patiently wait for buyers instead of pricing aggressively.