Mortgage Rates Finally Crash Through 6% Threshold

Thursday could prove to be a watershed day for the United States’ post-pandemic housing market. Or it could just be a brief blip into improved affordability.

The average 30-year mortgage rate fell to 5.98 percent, Freddie Mac revealed on Thursday, according to the New York Times. That’s the first time the rate fell below the 6 percent threshold since September 2022, nearly three-and-a-half years ago.

It’s a hefty drop from a year ago, when the same rate was nearly 7 percent, or from October 2023, when the rate peaked at 7.8 percent. Stijn Van Nieuwerburgh, a professor of real estate at Columbia Business School, told the Times the year-over-year drop “amounts to hundreds of dollars’ reduction in mortgage payments.”

The big questions, however, are whether or not the breakthrough will get prospective buyers off the sidelines or if the sub-6 percent rate will last.

Realtor.com chief economist Danielle Hale said the drop could help “people off the fence,” but referred to the rate decline as “more of a dimmer switch” than a “light switch” in terms of turning the housing market on.

Rates have been slowly falling for the last year, but that hasn’t necessarily moved the market on a consistent basis. In December, existing-home sales in the U.S. surged by 5.1 percent from the previous month and 1.4 percent year over year; the 4.35 million existing-home sales that month were the strongest level in nearly three years, according to the National Association of Realtors.

Last month, however, sales dropped by 8.4 percent from the previous month and 4.4 percent year over year. NAR’s chief economist blamed bad weather across the country for the reversal of fortune.

The Trump administration has thrown darts at the housing affordability wall, recently unveiling a proposal to bar many institutional investors from purchasing single-family homes. The president has also vowed to uphold values for those who already own homes.

Last month, the president ordered Fannie Mae and Freddie Mac to buy up to $200 billion of mortgage-backed securities in what the White House framed as a bid to make homeownership cheaper.

The idea is that large-scale buying by Fannie and Freddie could boost demand for mortgage-backed securities, lifting bond prices and pushing mortgage rates lower. But skeptics note how mortgage rates are shaped by a variety of forces, from Federal Reserve policy to inflation expectations.

— Holden Walter-Warner