Will Affordability Improve or Will Rates Drop Before Long?

September 10, 2025•2 min read

With mortgage rates easing slightly in recent months, many hopeful buyers are asking the big question: is housing affordability about to improve, or are rates still too high to make a difference?

The reality is a mixed picture. Rates may continue to trend downward in the short term, but affordability challenges will remain for most buyers well into the next decade.

Mortgage Rates: Trending Down, But Slowly

As of September 2025, the average 30-year fixed mortgage rate has dipped to about 6.5%, the lowest level in nearly a year. Economists expect rates to gradually ease through 2026 if inflation continues to cool and the Federal Reserve begins lowering its benchmark rate.

Forecasts from housing analysts suggest:

Fannie Mae projects mortgage rates averaging just above 6% in 2025.
Wells Fargo expects 30-year rates to average around 6.9% this year, improving slightly to 6.5% in 2026.
Morgan Stanley believes further declines are possible, but cautions that sub-5% rates are unlikely to return anytime soon.

In short: yes, rates may fall, but buyers shouldn’t expect dramatic drops.

Home Prices and Affordability

While mortgage rates are inching lower, home prices remain high due to tight supply. The “lock-in effect”—where homeowners keep their low pandemic-era mortgage rates instead of selling—continues to restrict inventory.

A few trends are worth noting:

Slight price declines ahead: Zillow predicts home values could dip nearly 2% by the end of 2025 as more listings come on the market.
Long-term affordability timeline: Research from Redfin suggests affordability may not return to “normal” levels (housing costs ≤ 30% of income) until 2029–2034, depending on wage growth and interest rate movement.
Regional differences: Some high-cost cities, like San Francisco or Anaheim, may never fully return to pre-pandemic affordability levels.

What This Means for Buyers

Short-term outlook: Rates are likely to improve modestly over the next year, but affordability gains will be limited by persistent high prices.
Medium-term outlook: A combination of slightly lower rates and cooling prices could help some buyers in 2026 and beyond.
Long-term outlook: True affordability relief may take years, requiring both rate declines and income growth to align.

Final Thoughts

If you’re waiting for affordability to “snap back” quickly, you may be waiting longer than expected. Mortgage rates are easing, but only gradually, and home prices remain sticky due to low supply. For many buyers, the best strategy is to purchase when the right home and budget align—knowing that refinancing later could unlock additional savings if rates drop further.

The housing market is shifting, but patience and preparation remain key to navigating affordability challenges.

Sources