Housing analyst predicts major mortgage rate changes are coming soon

The housing market has faced persistent challenges over the past few years. Soaring home prices and high mortgage rates have kept many buyers on the sidelines, while sellers have held off listing properties, as both await market improvements.

Slower new construction and a limited number of listings have led to a housing shortage, intensifying buyer competition and deepening the market’s stagnation.

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While economists and housing analysts anticipated mortgage rates would ease alongside several Fed interest rate cuts last year, ongoing economic uncertainty, market volatility, and political instability have kept them elevated.

Though mortgage rates aren't directly tied to the Federal Funds rate, many hope another interest rate cut this year could revive homebuyer demand and eventually bring mortgage rates down.

Even a modest dip in mortgage rates could provide just enough momentum to breathe life back into the cooling housing market, as housing analysts note that the real cost of buying a home is at an all-time high.

Rising home prices from inflation, stubborn mortgage rates, and a lack of affordable housing options have weakened homebuyer demand. Realtor.com analysts expect high mortgage rates to make homeownership increasingly unaffordable.

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High mortgage rates are raising the average cost of buying a home

The average home sales price has doubled from $268,000 in Q1 2011 to $503,800 in Q1 2025, far exceeding the pace of inflation and wage growth. Though mortgage rates and housing prices dropped notably during the COVID-era housing markets, they have skyrocketed over the past few years.

Mortgage rates have hovered between 6.5% and 7% since the beginning of the year, and most experts don't anticipate rates changing much this year. Many Millennial and Gen Z homebuyers have delayed homeownership, hoping affordability will improve.

Jiayi Xu, an economist at Realtor.com, highlights the strong correlation between rising mortgage rates and the increased amount needed to buy a home over the past six years.

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“Persistently high mortgage rates and elevated home prices mean that purchasing a home requires significantly more income than in the past,” Xu wrote. “In June 2025, a household needed an annual income of $92,160 to afford a typical home with a 20% down payment—$44,440 more than in June 2019, marking a 93.1% increase.”

The Harvard Joint Center for Housing Studies found that the median home price was 5.6 times the median household income in 2022, the highest level in history. The recent uptick in housing costs as a share of household income has locked a significant number of Americans out of the housing market.

“This sharp rise reflects both a surge in mortgage rates—from 3.8% in June 2019 to 6.82% in June 2025—and a 37.8% increase in median list prices during the same period.”

Realtor.com expects mortgage rates to stay elevated for the next few months

Although economists and homebuyers have been hopeful that mortgage rates may inch back toward 6% this year, a 2025 rebound is becoming less likely.

Fannie Mae recently revised its mortgage rate forecast to increase its year-end projections from 6.2% to 6.5%, as rates prove more stubborn than expected. Now, homebuyers can expect to face an unaffordable housing market for the foreseeable future.

“Rates are likely to stay elevated through the remainder of the season, further compounding affordability challenges for homebuyers,” Xu continued.

Expensive housing markets with steady buyer demand will likely become more expensive and competitive.

“As a result, high borrowing costs and home prices continue to pose major barriers to homeownership, especially for residents in the nation’s most expensive markets, such as San Jose, CA, and Washington, DC—prompting many local buyers to expand their searches beyond their current metros.”