Mortgage rates are falling, but they won’t be low enough for most Americans, according to CNET research

Key Findings

• Only 4% of American adults would realistically consider buying a home with a mortgage rate of 6%. But if mortgage rates fell to 4% or lower, half would consider it.

• About three-in-ten (29%) adults in the U.S. say there is no mortgage rate that realistically allows them to buy or refinance a home.

• In addition to mortgage rates, 45% say lower home prices would play a role in their decision to buy a home.

• More than half (53%) have faced an obstacle outside the housing market when buying a home in recent years, with 36% citing inflation as the main factor.

A recent CNET survey found that half (50%) of American adults say lower mortgage rates would realistically make them consider buying a home.

But how much lower? Only 2% of American adults would realistically consider buying a home or refinancing their mortgage at 6.5%. If mortgage rates were to drop another half percent, only 4% of American adults would consider it.

Average mortgage rates have already fallen significantly since peaking above 8% in late 2023, and are expected to fall nearly 6% by the end of the year. While that may seem like a bargain in today’s unaffordable housing market, it’s not enough to lure buyers off the sidelines.

With the Federal Reserve set to cut rates this month, there’s a chance we could see mortgage rates in the mid-5% range again next year. Yet only 9% would consider buying or refinancing a home at 5%.

The CNET survey found that if mortgage rates fell to 4% or lower, half of Americans would consider buying or refinancing a home. Unfortunately, it’s unlikely we’ll see a substantial drop in mortgage rates without a serious economic downturn.

Good news, despite limited optimism

In 2023, housing affordability reached its lowest point in almost 40 yearsIt will take some time for the housing market to recover, and many Americans are not looking forward to that.

CNET research shows that 40% of American adults are somewhat or very pessimistic about the affordability of mortgage rates through the end of this year.

Still, there is reason for optimism in the long run. With inflation now significantly off the charts, the Fed is poised to cut rates at the upcoming Federal Open Market Committee meeting on September 17-18. This marks a turning point for the housing market, which is particularly sensitive to rising lending rates. However, the Fed’s rate cut is likely to be a slow and gradual process.

Factors that influence housing affordability

High mortgage rates aren’t the only obstacle for homebuyers. Rising home prices and limited inventory are also putting homeownership out of reach and widening the generational wealth gap.

Nearly half (45%) of U.S. adults say that, in addition to mortgage rates, lower home prices would play a role in their financial decision to buy a home. Since 2020, home prices have risen more than 40%which also makes it difficult for potential buyers to save money for a down payment.

In addition to falling home prices, 31% of survey respondents said a raise or higher salary would have a significant impact on their decision to buy a home. When the cost of living rises but wages don’t keep pace, it’s harder for people to save for other costs that come with home ownership, like insurance.

Main obstacles to buying a house

More than a third (36%) of U.S. adults said inflation and/or the high cost of consumer goods and services have been the biggest obstacles to buying a home. Inflation has made basic goods and services more expensive, weakened the value of the dollar, and reduced consumer purchasing power.

In short

Both weaker inflation and the central bank’s rate cuts should lead to lower borrowing costs for mortgages. That won’t make up for the current high home prices and limited supply of homes for sale. But lower mortgage rates should be a step in the right direction for millions of Americans who have been priced out of the housing market.

Lower interest rates mean more homeowners are putting their homes up for sale, freeing up home builders to spend more money on construction and making it easier for potential buyers, especially first-time buyers, to purchase a new home.

Methodology

All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,368 adults. Fieldwork was conducted from August 19 to 21, 2024. The survey was conducted online. Figures are weighted and representative of all U.S. adults (18 years and older).