The US housing industry is experiencing a complex period of transition following the Federal Reserve’s recent moves to lower rates, with the average 30-year mortgage rate now at 6.19 percent, the lowest point in over a year and down sharply from peaks of 7 to 8 percent seen earlier in 2025. This decline in rates has spurred a noticeable rebound in home sales, which reached a seven-month high of 4.1 million in September. Yet affordability remains a major concern, as home prices are more than 50 percent higher than they were at the onset of the pandemic, while wages have not kept pace.
Despite increased buyer optimism due to lower borrowing costs, many homeowners remain reluctant to sell. Most are locked into pre-2022 mortgage rates near 3 percent, creating the so-called golden handcuffs effect. This has kept inventory tight, even as the number of homes listed rose 4.9 percent year-over-year this summer. However, homes are now sitting on the market about three weeks longer than last year, signaling that sellers are anchored to pandemic-era price expectations, while buyers remain constrained by current rates and high prices.
Because of these opposing pressures, the housing market has shifted towards buyers having more leverage, but only modestly so. Those with the means to take advantage of lower rates now have greater purchasing power. For example, a buyer with a 2500 dollar monthly housing budget can now afford a home worth 410000 dollars at today’s rates, up from 380000 dollars at recent highs. However, if inventory remains scarce, renewed demand could push prices back up, offsetting the benefit of cheaper mortgages.
Housing industry leaders are responding with aggressive incentives. Major homebuilders such as Lennar are using significant mortgage rate buydowns, dedicating up to 14 percent of revenues to these programs, in an effort to clear unsold inventory as the supply of completed but unsold homes hits a 16-year high. Meanwhile, landlords and real estate investment trusts face pressures from declining national rents, and commercial multifamily mortgage delinquencies have more than doubled in the past year to 6.5 percent.
In summary, the US housing market is seeing a tentative recovery in sales thanks to easing mortgage rates, but affordability, tight inventory, and slowing price growth continue to define the landscape. The situation remains extremely sensitive to both further rate cuts and supply conditions, and industry players are adapting with incentives and operational adjustments to meet evolving consumer behavior and persistent affordability challenges.
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