2026 Housing Outlook: Can Falling Rates Ignite the Early Spring Market?

 

After ending 2025 at a yearly low, all eyes are on the first economic reports of the New Year.

The 2025 calendar year closed with a significant win for homebuyers, as the average 30-year fixed-rate mortgage dropped to 6.15%—its lowest level in over 14 months. This downward trend, marking three consecutive weeks of declines, has created a sense of cautious optimism as the industry moves into the first week of January 2026.

While the holiday season typically sees a lull in activity, the recent dip in mortgage rates suggests that the "spring" buying season could arrive earlier than usual this year.

 
The "Wait-and-See" Period Ends

For much of late 2025, prospective borrowers remained on the sidelines, spooked by volatility and high home price growth. However, the move toward the 6% threshold is a psychological milestone that experts believe could trigger a wave of new applications.

Current Benchmarks: The 30-year fixed rate sits at 6.15%, while the 15-year fixed rate remains competitive at 5.44%.
Inventory Impact: Lower rates often encourage "rate-locked" sellers to finally list their homes, potentially easing the inventory crunch that defined the previous year.
Economic Wildcards: The market is currently bracing for the federal government's upcoming reports on unemployment and inflation, which are expected in early January.
 
Expert Caution: Affordability Remains the Hurdle
Despite the encouraging dip in borrowing costs, industry leaders warn that rates are only one piece of the puzzle. Lisa Sturtevant, chief economist at Bright MLS, recently noted that progress on affordability will be a marathon, not a sprint.

“It is likely going to take several years of lower rates, slower home price growth, and increasing household incomes to make significant progress on affordability,” Sturtevant stated. For many buyers, the decrease in monthly payments is a welcome relief, but it may not yet fully offset the rapid rise in home values seen over the last three years.

 
What to Watch in January
As the Mortgage Bankers Association resumes its regular reporting next week, the industry will get its first look at whether these lower rates have successfully converted "lookers" into "buyers." If inflation data continues to cool, we could see rates test the sub-6% level for the first time in nearly two years.

Key Dates for Your Calendar:

Early January: Bureau of Labor Statistics releases new unemployment and inflation data.
Next Wednesday: MBA release of bundled holiday mortgage application data.