Housing Affordability Worsens Despite Lower Mortgage Rates But There's Hope Ahead

Yesterday, ATTOM published its latest U.S. Home Affordability Report. Its news release revealed that, during the third quarter of this year (Q3), "median-priced, single-family homes and condos were less affordable than historical averages in 99 percent of counties with sufficient data to analyze for the third quarter of 2025."

You might have assumed that falling mortgage rates had made many homes more affordable. However, ATTOM reckons that rising home prices, which reached an all-time high median price of $375,000 during Q3, have been even more decisive in most places.

"The drop in mortgage rates will help some buyers keep pace with the rising cost of homes," said Rob Barber, CEO of ATTOM. "But the more favorable loan rates could also enable prices to keep rising and further extend this two-and-a-half-year streak we're in of homes being less affordable to the typical resident of an area than they historically have been."

According to Freddie Mac's weekly figures, a 30-year fixed-rate mortgage had an average rate of 6.67% at the start of Q3 and 6.3% at the end.

A More Cheerful Analysis

Also yesterday, Realtor.com published a more glass-half-full analysis. "Mortgage interest rates have been steadily decreasing for the last month and are expected to remain in the low 6% range through the end of 2025, raising the prospect of finally drawing jittery buyers off the sidelines," it said.

Interestingly, it suggested that the extent to which falling mortgage rates would unlock markets would largely depend on the proportion of homeowners in that area who have mortgages. Well, yes. Only those with mortgages worry about mortgage rates when they want to move home.

Conversely, people who own their homes outright don't care about mortgage rates because they don't have one. But that means they're less locked in by high rates than those who need a mortgage. They can move whenever they want.

Things are different for homeowners with an existing rate that is lower than the one they'll have to pay if they move. Last month, Realtor.com revealed just how numerous those are, basing its figures on the FHFA National Mortgage Database. In the first quarter of this year, this is how many homeowners had mortgage rates below current ones:

• <3% mortgage rate — 20.7% of homeowners with mortgages
• 3%-4% — 32.37%
• 4%-5% — 17.9%
• 5%-6% — 9.9%

Add those up, and 81.2% of homeowners have mortgage rates below the one they could get today. No wonder so many feel locked in.

However, Realtor.com economist Jiayi Xu expects more homeowners to break free from the "lock-in effect" currently keeping them in place as mortgage rates near 6%. And she's looking to markets with high levels of home financing to kick off the trend.

Realtor.com lists the markets with the highest levels of home financing:

1. Washington DC
2. Denver, CO
3. Virginia Beach, VA
4. Raleigh, NC
5. San Diego, CA
6. Baltimore, MD
7. Atlanta, GA
8. Seattle, WA
9. Portland, OR
10. Richmond, VA

What Happens Next?

So, there are grounds for cautious optimism.