Trends in Mortgage Rates and Affordability

We just completed a two‑part, 40‑page review of rent‑versus‑own dynamics across the country. The core theme is simple: homeownership has never been a purely emotional decision. Even historically, the choice to own or rent has been shaped by relative costs, financing conditions, and expectations around stability and wealth building. What sets this post‑pandemic period apart is how sharply the tradeoff has intensified as the cost of owning has climbed. As a result, more prospective buyers are asking a simple but uncomfortable question: does the math still math? Our latest research digs into exactly that. Three takeaways stood out: 1. The power of buydowns matters. Nationally, owners are paying about 31% more than renters. The largest rent‑versus‑own premiums show up in markets like San Jose, Allentown, LA/OC, Columbus, and Salt Lake City. Our analysis shows that a 4.9% mortgage rate via a buydown cuts the national ownership premium to roughly 14%, materially changing the calculation for many households (graph below). 2. Today’s ownership premium is reshaping behavior. We are seeing delayed purchases even among qualified buyers, a normalization of renting as a deliberate long-term choice, and heightened sensitivity to value. Many would‑be buyers feel they've “missed the boat,” making them far more discerning about what constitutes a good deal versus a bad one. 3. Housing is now competing with alternative investments. For some households, financial markets present a credible near‑term alternative to homeownership as a wealth‑building strategy. That competition for household capital is likely to remain tight until equity markets cool meaningfully or homeownership becomes more affordable. Subscribers to our Zonda National Outlook can log in now to learn more. Sarah Bonnarens Eric Alanis Julia Bunch Tim Sullivan Evan F. Peter Dennehy Kimberly Byrum (formerly Fiala) Bryan Glasshagel Susan Heffron

New-Home Sales Just Dropped to a Seven-Month Low New-home sales fell 13.7% in May - the steepest decline this year and the weakest pace since October. It’s another clear signal that demand is under stress, and that the housing market’s soft landing may be turning soft underfoot. For much of the past year, homebuilders have done what existing homeowners couldn’t: they kept inventory flowing. With owners locked into ultra-low mortgage rates and staying put, the new-home market became the only viable path to ownership for many buyers. Builders responded with aggressive incentives like mortgage rate buy-downs, free upgrades, closing cost coverage. And it worked . . . for a while because incentives kept the pipeline moving. But now, even with those perks, buyers are stepping back. The underlying affordability gap is simply too wide. Mortgage rates remain stuck around 7%. Insurance costs are rising. Household budgets are under pressure. The tools that once created urgency are losing their grip. When incentives stop working, it’s not just caution. It’s a signal that buyers are fundamentally rethinking what they can afford, or what feels worth the risk right now. That kind of behavioral shift doesn’t just affect homebuilders. It cascades through the entire consumer economy. Behind the scenes, supply is quietly building. Completed homes for sale rose to 119,000 in May which is the highest in nearly 16 years. Groundbreaking activity is slowing. Builders are pulling back. And yet, despite softer demand, the median sales price climbed 3% year-over-year to $426,600. That’s not inflation. That’s segmentation. Price gains aren’t market-wide they’re concentrated in the upper tiers, where buyers are less sensitive to rates and more resilient to volatility. Everyone else is sitting on the sidelines. For the Fed, this report won’t move the needle alone, but it adds to a mounting case that restrictive policy is weighing heavily on interest rate–sensitive sectors. Housing is often the first to turn. If it stays soft into the fall, it could reshape expectations about consumer strength heading into 2026. At Havas Edge, we track this data because when the psychology of the buyer shifts, so must the strategies of the marketer. #HousingMarketUpdate #ConsumerBehavior #MacroSignals

This week, I shared insights with Bloomberg Radio and Reuters on what to expect for the housing market in 2026. Below is a quick overview, and you’ll find the full analysis—complete with interactive charts to explore your local market—linked in the comments. 1) Affordability improves—mainly via prices and paychecks. Mortgage rates hover in the low-6% range, helpful but not a game-changer. The bigger lift comes from modest home-price growth paired with steady income gains, nudging affordability higher where active listings are more plentiful. 2) “Life happens” demand pushes sales up, slowly. We’re still missing millions of transactions relative to the pre-pandemic norm, leaving pent-up churn. With ~52 million Americans in their thirties—and millennials projected to add ~10.6 million owner households over time—life events (marriage, kids, caregiving, job moves) keep transactions grinding higher even if rates only edge down. 3) A two-speed map persists. Lean inventory in the Northeast and Midwest keeps conditions tight and price growth steadier. Many Southern and Western metros carry more supply—22 of the 75 largest markets already sit above their 2018–2019 active-listing baseline, concentrated in Florida and Texas—so pricing is more negotiable. 4) Stress pockets, not a foreclosure wave. Measures of strain have risen off the floor, but broad distress typically needs both income loss and no equity. The labor market has cooled—not cracked—and sizable homeowner equity keeps risk contained; weakness is likelier where affordability is stretched, insurance has jumped, or local job growth has softened. 5) Inventory climb as rate-lock loosens at the margins. Inventory has picked up in 2025, even if the pace of growth has slowed recently. Expect a steady rise in 2026—uneven by region, helped by completions and any incremental rate relief. 6) New homes keep the edge. Builders stay cautious on starts and focus on selling standing inventory; incentives like rate buydowns help meet buyers where they are. With many owners still rate-locked, builders retain a relative advantage until competition from resale supply normalizes. Bottom line: 2026 delivers progress without a breakout—modestly better affordability, a gradual rebound in activity, persistent regional divergence, contained risk, rising supply, and a continued new-home edge. Link to Reuters segment: https://lnkd.in/egbjdPJ7

Housing Affordability in the U.S. Isn’t Just About Rates 🏠 Yes, mortgage rates are higher. But let’s be clear: home prices themselves are meaningfully higher than they were in 2019. A few data points that stand out: A $100K household could afford 65% of listings in 2019 → 37% in 2025 A $75K household: 49% → 21% A $50K household: 28% → 9% These aren’t marginal changes; they’re structural shifts. Renting Is Becoming a Market Outcome, Not a Preference For many middle-income households, homeownership isn’t delayed by choice; it’s constrained by price-to-income reality. Even higher-income households feel it: a $150K income once accessed over 80% of listings; today, it’s closer to 60%. Why This Matters 📉 More inventory doesn’t automatically mean more accessibility. When prices rise faster than incomes, the gap remains even as supply improves. Homes are simply more expensive. Understanding that is the starting point for more honest conversations about renting, owning, and housing policy going forward. Source: National Association of Realtors (via Visual Capitalist / Voronoi) #HousingAffordability #USHousing #RealEstateData #HomePrices #RentingVsOwning #HousingMarket #EconomicTrends

Mortgages. From the The Economist, some interesting stats on how the mortgage market has challenges on affordability, access to credit and some changes over the last two decades. "At $13.5trn, America’s current stock of mortgage debt is equivalent to 44% of the country’s GDP. That marks a drop of almost 30% since the global financial crisis of 2007-09, which was sparked by a binge on dicey housing debt, and the lowest level since 1999, before that property bubble got started (see chart 1). More striking still, mortgage debt has shrunk to just 27% of the value of American household property—a 65-year low." "The median monthly principal-and-interest payment on an American home has surged from just above $1,000 to $2,100 in five years, buoyed by soaring interest rates and property prices. The availability of mortgages, as measured by lenders’ appetite for risk, is at its lowest in decades." "In 2003, 35% of American mortgages were extended to borrowers with credit scores below 720. Between 2004 and 2007 that figure climbed to 45%, as lenders lavished funds on less creditworthy buyers, including “subprime” borrowers. It has since slumped to just 22% (see chart 2)." "the Dodd-Frank Act, which revamped financial regulation, made lending to riskier borrowers an even lousier business. Interest-only loans were curtailed, and mortgage fees were capped. At the same time, the process of foreclosing on a home was made much slower." "Had the share of borrowing by lower-scoring households stopped its fall at 25%—still well below the level before America’s ill-fated mortgage boom—The Economist calculates that lenders might have originated roughly $1.6trn in additional loans, equivalent to 8m mortgages of $200,000." "more than 15 years on, the construction of single-family homes still lags behind pre-crisis levels, even as, in many cities, the population keeps growing. The resulting housing crunch is especially clear in cities like Atlanta, Phoenix, Austin and Orlando. And as competition for tenancies gets ever fiercer, rents are hitting the stratosphere." "Impeding the few developers willing to build new houses by cracking down on the providers of capital threatens to make a simmering crisis boil over. Goldman Sachs, a bank, estimates that the 1.6m privately owned properties completed last year still leave the market short of 3m-4m homes. Unless that gap is plugged fast, any policies meant to make mortgages more widely available will only push house prices higher, nullifying their effect." https://lnkd.in/e5vTUZAE

A 0.50% Rate Move Can Shift Your EMI by ₹2,400 Every Month! On a ₹75 lakh loan for 20 years, here’s what rate movement actually does: At 8.0% → EMI ≈ ₹62,700 At 8.5% → EMI ≈ ₹65,100 At 9.0% → EMI ≈ ₹67,500 Every 50 basis point change moves the EMI by roughly ₹2,400 per month. That’s ₹28,800 a year. Across a 20 year tenure, the cumulative difference runs into several lakhs. RBI has already adjusted rates by 25 bps this cycle. Another 25 bps move is under discussion. If that materialises, a buyer evaluating a ₹75 lakh ticket could see the EMI shift from around ₹65,100 toward ₹62,700. For a dual income household budgeting ₹65,000 to ₹70,000 toward housing, that margin directly affects comfort. Rate cycles operate on their own timeline. Transmission from RBI decision to bank lending rates typically takes 4 to 8 weeks. Buyers who have completed financial approvals and property shortlisting can act during that transmission window. Others revisit their calculations after the adjustment reflects. In a leveraged purchase, rate sensitivity shapes affordability more than most buyers account for. #PuneRealEstate #InterestRates #HomeLoans #EMIImpact

Chart of the Week, Is the US housing market recovering Or is it 2008 all over again? If growth ever re-emerges in this cycle, it will come through private credit, and housing sits at the centre of that mechanism. The below chart tracks the YoY change of the U.S. Housing Affordability Index against the YoY change in Housing Starts. In this index, a higher reading means housing has become less affordable, while a lower reading signals improving affordability. During the rate surge of 2022 and 2023, affordability deteriorated sharply as mortgage rates climbed above seven percent, and housing starts followed with a lag as financing costs compressed demand and construction activity slowed. The right edge of the chart now shows an inflection. Affordability has peaked and begun to roll over as mortgage rates have declined meaningfully over the past six months toward the six percent area, and nominal personal income has also risen. Now housing starts are starting to respond with consecutive monthly gains alongside rising permits. Housing remains the most rate-sensitive sector of the U.S. economy, and when long-term yields fall, mortgage rates ease, affordability improves at the margin, builders regain confidence, and private borrowing begins to reactivate. That sequence is how private credit cycles turn. The affordability shock defined the tightening phase, and the rollover in affordability combined with stabilizing starts signals that the pressure has eased and transmission is underway. Full analysis in this week’s Macro Anchor. Andre Chelhot, CFA Editor, The Macro Anchor #MacroAnchor #Housing #PrivateCredit #Rates #Macro