:max_bytes(150000):strip_icc()/GettyImages-1333447841-be4bcaaaa8af4ca6aa89ffe7c2208837.jpg "Here’s How Much Mortgage Rates Should Fall To Bring Housing Within Reach for Buyers")
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Key Takeaways
- A Zillow study showed that mortgage rates in many major U.S. cities would have to drop well below today’s levels of around 6.1% to make housing affordable.
- Mortgage rates need to fall by about two percentage points in places like Dallas, New Orleans, and Nashville to make borrowing costs accessible for homebuyers.
- But in Pittsburgh, Birmingham, and other cities with low housing costs, mortgage rates could tick even higher and still remain affordable.
Some housing markets are so expensive that they would still be unaffordable even if rates plummeted. In other areas, a small decline in rates would be enough to make homeownership possible for many buyers.
A 2025 Zillow report found that mortgage rates nationwide would need to fall more than 4% to make the typical home affordable for a median-income family. Currently, the average mortgage rate on a 30-year, fixed-interest loan is 6.11%. The study assumed a 20% down payment and defined affordability as a monthly mortgage payment of less than 30% of the median household income.
New York, Los Angeles, and Miami are examples of big cities with rising home values that wouldn’t be affordable even with a 0% mortgage rate. New York’s average home value is over $800,000, while in Los Angeles it’s just shy of $1 million.
Boston and Seattle are also pricey, and borrowing costs would have to fall to below 1% to achieve affordability. Dallas, New Orleans, and Nashville would have to see rates drop by more than two percentage points in order for housing to be affordable there.
Other areas of the U.S. have lower prices, meaning that housing would still be affordable even if rates climbed above 6.7%, Zillow said.
For instance, home prices in Pittsburgh, Pennsylvania, average a more manageable $231,518, well below the $359,241 average home value in the U.S. Buying a house there would still be attainable for most people even if rates jumped as high as 9%.
Home values in Birmingham, Alabama, average $132,725, which means that the average buyer could still afford a home even if rates hit 7.62%. In Detroit, the average home value of $76,340 means a homebuyer can afford a mortgage rate of 7.02%. Buffalo, Indianapolis, and St. Louis are also cities with home values low enough to remain affordable if rates went above 7%.
