When the Federal Reserve began easing interest rates in 2025, many would-be homebuyers and sellers expected mortgage rates to follow suit. Instead, borrowing costs remained stubbornly high, and a mix of inflation expectations, bond market uncertainty, and supply-and-demand dynamics have led to even more confusion for those looking to buy or sell homes.

Luckily, Sriram Villupuram, housing finance expert and professor in the College of Business, is here to help make sense of it all.

What do today’s mortgage rates say about housing affordability?

Affordability depends on several factors, and interest rates are only one piece of the puzzle; home prices and household incomes also play significant roles. Between 2019 and 2024, home prices rose by roughly 44%, while household incomes increased by only about 22%, creating a widening affordability gap.

What does this environment mean for first-time buyers and sellers?

According to the National Association of Realtors, first-time buyers accounted for just 21% of all home purchases in 2025, a roughly 50% drop from 2007. Elevated home prices and interest rates have made it difficult for new buyers to enter the market. One strategy for first-time buyers is to wait and save toward a 20% down payment, which can eliminate private mortgage insurance and lower monthly costs. Sellers, meanwhile, are facing increased competition as sales volumes remain low and housing supply remains relatively high.

How are higher rates changing buyer behavior?

Buyers are becoming more cautious and are increasingly willing to rent longer while waiting for the right opportunity. The fear-of-missing-out mentality that fueled the housing market in recent years has largely faded. At the same time, a boom in apartment construction has created a strong rental supply nationwide, helping stabilize—or even reduce—rents in many markets and giving prospective buyers more flexibility.

Over the next 6-12 months, what indicators should consumers watch if they’re trying to time a purchase or refinance?

Real estate is highly local, so buyers should closely monitor supply and demand in their specific market—such as how many homes are for sale and how long they stay on the market—to determine fair pricing. For refinancing decisions, consumers should also watch inflation expectations, including surveys from the Federal Reserve Bank of New York, which can offer insight into where long-term rates may be headed.