Terry LaneFri, Jul 18, 2025, 8:41 PM 3 min readEric Thayer / Bloomberg via Getty ImagesLower mortgage rates may not solve all the problems in the housing market, economists said.Mortgage rates have been elevated for the better part of three years, and many are anxious to see them move lower.While a modest drop in mortgage rates will help improve market conditions, it may not lead to an immediate drop in prices, since more potential buyers could make homes even more expensive in the short term.A rate drop of a percentage point or more would likely encourage more homeowners to sell, which could lower home prices.There’s no shortage of people who want lower mortgage rates as the housing market grinds to a halt under the pressure of high rates and prices. But it's not clear that lower mortgage rates will actually lower home prices.Rates have hovered above 6.5% for the better part of the last three years, higher than they've been since the 2008 housing crisis, making conditions unaffordable for many prospective buyers.“There are many buyers who are waiting on the sidelines due to affordability concerns that may rush back into the market once rates fall,” said Ben Ayers, senior economist at Nationwide. “There are also many potential sellers who are ready to move, maybe to downsize or to change locations, but are waiting for mortgage rates to move closer to what they are currently paying.”Elevated mortgage rates not only make monthly payments more expensive, they also undercut the supply of homes for sale.That’s because most owners have an interest rate that is much lower than those being offered currently, leaving them feeling “locked in” to their existing mortgages. And when fewer homeowners list their homes, buyers bid up prices for available homes, putting more pressure on affordability.While lower rates could prompt more people to list their homes and boost supply, lower rates might also bring in more buyers, who would increase demand and bid up home prices, some economists said.It's not clear to economists and industry officials whether lower rates will affect supply or demand first. A lot depends on how low mortgage rates go and how quickly that happens.Lower rates most likely will impact demand first, especially if they move below 6%, said Heather Long, chief economist at Navy Federal Credit Union. That would likely flood the market with buyers, potentially increasing annual home sales by 1 million from their current 30-year lows of around 4 million, she said.“This is especially likely since millennials are at prime homebuying and family-building age. They have largely sat on the sidelines since mid-2022, so there’s pent-up demand ready to go on top of the normal demand that’s expected each year,” Long said.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P 5006,296.79 -0.57 (-0.01%)Dow 3044,342.19 -142.30 (-0.32%)Nasdaq20,895.66 +10.01 (+0.05%)Russell 20002,240.01 -13.68 (-0.61%)VIX16.41 -0.11 (-0.67%)Gold3,358.30 +13.00 (+0.39%)PortfolioSign in to access your portfolioSign inTop gainersSTEM Stem, Inc. 13.50 +4.23 (+45.63%)TLN Talen Energy Corporation 328.63 +64.63 (+24.48%)CRSP CRISPR Therapeutics AG 65.13 +10.04 (+18.22%)IVZ Invesco Ltd. 19.92 +2.64 (+15.28%)SOC Sable Offshore Corp. 31.69 +3.35 (+11.82%)Top losersMLGO MicroAlgo Inc. 14.66 -3.12 (-17.57%)ARWR Arrowhead Pharmaceuticals, Inc. 16.76 -2.09 (-11.09%)MOH Molina Healthcare, Inc. 182.98 -21.27 (-10.41%)ELV Elevance Health, Inc. 277.09 -25.36 (-8.38%)STNE StoneCo Ltd. 13.67 -1.24 (-8.32%)Most activeLCID Lucid Group, Inc. 3.0400 -0.0800 (-2.56%)QS QuantumScape Corporation 14.64 +1.04 (+7.65%)NVDA NVIDIA Corporation 172.41 -0.59 (-0.34%)WBD Warner Bros. Discovery, Inc. 12.75 -0.09 (-0.70%)NU Nu Holdings Ltd. 13.02 -0.97 (-6.93%)Earnings eventsTrending tickersLTC-USD Litecoin USD 111.14 +10.08 (+9.97%)BTC-USD Bitcoin USD 117,954.66 -95.14 (-0.08%)ETH-USD Ethereum USD 3,612.05 +71.65 (+2.02%)S SentinelOne, Inc. 18.01 +0.29 (+1.64%)XRP-USD XRP USD 3.42 -0.02 (-0.47%)Top economic eventsPowered by Money.com - Yahoo may earn commission from the links above.