If Mortgage Rates Drop to 5% in 2026, Average Home Prices Could Jump This Much

Core Insights - The average U.S. home price is currently $360,727, with potential increases if mortgage rates drop to 5% by 2026 [1] - A modest decline in mortgage rates to around 5.9% to 6% could significantly boost buyer demand and home prices [1] Affordability and Demand - If mortgage rates decrease to 6%, approximately 5.5 million additional households could afford a median-priced home, including 1.6 million renters [3] - A drop to 5% would further increase the number of qualified buyers, expanding the pool of potential home purchasers [4] Price Projections - NAR forecasts a 4% increase in home prices for 2026, estimating the average home price to reach approximately $375,156 if rates remain around 6% [5] - If rates drop to 5%, the surge in buyer demand could push prices higher than the 4% increase projected [5] Scenario Analysis - Historical data indicates that every 1% drop in mortgage rates typically brings millions more buyers into the market [6] - A conservative estimate suggests that 5% rates could bring 15%-20% more buyers than 6% rates, potentially leading to a price increase of 6%-7% [7] - This would result in an average home price between $383,170 and $385,978, reflecting an increase of $22,443 to $25,251 from current levels [7]