Here's How Much Mortgage Rates Should Fall To Bring Housing Within Reach for Buyers

Key Takeaways

• A Zillow study showed that mortgage rates in many major U.S. cities would have to drop to about 4.43% nationally to make housing affordable.
• Not even a 0% mortgage rate would make housing affordable in New York, Los Angeles, Miami, San Francisco, San Diego, and San Jose, given the housing costs there.

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 to 4.43% to make the typical home affordable for a median-income family. 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 no more than 30% of median household income.

Zillow expects home values to tick down about 2% in 2026, but that barely dents the 49% increase since 2019. And if rates and other factors held steady, home values would need to plummet 18% for the typical home to become affordable — a correction that’s extremely unlikely without a serious economic slowdown.

New York, Los Angeles, Miami, San Francisco, San Diego, and San Jose are so expensive that not even an interest-free mortgage would make the typical home affordable. In these metros, taxes, insurance, and maintenance alone can exceed 10% of the median income.

Boston and Seattle are also pricey, and borrowing costs would have to fall to below 1% to achieve affordability.

Across the Midwest and Inland South, a cluster of metros would remain affordable even if rates climbed above 6.7%. The list includes Pittsburgh, Birmingham, Detroit, Buffalo, Indianapolis, St. Louis, Memphis, Chicago, Cleveland, Louisville, and Oklahoma City.

For instance, home prices in Pittsburgh average a more manageable $228,571, well below the $357,275 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 $131,872, which means that the average buyer could still afford a home even if rates hit about 7.6%. In Detroit, the average home value of $75,511 means a homebuyer can afford a mortgage rate of about 7.0%. Buffalo, Indianapolis, and St. Louis are also cities with home values low enough to remain affordable if rates went above 7%.

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