Homebuyers refuse to back down as mortgage rates continue hovering stubbornly near 6% mark
Despite mortgage rates just dipping below the 6% mark, American homebuyers aren't retreating just yet.
While high mortgage rates have historically chilled demand, the latest data reveals a defiant consumer base: new home sales remain higher than year-ago levels, and a massive surge in refinancing suggests homeowners are pouncing on any slight dip in borrowing costs.
Recent data from the Census Bureau reveals that while new home sales dipped slightly by 1.7% in December, the market remains surprisingly resilient, with annual sales outpacing 2024 levels by nearly 4%.
The Mortgage Bankers Association additionally reported Wednesday that refinance applications are 150% higher than the same week last year, and up 4% from the previous week, potentially signaling that homeowners who bought at 7% or 8% are racing to lower their monthly overhead.
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"The growth in mortgage demand reflects the gradual erosion of the lock-in effect, which began in early 2022 with the Fed [pivoting] to higher interest rates. Rising inventory in many markets has brought more choices to consumers and slowed home price growth," StreetMatrix real estate analyst Jonathan Miller told Fox News Digital.
"While many potential homebuyers are still hoping for mortgage rates to fall sharply," he continued, "there is a growing recognition that they won't return to the rock-bottom levels coming out of the pandemic and that home prices are only getting higher."
It’s a potential sign that buyers are still acclimating to a new normal of borrowing costs, even as the median price tag for a new build jumped to $414,400 last month.
"The existing home market… remains constrained by the lock-in effect, with many owners unwilling to trade a 3% mortgage for a 6% one," Palm Beach-based RWB Construction Management’s Robert Burrage chimed in. "So while both markets are supply-limited, new construction has been more agile in stimulating demand."
Housing supply currently sits at 7.6 months. Anything over six months typically cues a buyer's market, giving shoppers more leverage to negotiate for concessions.
"Because we build exclusively for end users, not as a spec developer, our pipeline looks very different from what you see in the national new home sales data," Burrage noted.
"When a custom home starts, it’s typically tied to a committed client who has already secured financing or is paying cash. That removes a lot of the speculative risk from the equation," he expanded. "So even if new home sales tick down nationally, that doesn’t necessarily translate into excess inventory in the true custom segment. These homes aren’t sitting on the market waiting for a buyer, they’re being delivered to one."
"The opportunity cost isn’t just about the rate, it’s about price trajectory and competition. Buyers and sellers get the same memo when rates are falling. The perception of improved affordability for buyers with lower rates are offset with sellers believing that can get a higher price because buyers have more financial strength to purchase. If we learned anything during the housing boom five years ago, [it’s] that lower rates push housing prices higher," Miller added.
StreetMatrix’s analyst also noted that beneath the national surface, Florida is seeing a 2.7% year-over-year price cooling as national averages remain resilient. That decline could be tied to high insurance and maintenance costs.
"Across the Sun Belt, states like Florida are experiencing a housing market reset after a prolonged period of price growth, and inbound migration is waning. Expect a period of more modest sales and price growth going forward," Miller said.
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On the national level, Miller advises keeping a close eye on U.S. jobs and wage numbers throughout 2026.
"We’ve been in a rapid housing growth period where affordability remains strained, but distressed sales remain limited so far," he said. "Thankfully, mortgage lenders didn’t lose their minds like they did during the great financial crisis. If jobs and wages hold, the market is more likely to grind sideways than correct."