The housing market has thrown a curveball lately, and it’s one most people didn’t expect. Even in the middle of a historic 43-day government shutdown, mortgage rates are dropping and home sales are rising across much of the country. Buyers who had been sidelined for months suddenly started resurfacing as mortgage rates dipped, and that momentum is showing early signs of carrying into 2025 and 2026. When the market performs well under stress, it’s usually a sign that consumers are paying close attention to affordability and timing.
For buyers, sellers, and homeowners trying to understand what comes next, this shift could mark the early stages of a much different landscape ahead. Lower mortgage rates, modest inventory improvements, and varied regional performance are all shaping a market that feels more active than it did earlier this year. In this article, we’ll break down why mortgage rates are dropping & home sales are rising, what the current data means for the future, and how you can position yourself to make smart moves in a changing market.
Why Mortgage Rates are Dropping and Home Sales are Rising
The biggest story in real estate right now revolves around affordability. Mortgage rates are dropping & home sales are rising because buyers are finally seeing monthly payments move in a more reasonable direction. Rates have come down from around 7 percent to roughly 6.25 percent, and that shift alone has pushed many people back into the market. Even small rate adjustments can change long-term purchasing power, and buyers recognize when the tide starts turning.
There’s also broader economic context behind this change. Rent increases are slowing, inflation is easing, and the Federal Reserve is signaling additional rate cuts on the horizon. All of these factors contribute to stronger consumer confidence. The result is a market where mortgage rates are dropping & home sales are rising because buyers are responding quickly to financial improvements they’ve been waiting years to see.
NAR’s Chief Economist Lawrence Yun expects home sales to surge by 14 percent in 2026, with 2025 acting as the buildup period. Based on buyer activity I’m seeing in my own market, that projection feels well grounded. When people begin to sense opportunity, they move quickly—and we’re in the early stages of that response.
Price Trends in a Market Where Mortgage Rates are Dropping and Home Sales are Rising
Even as activity increases, prices remain strong. The national median home price rose 2.1 percent year-over-year to $415,200, and NAR expects another 4 percent increase by 2026. If mortgage rates are dropping & home sales are rising, many assume prices will fall, but that’s not how today’s market is structured. Inventory plays a major role, and while supply is up 11 percent compared to last year, it’s not evenly distributed across regions.
Some areas, especially parts of the Northeast, continue to experience extreme supply shortages, which keeps prices moving upward. Other regions, particularly those with more new construction and resale inventory, are beginning to see price corrections. A key stabilizing factor is the extremely low share of distressed sales—only 2 percent of transactions last month. That’s the same as a year ago and a sign of how much stronger today’s housing fundamentals are compared to past downturns.
Cash is another force shaping price trends. Approximately 29 percent of October home sales were all-cash purchases. That number reflects move-up buyers using longstanding equity gains and investors making strategic choices. When mortgage rates are dropping & home sales are rising, cash buyers often move first because they aren’t limited by lending timelines. Their activity continues to support pricing strength even in markets where buyer activity has fluctuated.
How First-tTime Buyers Fit Into This Market
First-time buyers are facing challenges, but the picture isn’t entirely bleak. NAR’s annual report shows their share at a record low 21 percent, and the median first-time buyer age has climbed to 40. These numbers highlight how difficult affordability has been, especially over the past few years. However, monthly data tells a more encouraging story: first-time buyers represented 32 percent of sales in October, up from 27 percent the year before. That’s a clear sign that mortgage rates are dropping & home sales are rising in a way that benefits new buyers.
Regional differences matter a great deal. The Northeast continues to be difficult due to scarce inventory. The West struggles with high prices that remain out of reach for many buyers. The Midwest and South offer more opportunities because of better affordability and more available homes. In my own experience, first-time buyers who take the time to understand financing options, down payment programs, and local inventory trends tend to fare better in shifting markets like this.
If mortgage rates are dropping & home sales are rising, timing matters more than ever. First-time buyers benefit from beginning conversations early—well before they’re ready to write an offer. Preparation is a powerful tool, especially when the market begins transitioning from slow to active.
Regional Shifts and Why They Matter
National trends help paint the overall picture, but regional data shows how varied the market really is. In October, three of the four major regions saw increases in home sales, with the West being the only area that slipped. Prices rose everywhere, but the Northeast saw a substantial 6.5 percent increase due to severe supply constraints. Meanwhile, the South saw a modest 0.3 percent price increase, highlighting just how different local conditions can be even when mortgage rates are dropping & home sales are rising across the country.
Homes are taking longer to sell, with the median days on market rising from 29 to 34. That gives buyers more room to think, negotiate, and avoid rushed decisions. For sellers, it’s a reminder that pricing based on last year’s conditions can delay offers. I’ve seen properties gain traction simply by adjusting to the current pace of the market, especially in regions where buyer activity has become more measured.
These regional swings show why understanding your own local market is essential. Even when mortgage rates are dropping & home sales are rising nationally, your city or neighborhood may be responding differently based on inventory, job growth, migration patterns, and price pressure.
What This All Means for Your Next Move
The housing market is clearly entering a new phase. Mortgage rates are dropping & home sales are rising, and that combination often marks the start of increased buyer momentum. But this isn’t a market to interpret only from headlines. Your best outcomes will come from understanding what’s happening in your specific area and preparing early for the changes ahead.
If you’re thinking about buying or selling in the next year or two, now is the time to strategize. When rates fall, competition rises. The people who prepare early—financially and logistically—tend to move confidently when the right moment comes.
FAQ
Why are buyers returning now?
Buyers are returning because mortgage rates have eased, making monthly payments more manageable and increasing affordability.
Are home prices expected to fall?
Some areas may see pricing adjustments, but nationally prices are projected to continue rising due to strong demand and limited supply.
Is this a good time for first-time buyers?
It can be, especially in regions with more inventory and better affordability. Preparation and financing conversations are essential.
What will the market look like in 2025 and 2026?
Forecasts show gradual improvement in 2025 and potentially a strong rebound in 2026 as rates continue to ease.
Do longer days on market help buyers?
Yes, longer market times can provide buyers with more leverage and reduce the pressure to make rushed decisions.
