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Mortgage rates ticked down this week and more homes are hitting the market, but demand has weakened.
Key points:The 30-year fixed rate averaged 6.27% this week, which is around the lowest level of the year — but buyers shouldn’t expect rates to fall much further. New listings are on the rise as sellers test the market, but so are home prices. Affordability and concerns about job security are keeping buyers sidelined. Builder confidence rose in October as optimism about future sales increased.
Buyers are seeing steady improvements in this real estate market, but even with more favorable conditions, demand remains weak.
Mortgage rates continue to decline while new listings and builder confidence are on the rise, according to the latest data. But mortgage applications have slowed as high home prices and economic uncertainty weigh on prospective buyers.
Rates remain near the lowest level of 2025
The 30-year fixed rate averaged 6.27% this week, according to Freddie Mac. That’s down slightly from the week before and is nearly tied with the lowest rate of the year (6.26% on Sept. 18).
Will that decline continue? While it’s difficult to forecast where rates will go next, “the likely bet is that they are not going to fall much further,” said Lisa Sturtevant, chief economist at Bright MLS.
“Buyers who think they want to wait for lower rates could find themselves facing higher prices but without an improvement in mortgage rates,” Sturtevant cautioned.
More sellers are listing, but demand isn’t keeping pace
Sellers appear to be testing the market to see if lower mortgage rates will entice buyers, according to Redfin. New listings were up 4.1% year-over-year during the four weeks ending Oct. 12 — the biggest increase in more than four months.
At the same time, pending sales were down 1.2% for the same period, which is the largest drop in five months. Meanwhile, prices are still rising, with the median home price up 1.9% year-over-year, Redfin found.
“Buyers are hesitant because of concerns about job security and high mortgage rates,” said Jo Chavez, a Redfin Premier agent in Kansas City, Missouri. “Even though rates have come down from their peak, a lot of people are waiting for sub-6% rates before they buy.”
Another factor affecting demand in some areas? The government shutdown. “In Kansas City, where there are tens of thousands of government jobs, furloughs and potential layoffs are hitting hard,” Chavez noted.
The reluctance to buy is also showing up in mortgage applications. Overall applications were down 1.8% for the week ending Oct. 10, while purchase applications fell 3%, according to the Mortgage Bankers Association.
Notably, FHA applications increased. The rate on those loans is more than 10 basis points lower than the conventional fixed rate, said Joel Kan, deputy chief economist at the MBA.
Builders more bullish about future sales
While buyers remain cautious, the construction industry is showing more optimism — despite the challenges around tariffs and weaker demand — according to the National Association of Home Builders.
The overall NAHB confidence index was 37 in October, up four points from September but still low compared to recent years. The index is based on builder perceptions of current sales conditions, sales expectations for the next six months and buyer traffic. All three metrics rose, but confidence about future sales showed the biggest jump, increasing nine points to 54.
“Builders expect a slightly improving sales environment, albeit one in which persistent supply-side cost factors remain a challenge,” said Robert Dietz, chief economist at the NAHB.
While no construction reports are expected from the U.S. Census this week because of the federal government shutdown, NAHB predicts that single-family building permits rose around 3% in September.
DC market starting to see shutdown impacts
More than two weeks in, the shutdown is hurting demand in the Washington, D.C. area. Pending sales are down 6.7% year-over-year, and days on the market rose to 43, nine days longer than a year ago. New listings are up 9.8%, according to Redfin.
Home prices in D.C. were essentially flat in September leading up to the shutdown, according to Bright MLS. The median sold price was $600,500, up 0.3% from a year ago.