Housing affordability continues to pose a significant challenge across the United States, with mortgage rates playing a crucial role in determining homebuying opportunities for many. Recently, mortgage rates have seen a decline from a peak of about 7.6% in 2023 to approximately 6.01% as of February 19, 2026. Despite this reduction, rates remain high compared to the typical levels observed during the 2010s, where they generally hovered between 4% and 5%. Furthermore, they still fall short of the record lows witnessed during the pandemic.
Interestingly, even minor reductions in mortgage rates can profoundly influence housing affordability, effectively opening the market to more households. New estimates from the National Association of Home Builders (NAHB) highlight just how sensitive home affordability is to fluctuations in interest rates.
As 2026 commenced, the average 30-year fixed mortgage rate was set at 6.25%. At this rate, approximately 31.5 million households could afford a median-priced new home, which is currently listed at $413,595. This price necessitates a household income of $124,336 based on standard front-end underwriting criteria. Notably, a slight reduction of 25 basis points, lowering the rate from 6.25% to 6%, could enable an additional 1.42 million households to qualify for buying a median-priced new home.
The significant response in affordability reflects the distribution of household incomes in the U.S. Many households fall within the middle-income range, with about 79.8 million households earning less than $105,880, alongside an additional 14 million households earning between $105,881 and $132,350. Thus, when mortgage rates decline, more households can meet the income thresholds needed for qualification, consequently allowing them to enter the housing market.
Conversely, the effect of a 25 basis-point cut in higher interest rate ranges is less pronounced. For instance, moving from 7.75% to 7.5% would only allow around 1 million additional households to access the market, as fewer households remain near the qualification margin at these elevated rates.
Overall, the data illustrates that even modest reductions in mortgage rates can lead to significant improvements in housing affordability. This underscores the critical role mortgage interest rates play in shaping opportunities for prospective homebuyers, ultimately influencing the broader housing market dynamics.