Zillow predicts major mortgage rate change, homebuying shift | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

For homebuyers who’ve spent years watching the housing market move out of reach, the real estate tide may finally be turning.

Mortgage rates seem to be slipping just enough to hint at a new phase — one where affordability isn’t theoretical, but actually within sight.

A fresh prediction from major real estate technology company Zillow suggests this trend is no blip. The firm expects rates to keep falling, a shift it says is likely to give buyers more room in their budgets and help thaw a market frozen by high borrowing costs.

“Zillow expects rates to fall further through 2026, which would unlock additional buying power for home shoppers,” wrote Zillow in a new analysis published Feb. 23.

For years, I have reported on rising mortgage rates (among other finance topics). The acute rate run-up from 2022 to 2025 drove homebuyers largely out of the housing market, as reported extensively by Fannie Mae.

In February 2026, it appears to me that new optimism about mortgage rates, at least for now, shows signs of real sustainability.

30-year fixed-rate mortgage falls below 6%

On Feb. 26, Freddie Mac reported weekly data showing the 30-year fixed-rate mortgage (FRM) averaged 5.98%.

“For the first time in three and a half years, the 30-year fixed-rate mortgage dropped into the 5% range, falling even lower than last week’s milestone,” said Freddie Mac chief economist Sam Khater.

“This rate, combined with the improving availability of homes for sale, is meaningful and will drive more potential buyers into the market for spring homebuying season,” Khater predicted.

Mortgage News Daily’s Chief Operating Officer Matthew Graham had reported a daily FRM of 5.99% on Feb. 23.

Graham explained that the current downward trend shows more signs of lasting mortgage rate health, compared to other recent drops.

“Unlike last time, mortgage rates have eased down to current levels in a much more gradual and — dare we say — sustainable way,” he wrote. “After all, (Monday’s) improvement is only a moderate 0.05% vs Friday. Back on January 9th (the last time the daily FRM was briefly under 6%), the initial day-over-day jump was more than 0.20%.”

Mortgage News Daily (MND) reported on Feb. 26 that the daily FRM was 6%.

“It may not be as glamorous as being able to say mortgage rates are ‘in the 5s,’ but at 6.00%, today’s MND rate index is a mere 0.01% higher than yesterday’s multi-year low,” Graham wrote on Mortgage News Daily.

“For all practical purposes, this means the average borrower will see almost exactly the same rates as yesterday. In many cases, the quotes will be exactly the same.”

Zillow sees increasing home affordability

Zillow says improving affordability points to a more active home shopping season in the spring of 2026.

“A new Zillow analysis shows a median-income U.S. household can now afford a $331,483 home. That is a $30,302 improvement since last year and the highest affordable price since March 2022,” Zillow reported.

“A median-income household has seen roughly 82,300 more homes come into their budget than a year ago,” wrote Zillow senior economist Kara Ng.

More on mortgages, housing market:

The monthly principal‑and‑interest payment on a typical home — based on a 20% down payment and excluding taxes and insurance — is now 8.4% lower than it was a year ago, Zillow reported.

Home prices have leveled off, mortgage rates have slipped from an average of 6.96% in January 2025 to 6.10% last month, and household incomes have inched upward. Taken together, those shifts give a median‑earning buyer roughly $30,302 more in purchasing power, according to Zillow.

“A more than $30,000 gain in buying power is meaningful for households that have been stretched thin by high rates. It can mean the difference between settling and choosing,” Zillow said in a statement. “That doesn’t suddenly make this market affordable for everyone, but it does crack open doors that had firmly shut when rates peaked.”

Zillow sees positive real estate trends, acknowledges continued strains

A median‑income household would still devote 32.3% of its income to a typical mortgage payment, underscoring that affordability remains strained even as conditions improve.
The additional $30,000 in buying power created by lower rates and flat prices can meaningfully expand the options available to buyers who have been stuck choosing between compromises.
Buying power is now at its strongest point since March 2022, when mortgage rates were still below 5%.
The recent low came in October 2023, when buying power fell to $272,224 as mortgage rates averaged 7.62% — the highest monthly average since 2000.
Forecasts from Zillow anticipate mortgage rates continuing to decline through 2026, which would further increase what shoppers can afford. Source: Zillow