Mortgage Rates Are Falling: 10 Housing Markets That Could Benefit the Most

Mortgage rates have come down from the 23-year highs that have frustrated the housing market, and are now sitting at the lowest level since February 2023. Rates had already started to come down ahead of last week's Federal Reserve decision to cut interest rates for the first time since 2020, and are poised to fall further in the months ahead. Lower mortgage rates over time should help recharge the housing market.

As rates continue to fall there will likely be a surge in home sales and refinance applications, as homeowners become “unlocked” from their current rates and are less hesitant to sell their homes or remortgage at a lower rate. However, some experts believe that many homeowners will hold off on refinancing or selling until mortgage rates reach a “magic number.”

What is that magic number? And when it's reached, which areas of the country are likely to benefit the most? A recent study from Realtor.com identified the areas in which easing mortgage rates will “unlock” the housing market the most.

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The latest Fed meeting

The Federal Reserve cut interest rates at its latest policy-setting meeting on September 17-18, bringing the federal funds rate, a key overnight bank lending rate that influences all kinds of borrowing costs, down by 50 basis points to a range of 4.75% to 5%. More rate cuts are expected throughout the rest of this year and into 2025.

And while the federal funds rate doesn't directly impact mortgage rates, Fed cuts on short-term rates "will boost banks’ lending margins and should bring some extra reduction in mortgage rates, too," according to Kiplinger's Interest Rates Outlook.

Realtor.com economists predict that by the end of the year, mortgage rates will drop to 6.3%. That 6.3% figure gets close to the so-called "magic number." Here's a look at the metro areas most likely to benefit.

Top 10 metro areas where most mortgages are unlocked by lower rates

To determine the areas where the greatest number of mortgages would be unlocked by lower rates, Realtor.com used the Realtor.com public records database and Optimal Blue to analyze the number of home sales in each area since 2020 when mortgage rates averaged over 6.5%, expressed as a share of the metro’s total number of owner-occupied housing units, according to the U.S. Census Bureau. Here’s what they found.

1. Naples, FL
Share of mortgages above 6.5%: 15.2%
Median list price in July: $770,000

2. St. Louis, MO
Share of mortgages above 6.5%: 13.9%
Median list price in July: $313,900

3. Myrtle Beach, SC
Share of mortgages above 6.5%: 13.4%
Median list price in July: $339,900

4. Cape Coral, FL
Share of mortgages above 6.5%: 12.4%
Median list price in July: $449,950

5. Miami, FL
Share of mortgages above 6.5%: 12.4%
Median list price in July: $449,950

6. Albuquerque, NM
Share of mortgages above 6.5%: 11.6%
Median list price in July: $419,000

7. Kansas City, MO
Share of mortgages above 6.5%: 11%
Median list price in July: $410,000

8. Fort Wayne, IN
Share of mortgages above 6.5%: 10.5%
Median list price in July: $319,900

9. Oklahoma City, OK
Share of mortgages above 6.5%: 10.4%
Median list price in July: $325,903

10. New Haven, CT
Share of mortgages above 6.5%: 10.3%
Median list price in July: $424,925

"Inventory climbed annually in July in each of these markets, which may have spurred recent sales, despite still-high mortgage rates,” says Realtor.com senior data analyst Hannah Jones. “This means that buyers in these markets stand to enjoy ample home options even today, and can take advantage of falling rates.”

According to Realtor.com, Naples, Cape Coral, Fort Myers and Myrtle Beach have recently experienced a surge in population growth, which could also account for such a large share of mortgages with rates exceeding 6.5%.

Use our tool below, powered by Bankrate, to compare mortgage rates today.

The magic number for mortgage rates

Many experts believe that the magic number to bring sidelined buyers into the housing market is 6%. When mortgage rates drop below 6%, there will be a surge in home buyers — stirring up demand, and driving up home prices.

Earlier this year, Shark Tank investor and self-made real estate millionaire, Barbara Corcoran, told Fox Business that if rates go down just another percentage point, "everyone will come out and buy." However, she believes that this will cause prices to skyrocket. "I wouldn't be surprised if real estate went up by another 8 or 10% if interest rates come down," says Corcoran.

Home prices are already going up, increasing year over year by 4.9% in May 2024 compared with May 2023, according to CoreLogic. Realtor.com's economic research team expects list prices to rise 4.6% by the end of this year.

Erin pairs personal experience with research and is passionate about sharing personal finance advice with others. Previously, she was a freelancer focusing on the credit card side of finance, but has branched out since then to cover other aspects of personal finance. Erin is well-versed in traditional media with reporting, interviewing and research, as well as using graphic design and video and audio storytelling to share with her readers.