Housing Stocks Rise as Mortgage Rates Hit Lowest Since 2022
A drop in the 30-year fixed rate to 6.06% injects optimism into the housing market, stirring buyer demand ahead of the crucial spring selling season.
A significant dip in borrowing costs is breathing new life into the U.S. housing market, sending shares of major homebuilders higher as investors bet on a revival of buyer demand.
The average rate on a 30-year fixed mortgage fell to 6.06% this week, marking its lowest point in more than three years, according to data released Thursday by Freddie Mac. The move provides a crucial boost to affordability just as the industry heads into the pivotal spring homebuying season.
This renewed optimism was reflected in Tuesday's trading. Shares of D.R. Horton (NYSE: DHI), the nation's largest homebuilder by volume, traded near $159. Lennar Corporation (NYSE: LEN), another industry giant, saw its stock hover around the $121 mark. The drop in rates is a welcome development for a sector that has grappled with the dual challenges of high financing costs and elevated home prices, which had sidelined many prospective buyers.
The decline in mortgage rates follows the market's growing conviction that the Federal Reserve's aggressive rate-hiking cycle has concluded, with potential cuts on the horizon in 2026. Mortgage rates are closely tied to the yield on the 10-year U.S. Treasury note, which has fallen as investors anticipate a shift in Fed policy.
"The combination of solid economic growth and lower rates is leading to improving momentum in residential demand," said Sam Khater, Freddie Mac's Chief Economist. He noted that purchase applications have surged by over 20% compared to the same period last year, signaling a tangible pickup in buyer interest.
This positive sentiment comes after a prolonged period of strain for the housing market. For much of the last two years, rates hovering above 7% dramatically eroded purchasing power. A buyer financing a $400,000 loan would now pay approximately $2,416 per month at a 6.06% rate, compared to $2,660 at a 7.04% rate seen a year ago—a monthly saving of over $240.
Despite the favorable rate environment, challenges persist. Housing inventory remains tight across many parts of the country. A December 2025 report noted that while national active listings have increased year-over-year, overall inventory is still projected to be well below pre-pandemic averages throughout 2026.
Furthermore, homebuilders themselves remain cautiously optimistic. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index edged up slightly in December but remained in negative territory. To navigate the challenging affordability landscape, many builders have continued to rely on incentives. In December, 40% of builders reported cutting prices to attract buyers.
As the weather warms, the upcoming spring season will serve as a critical test for the housing market. All eyes will be on whether the lower mortgage rates are enough to overcome the persistent hurdles of high home prices and limited supply, and translate the recent surge in buyer interest into closed sales.