If you waited for the housing market to become more affordable before purchasing a home, you may not feel as secure in 2027.
Latest forecasts suggest that 30-year fixed mortgage rates could remain near 7% next year, meaning borrowing costs could remain high for prospective buyers. The average 30-year fixed rate is currently 6.81%, according to Mortgage News Daily.
Fannie Mae now expects interest rates to average 6.7% in 2027, a marked increase from the 6.3% forecast just a month ago. The Mortgage Bankers Association’s August forecast also predicts that next year’s interest rates will average 6.7%, up from the June forecast of 6.5%.
In other words, forecasters who expected mortgage rates to ease now expect them to stay at about their current levels.
“Most of the recent affordability challenges are due to rising mortgage rates. Home prices are actually declining year over year on a national level through 2026,” said Joel Varner, senior economist at Realtor.com. “But behind the scenes, inflation is the real culprit.”
If inflation remains high, mortgage rates may also rise because investors typically demand higher yields on government bonds. High inflation also reduces purchasing power for buyers and can make it more expensive to build a home.
Realtor.com’s own forecasts predict that mortgage rates will be around 6.3% for the remainder of 2026, but the company has since said that this outlook “may be overly optimistic” as inflation and the Iran war put new upward pressure on interest rates.
For potential buyers, this means waiting until 2027 may not make buying a home much cheaper.
Why home affordability could remain under strain in 2027
Mortgage rates tend to be tied to the yield on the 10-year Treasury note, which is influenced by inflation and expectations for economic growth. If inflation is expected to remain high, government bond yields and mortgage interest rates may rise accordingly.
“Economic realities are forcing even the most optimistic rate forecasters to predict a higher interest rate environment than they expected at the beginning of the year,” said Marty Green, a mortgage lending attorney at Polunsky Beitel Green.
The Federal Reserve’s recommended inflation rate in July was 3.7% higher than a year ago, well above the central bank’s annual target of 2%, according to the U.S. Bureau of Economic Analysis. Greene cited renewed tariffs and the Iran war as factors that will keep inflation high and make it harder to predict lower mortgage rates.
Inflation is also eroding homebuyers’ purchasing power. After adjusting for inflation, average hourly wages fell by 1.66% annually in the first half of 2026, according to an analysis of federal data by the Brookings Institution’s Hamilton Project.
At the same time, buyers still face home prices that are approximately 59% higher than in 2020 and are expected to continue rising. A new Fannie Mae survey of more than 100 housing professionals predicts that home prices nationwide will rise 2.2% in 2027.
In a market where home prices are rising along with mortgage rates, Varner said affordability is a “double whammy.”
Building more housing could ease price pressures, but the cost of building housing is also rising.
According to the National Association of Home Builders, the tariffs are increasing the price of materials used throughout homes, including wood, plywood, steel, aluminum, copper and cement. Construction companies are also grappling with a persistent shortage of skilled labor.
The Iran war is also increasing spending. According to NAHB, the rise in oil prices has increased the prices of gasoline and diesel, increasing the cost of producing and transporting construction materials.
“This reduces the amount of inventory coming into the housing market and reduces affordability,” Berner said.
