10 Places Where Lower Mortgage Rates Will Unlock the Housing Market the Fastest

by Keith Griffith

Illustration by Realtor.com. Source: Getty Images

For several years, high mortgage rates have frozen much of the housing market, with many homeowners who were locked in at prior lower rates remaining unwilling to sell and assume a new, more costly mortgage.

Now, as rates begin falling, a new Realtor.com® analysis shows the metro areas that could see the earliest signs of thawing in the form of increased seller and refinance activity.

Those markets have the highest share of recent home sales when rates averaged over 6.5%. Those homeowners are now “unlocked” and in a position to refinance, or sell and buy a new home at a lower rate, after average rates dipped below 6.5% this month for the first time in more than a year.

Leading the list is Naples, FL, where 15.2% of mortgages are estimated to be above the 6.5% cutoff, compared with the national average of just 5.3% of all mortgages.

Other Florida metros in the top 10 include Miami and Cape Coral. St. Louis placed second, with 13.9% of owner-occupied homes now unlocked by lower rates. Other cities on the list vary widely in geography and affordability, and include Fort Wayne, IN; Albuquerque, NM; Kansas City, MO; and New Haven, CT.

The Realtor.com economic research team projects mortgage rates will fall to 6.3% by the end of this year, as the Federal Reserve begins cutting its benchmark rate. If that scenario plays out as expected, the cities we’ve identified could be among the first to benefit.

“From this point forward, assuming rates continue to ease, selling or refinancing may look increasingly attractive to many homeowners in these markets,” says Realtor.com senior data analyst Hannah Jones. “Homeowners who have felt ‘locked in’ by mortgage rates are likely to feel increasingly eager to sell as rates improve.”

However, Jones notes that, for the time being, the marginal benefit of selling might be too small for recent buyers, and they may opt to refinance instead.

By definition, the cities identified by Realtor.com all have one thing in common: an unusually large share of their homes have been purchased fairly recently, when average rates exceeded 6.5%.

Many of the cities have seen significant recent population growth, including Naples, Cape Coral, Fort Myers, and Myrtle Beach.

High demand from homebuyers has driven explosive growth in home prices in those areas. In Naples, for instance, home prices grew 69% from 2020 to 2023, according to federal data.

Now, there are signs that the markets in question are moving back toward balance between buyers and sellers, a situation that could improve further as mortgage rates fall.

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

To estimate the cities with the highest share of existing mortgages that are now unlocked, we used data from deed records and Optimal Blue to analyze the number of home sales in each metro area during months since 2020 when local mortgage rates averaged more than 6.5%.

Those transactions are expressed as a share of the metro’s total number of owner-occupied housing units, according to the U.S. Census Bureau, to estimate the share of local mortgages above the 6.5% threshold.