What Happens to Housing if Mortgage Rates Fall?

Mortgage rates surged from late 2020 to 2022, ending a refinancing boom and causing many homeowners to stay put due to favorable locked-in rates. If rates decline again under normal conditions, home values may rise, but demand could shift toward smaller homes as households downsize. Current home prices are partly supported by the lock-in effect, and future rate movements remain uncertain due to economic and demographic factors.