Will Interest Rates Drop Soon? A Buyer and Seller’s Guide to What’s Next in Real Estate

Will Mortgage Rates Drop in 2025? What Austin Buyers & Sellers Should Know

Mortgage rates—especially here in Austin—aren’t just numbers. They’re the pulse of affordability.

For a $100,000 mortgage over 30 years:

At 5.5% interest, the monthly payment is about $568.
At 6.0% interest, the monthly payment is about $600.
At 6.5% interest, the monthly payment is about $632.

That’s a difference of about $32 more per month for every 0.5% rate increase per $100,000 borrowed.

So if someone is financing $400,000, a 0.5% rate increase would cost roughly $130 more per month.

👉 For real-time mortgage rate monitoring, Mortgage News Daily is the most practical.

Why Rates Matter Locally

For Austin Buyers: Every 1% swing in mortgage rate changes your monthly payment by hundreds of dollars—impacting what home you’ll qualify for.

For Austin Sellers: Higher rates squeeze buyers, reducing demand; falling rates can spark renewed interest and more offers.

How We Got Here (Austin Edition)

2020–2021 Boom: Ultra-low national rates drove a bidding frenzy and massive price jumps in Austin.

2022–2023 Correction: The Fed’s rate hikes brought mortgage rates above 6–7%, cooling the market.

2024–2025 Adjustment: Rates remain elevated, but inflation is slowing. Austin buyers now enjoy increased inventory and more negotiating power.

Austin-Specific Market Snapshot
Inventory & Buyer Leverage:
Active listings in the six‑county Austin area hit a 20-year high in June 2025—about 12,605 homes available, giving buyers significant leverage.

In May, inventory rose ~21%, months of inventory climbed to 5.65, and new listings skyrocketed—pushing toward a buyer’s market.

For the Austin-Round Rock-San Marcos MSA: mid‑2025 saw nearly 20% more active listings, inventory at 5.5 months, and median price holding around $439,900–$450,000.

Q1 2025 median prices dipped ~2.3% to $429,869, yet remain roughly 40% above 2019 levels.

A Parcl Labs report shows Austin posted the largest increase in new listings and steepest median price drop (>6%) nationally—45% of listings saw price cuts.

Sales & Price Trends:
Central Texas sales volume was modest: June recorded 2,823 closings (a 2.8% increase over June 2024) with median price flat at ~$449,900.

Year‑to‑date closed sales dropped ~5.3%, median home prices dipped ~2.2% compared to early 2024.

Will Rates Drop in 2025? Here’s What Experts & Locals Say
Local Forecasts (Austin):

Unlock MLS economist Dr. Clare Knapp anticipates rates staying in the 6% range through the first half of 2025, possibly dipping into the 5% range later.

Axios reports: rates expected to finish the year in the low‑ to mid‑6%, maybe near 7%. The median sale price still sits ~40% above 2019, balancing seller equity with buyer opportunity.

The State‑wide view: High rates (6.75–7%) continue to challenge affordability; inventory growth is highest seen since 2007–08.

National Outlook:
Mortgage rates likely to stay above 6% in 2025, averaging ~6.5% early and dipping slightly later—encouraging life but not dramatic change.

Bottom Line: Rates may trend down gradually—good for homebuying sentiment—but any softening is expected to be modest and slow.

What Austin Buyers Should Do

Should you wait? Maybe—but rising inventory means more options now. Higher prices later could erase any savings from a small rate drop.

If you buy now: Lock in today’s price, avoid competition, and consider refinancing if rates dip later.

Austin-specific tips:

Get pre‑approved—inventory is high, but competition still exists in desirable areas.

Ask agents about seller concessions or rate buydowns.

Focus on monthly affordability—especially crucial with current 6–7% rates.

What Austin Sellers Should Know

Price intentionally. A price-sensitive buyer base now rewards realistic expectations.

Low competition—many sellers are staying put—means your home stands out if it’s well-priced.

Listing before any rate-induced buyer surge later this year could give you an edge.

Highlight affordability incentives like assumable mortgages or flexible terms to attract cautious buyers.

FAQ: Austin Edition

Will rates ever drop back to 3%?

Unlikely. Those pandemic-era lows are gone for good.

How often do interest rates change?

Daily—based on inflation data, Fed signals, and bond markets.

Should I refinance now?

If your current rate is considerably higher, yes. But if rates are trending downward, you may wait for a slightly better deal.

Scenarios for Austin Housing in 2025

Gradual Decline: Rates ease modestly, buyer activity picks up, inventory slowly absorbs.

Rate Plateau: Rates remain ~6–7%, keeping the market balanced but cautious.

Rates Rise Again: Any spike thrusts affordability pressure back into center stage.

Final Takeaway: Act When It Aligns with Your Goals

In Austin 2025, the best time to buy or sell isn’t defined by rates alone—it’s shaped by inventory trends, personal readiness, and local pricing. Rates may ease, but today’s conditions—more homes, motivated sellers, fewer bidding wars—aren’t guaranteed tomorrow.

Buyers: If the right home appears, buying now and refinancing later may be smarter than chasing a lower rate.

Sellers: Take advantage of your pricing power now—when buyers are in the market and before everyone puts their house back on the market.

When it comes down to it, in Austin or anywhere, the smartest move is the one that fits your long-term needs—not just the rate forecast.

Byrne Buyer Guarantee
Our buyer clients enjoy access lower than the lowest rates and/or mortgage fees with our in-house mortgage broker, Buyer's Rate Mortgage NMLS: 2565699.  

Our buyer clients that purchase a homestead (owner-occupied home) enjoy our Byrne Buyer Guarantee - dont love your home after 18 months then we will sell it for free.

Call for details and conditions 512-942-7880.