The Housing Market’s New Reality – Why 7% Mortgage Rates Are the New Normal, According to Freddie Mac

You only notice the sound of an open house sign slapping softly against its own post in the wind a few blocks from a commuter rail station when you’re standing motionless for an extended period of time. Inside, people move between rooms, performing the silent mental calculations that have come to characterize homebuying in America. “Do we like the kitchen?” is not as important as “What does 6.9% do to our monthly payment?” There has always been emotion in the real estate market. Actuarial has also been used recently.

It’s important to handle the statement “7% is the new normal” with caution because it’s frequently used like a blunt instrument. As of February 19, 2026, the average 30-year fixed rate was 6.01%, down from 6.85% the previous year, according to Freddie Mac’s own weekly mortgage survey. That isn’t seven percent. However, people still talk about the pandemic-era 3% with the same fondness and a hint of resentment that they did about cheap rent in the 1990s, and there is a sense that “normal” now means living in a band closer to 6–7%.

There isn’t a single weekly print that supports the “new normal” argument. The psychological scar tissue from the previous few years is what it is. It was more than just a figure when Freddie Mac’s PMMS crossed 7% in January 2025; it was a signal flare. The market began to move like it was wading through cold water as buyers froze and sellers hesitated. The mood hasn’t completely subsided even now, as rates are easing into the low sixes. People can recall what 3% felt like, and remembering is paralyzing in and of itself.

When it comes to explaining what falling rates do and don’t do, Freddie Mac has been largely consistent. Chief Economist Sam Khater pointed to an increase in refinance activity in its February 2026 report, framing the lower-rate environment as strengthening homeowners’ financial positions and enhancing affordability.

The underlying message is well-known: rate changes have an impact on the margin, but the market is still limited by more obstinate factors, such as prices that have never truly returned to reality and a limited supply.

The lock-in effect’s subtle cruelty is difficult to ignore. In comparison to current offers, millions of homeowners are stuck with mortgage rates that appear to be typos. Selling entails giving up that inexpensive debt and accepting a new loan with an interest rate that feels, to be honest, punitive. You can sense that dynamic in neighborhoods where “For Sale” signs, which once appeared like mushrooms after rain, now appear infrequently and almost timidly. It is not evident in any open house.

The other driver, inflation expectations and mood swings in the bond market, is both larger and smaller than housing. Because mortgage rates don’t always follow the Fed exactly, many people become confused and wait for a clean drop that never comes.

Long-term yields may remain high even if the Fed changes because markets may have already priced it in or they may be concerned about inflation picking up speed again. Like drywall absorbing moisture, the housing market ultimately absorbs that uncertainty—slowly and with unseen stains.

Additionally, buyers—particularly younger ones—are beginning to realize that the 3% era was an exception rather than the norm. Although it alters behavior, that realism does not make the payments any simpler. In an effort to wait for wages to catch up, people are moving farther away, renting longer, taking out adjustable-rate mortgages, and selecting smaller homes. It’s still unclear if wage growth and slight rate reductions will be sufficient to restore the kind of housing churn that the American economy subtly depends on: people relocating for work, downsizing after retirement, and upsizing after having children.

Then there is the uncomfortable reality that no one likes to discuss aloud: a world with 6–7% mortgages isn’t historically out of the ordinary. The disparity—today’s rates on top of today’s prices—is what is causing the outrage. The payment shock is real and feels like an unvoted tax when rates rise and prices remain high. The “normal” of one economist turns into the canceled plans of a household.

Rates are currently close to three-year lows, according to Freddie Mac’s weekly data, with the 30-year fixed rate falling about 6% in February 2026. On paper, that is the reality. In actuality, however, the market has been conditioned to view anything close to 7% as a warning and anything above 6% as a problem. The true “new normal” may not be a single figure, such as 7%, but rather a new form of housing fatigue in which people continue to delay, refinance, and shop while tacitly acknowledging that the days of easy money are over.