What Lower Rates Could Mean for New Jersey’s Housing Market in 2026

By William “Bill” Boswell

Bill is widely known as one of New Jersey’s most sought after real estate agents and is a sales associate of Keller Williams Prosperity Realty.

Are interest rates really going to go down in 2026? This conversation has been happening for years. Rates were expected to drop, but they never did, and many people have stopped believing they will. The real question is not whether we’ve heard it before, but what makes this year different.

Several factors are finally aligning in a way that makes lower rates a realistic possibility. One of those is a recently announced $200 billion mortgage-backed security buyback. This type of announcement is designed to increase demand for mortgage-backed securities, which can help drive mortgage rates down.

Another important factor is inflation, which has been easing significantly on a month-over-month basis. As inflation continues to cool, it becomes more likely that the Federal Reserve will continue reducing its rates.

While the Fed doesn’t control mortgage rates, expectations for the market do. These trends suggest rates will keep declining.

This matters even more in the Northeast, where the housing market behaves differently than it does in many other regions. One of the biggest challenges we face here is that homeowners are staying put. Many people are holding interest rates around 2.5%, and it’s difficult for them to justify selling and moving into a loan in the 6% range or higher.

I often speak with homeowners who want to downsize but discover that, financially, doing so would result in a higher monthly payment than staying where they are. That reality has contributed heavily to the lack of available inventory.

As rates come down, the real question is what level makes a move feel worth it. For some homeowners, that might be 5%. For others, it could be slightly lower. There’s no single answer, because the value of being in the right home and location is different for everyone. After years of waiting, many homeowners may decide that trading a 2.5% rate for something closer to 5% is acceptable.

What we do know is that rates in the 6% and 7% range created a wide gap. In the Northeast, where new construction is limited, that gap has been a major reason inventory remains tight, and prices have continued to rise.

No one can predict exactly how the market will unfold, but we can focus on the most likely outcome based on current information. The most important step for anyone considering a real estate move is to plan ahead. Real estate decisions take time, with planning before, during, and after the transaction.

If you want to discuss your options, feel free to call me anytime at 973-224-4605 or email me at bill@northjerseyluxury.com. Having those conversations early allows for thoughtful decisions rather than reactive ones.