The idea of home ownership feels like an increasingly impossible goal for many young Americans — especially those dealing with debt, a dwindling job market and a national housing affordability crisis.
A new report from real estate brokerage Redfin, however, could bolster home ownership hopes [1].
The report showed that active U.S. home listings experienced their biggest drop since 2023 in August, falling 1.4% from July. New listings also dropped 1.1% month-over-month, and almost 3% year-over-year.
That’s because, as Redfin’s Chen Zhao explained, unease over housing costs and the overall economy is now impacting sellers in addition to buyers. He added that he expects 2025 home sales to finish at 2024 levels, “which was the worst year for sales since 1995.”
And though the median home sale price did jump 1.7% year over year to $440,004, Zhao said the silver lining lies in falling mortgage rates, which could open the door to “a significant bump in sales” if they continue downward.
Even better, one Redfin agent believes that hopeful young buyers are within reach of a “magic” mortgage rate that could make their home ownership dreams a reality. Here’s what the magic number is, and what you can do to prepare to enter the mortgage market.
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The mortgage rate “magic number”
Chicago-based Redfin real estate agent Beth Behling says, “The magic number is 6%. Prospective homebuyers are paying attention to mortgage rates, and if they drop to 6%, I think we’ll see a flood of interest.”
The August Redfin report showed that the average mortgage rate has dropped to a year-long low of 6.26% (the September federal interest rate cut was factored into the percentages), so buyers are finding themselves closer to that magic number than they’ve been in years.
Of course, 6% is still a long way from the 30-year fixed-rate of 2.96% homebuyers enjoyed in 2021 — the lowest rate in more than 50 years. But as Mortgage Reports explained, the average rate dating back to 1971 is almost 8%, so waiting for ultra-low 2021 levels isn’t realistic. Plus, they noted, “slower price growth, more inventory, and stronger negotiating power … are shifting in buyers’ favor” [2].
True, it’s not a completely rosy picture. The National Association of Realtors found that, in 2024, the average age of a first-time homebuyer hit an historic high of 38, while the share of first-time homebuyers in the overall market fell to an all-time low of 24% [3]. And, yes, 25% of those first-time buyers pulled it off with money either gifted or loaned to them [4].
Still, Lisa Sturtevant, Bright MLS chief economist, offered credence to the “magic number” idea, telling Forbes that “Slower price growth coupled with a slight drop in mortgage rates will improve affordability and create a window for some buyers to get into the market” [5].
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
How to prepare to enter the real estate market
For prospective buyers, it’s important to ensure that you get all your financial ducks in a row so that you’re ready to pounce on lower mortgage rates if they do hit, or exceed, that magic number. In addition to creating a budget and cutting out unnecessary expenses, here are a few ways to start preparing:
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Get a handle on your debt: Carrying large amounts of debt can severely impact your ability to purchase a home, so you’ll want to pay down as much as possible before applying for a mortgage loan. First Bank also suggests determining your debt-to-income (DTI) ratio by dividing your total monthly debt payments by your total gross monthly income. They say that anything lower than a 36% DTI ratio will make it much easier to secure mortgage financing [6].
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Save for a down payment: Home buyers who put down less than a 20% down payment are subject to the additional cost of private mortgage insurance. That’s one of the reasons, in addition to lowering monthly costs, that Ramsey Solutions advises saving at least a 20% down payment [7]. Using the August 2025 Redfin numbers, a 20% down payment on the average $440,000 home is $88,000. That’s a lot, but there are a number of first-time home buyer programs to help you along the way.
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Turn to the pros: Two great tips come courtesy of John Hancock Investments: enlist a financial adviser and complete a homebuyer’s course [8]. The former can help you develop a full financial plan to ensure you’re ready to make an offer on a home when the time comes. The latter, they note, provides both valuable home-buying knowledge and qualifies you for “a myriad of financial benefits” like down-payment assistance, among others.
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Find a mortgage lender: Once you’re finally in a financial position to dip your toe in the real estate market, you’ll have to pick a mortgage lender. It’s best to shop around and get quotes from multiple lenders while also deciding on which sort of mortgage — fixed- or adjustable-rate — works for you. Freddie Mac says that, when you find a lender, you should secure a pre-approval letter that shows how much they’re willing to loan you. While they note that it’s not a guarantee of a loan, it “allows you to look for a home with greater confidence and demonstrates to the seller that you are a serious buyer” [9].
For now, the housing market remains a tough climb for first-time buyers — prices are high, inventory is limited, and many rely on family help to make it work. But with mortgage rates hovering just above that 6% threshold, experts say conditions could soon tilt in buyers’ favor. Whether this year marks a turning point depends not only on rates, but also on how prepared buyers are to move quickly when the “magic number” finally arrives.
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[1]. Redfin. "Housing Supply Drops Most in 2 Years as Sluggish Demand Spooks Sellers"
[2]. The Mortgage Reports. "Mortgage Rate History | Chart & Trends Over Time 2025"
[3]. NAR. "Young Buyers Continue to Be Fenced Out of Homeownership"
[4]. NAR. "Highlights From the Profile of Home Buyers and Sellers"
[5]. Forbes. "Housing Market Predictions For 2025: When Will Home Prices Drop?"
[6]. First Bank. "The Ultimate Guide for First-Time Homebuyer"
[7]. Ramsey Solutions. "Home Affordability Calculator"
[8]. John Hancock. "12-month plan to buying your first home"
[9]. Freddie Mac. "Applying for a home loan"
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.