Big Wins for American Families as Gas Prices, Mortgage Rates Plummet

Gas prices are projected to fall below $3 per gallon for the first time since 2020, according to GasBuddy’s 2026 Fuel Price Outlook. The yearly U.S. average is expected to be $2.97 per gallon, a 13-cent decline from 2025's average of $3.102. This decline comes after years of price volatility driven by global events such as the pandemic and geopolitical tensions according to the outlook.

Simultaneously, mortgage rates have dropped below 6% for the first time in nearly three years. The 30-year fixed-rate mortgage fell 22 basis points to 5.99% following a move by the Trump administration to purchase $200 billion in mortgage-backed securities. This initiative aims to lower the cost of homeownership by reducing both mortgage rates and monthly payments.

The administration's efforts to lower housing costs have been complemented by broader regulatory changes. Fannie Mae and Freddie Mac, government-sponsored entities responsible for mortgage financing, are executing the bond purchases. Federal Housing Finance Agency Director Bill Pulte confirmed the move, saying, "we are on it".

Why Did This Happen?

The drop in gas prices is attributed to a combination of global economic factors, including central banks slowing economic growth to control inflation and new refining capacity coming online. Seasonal demand, refinery maintenance, and hurricane season are expected to cause short-term fluctuations, but the overall trend shows continued relief for consumers.

Mortgage rates were also influenced by market dynamics and Trump's policy initiatives. Analysts at Kepler Cheuvreux highlighted Trump's broader geopolitical strategies, including increased military spending and potential control of Venezuela's oil reserves, as part of a larger "global reset trade". These moves are aimed at increasing energy supply and stabilizing prices ahead of mid-term elections.

How Did Markets React?

The policy moves had immediate effects in the stock market. Shares in mortgage lenders and housing-related companies surged, including Rocket Companies, UWM Holdings, and Opendoor Technologies according to Reuters. The Philadelphia Housing Index rose nearly 5%, and the MSCI US REIT Index gained 0.6% as reported. Investors were reacting to the potential for lower borrowing costs and renewed housing demand.

Analysts at TD Cowen noted that the move could narrow the spread between the 30-year mortgage rate and the 10-year Treasury yield, potentially pushing mortgage rates as low as 5.25% by the end of 2026. This would be a significant shift from the current rate of around 6.2%.

What Are Analysts Watching Next?

While the recent declines in gas and mortgage rates offer short-term relief, long-term challenges remain. Housing affordability continues to be constrained by supply-side issues, with a shortage of approximately 5 million homes in the U.S. Lower rates without increased supply could intensify competition in the housing market, potentially raising home prices.

Analysts at Realtor.com highlighted that while the bond-buying plan may provide a one-time rate drop, it may not lead to lasting improvements in affordability. The focus should remain on increasing housing supply through zoning and regulatory reforms, according to experts.

Gas prices, while lower, are still subject to seasonal and geopolitical risks. Diesel prices, for instance, remain elevated relative to gasoline, averaging $3.55 per gallon in 2026. This disparity highlights the uneven recovery in energy markets and the continued need for diversification in energy sources.

Investors are also watching how global events unfold in 2026. Analysts at Kepler Cheuvreux emphasized the uncertainty created by Trump's geopolitical strategies, including his call for the U.S. to seize Greenland and his actions in Venezuela as analysts note. These developments could impact both energy and defense sectors in unpredictable ways.

Market participants are also monitoring the potential for further policy interventions. The Trump administration's focus on affordability has brought housing and energy markets into sharper focus. However, the long-term effectiveness of these policies will depend on execution, regulatory support, and broader economic conditions.