Mortgage rates in the US have recently approached 7%, reaching their highest level in over 19 months. The daily 30-year fixed mortgage rate soared to 7.24% last week, while Freddie Mac’s weekly average climbed to 6.95%. This surge in borrowing costs is attributed to the Federal Reserve's interest rate hikes aimed at combating persistent inflation, adding hundreds of dollars to monthly mortgage payments for homebuyers. For instance, a nearly 1 percentage point increase in rates since late February (when rates briefly dipped to 5.98%) translates to an additional $255 per month for a borrower financing a $400,000 home loan.
The rising rates are severely affecting the housing market. Mortgage applications for home purchases fell 19% from a year earlier in the week ending September 11, and Google searches for "homes for sale" were down 15%. The number of homes buyers agreed to purchase dropped to its lowest level in nearly three years, a 5.4% decrease from the prior year, during the four weeks ending September 13. Completed home sales also declined for the second consecutive month in August, with the yearly sales pace falling below 4 million for the first time since June 2025. This indicates a market struggling to convert interested buyers into homeowners, with many delaying purchases due to the increased expense of debt.
Despite the decline in buyer activity, national home prices have remained high. The median existing home sold for $429,100 last month, up 1.6% from a year earlier, though some regions like the West saw a slight decrease of 0.2%. However, sellers are losing leverage, with concessions offered in nearly 45% of US home sales during the three months ending in August, the highest share since at least 2020. These concessions include covering closing costs and paying for repairs. Real estate agents are now advising sellers to price homes lower initially to attract more buyers and potentially drive up the final sale price through competition, rather than overpricing and deterring potential purchasers.
