Rising Mortgage Rates Push Housing Affordability to a Multi-Year Low
Mortgage rates have climbed sharply, reaching 7.17% for the average 30-year fixed loan—the highest level in nearly two years—due to rising 10-year Treasury yields hitting their highest since July 2007 at 5.04%. This rapid increase has significantly raised borrowing costs; a $400,000 mortgage now incurs about $2,200 more annually than it did in July, pushing many middle-class buyers beyond qualification limits. The housing market is experiencing growing imbalance as active listings surged to 1.53 million while buyer activity hit near-record lows across major U.S. metro areas. This has led to a record-wide buyer's market with nearly twice as many sellers than buyers in August, despite home prices continuing to rise. The Federal Reserve’s easing monetary policy contrasts sharply with the bond market pricing in persistent inflation and increased Treasury supply. Housing demand is buckling under these pressures: existing sales dropped 2% year-over-year while housing starts fell by over 12%. Core PCE data remains elevated, contributing to a compressed yield curve that signals continued tightening at long-term rates.
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