Mortgage Rates Keep Pressuring US Homebuyers
As the spring homebuying season winds down, homebuyers hoping for a price drop might be in for another letdown. Persistently high mortgage rates are a direct outcome of the war with Iran and the ensuing inflation rise, and increased worries about the Federal Reserve’s possible interest rate hikes to control inflation have added fuel to the fire of worry. At the same time, barring a veto from President Trump, a bipartisan housing law that aims to increase supply and reduce affordability constraints in the future is set to automatically take effect at midnight on Friday into Saturday. Freddie Mac announced that the average 30-year fixed mortgage rate was 6.49% this week, which is close to the peak levels seen this year. The US 10-year Treasury yield is highly correlated with inflation expectations and, by extension, mortgage rates. Investors’ worries about the potential impact of rising oil prices and the ongoing conflict in the Middle East on inflation and interest rate hikes from the Federal Reserve have kept the yield, which swings inversely to bond prices, elevated.
After bond market anxieties were somewhat allayed by a recent US-Iran preliminary accord, tensions flared up again this week as the US launched more strikes on Iran, sending oil prices soaring and the 10-year yield soaring. Zillow predicts that mortgage rates would fall steadily, hitting about 6.3% by the end of 2026, despite the fact that the economy has been experiencing recent upheavals. But that would still be higher than the rates that were achieved by the end of 2025. In a statement, Kara Ng warned that affordability, which had been a positive factor compared to previous year, may become a negative factor if rates ended 2026 at 6.3%, which would be somewhat higher than the range purchasers witnessed in autumn and winter 2025. Some purchasers seem to be staying out of the market since mortgage rates are consistently over 6%. According to a study released on Thursday by the National Association of Realtors, the number of existing home sales fell 2.4% from May to June. In the midst of what is usually seen as the busiest spring season for the home market, this constitutes a setback. Yet, sales were 2.8% higher than June of the prior year.
Consumers’ sensitivity to affordability circumstances is demonstrated by the monthly swings in house sales activity, which are caused by little changes in mortgage rates, according to Lawrence Yun’s comments. As reported, the median price of existing homes reached a historic peak of $440,600 for the month of June, despite the fall in sales. When considering housing affordability, mortgage rates are just one factor among several. Buyers are bidding up prices due to a low supply of homes on the market, which has been a major problem for some time. The 21st Century Road to Housing Act, passed by Congress last month, is an effort to increase the number of houses on the market. The purpose of the measure is to make it easier to build manufactured homes, which are built in factories rather than on-site.
Among other things, it aims to improve market supply by providing grants and forgiven loans to fix up dilapidated properties. The bill was about to become law when Trump abruptly decided last month to scrap the official signing. Trump said the measure was “of minor importance compared to lower interest rates” and then called it a “big yawn” in a social media post. On the other hand, the bill will be automatically signed into law unless Trump vetoes it by Friday night. According to experts, property prices and availability are not going to magically change overnight in most parts of the nation. However, small but noticeable improvements could happen eventually.
