Mortgage rates are caught up in an upward swell formed by a stormy mix of sticky inflation, bond market worries and Federal Reserve rate hikes. The 10-year Treasury closed in on 5.1% Wednesday this week, a 19-year high watermark. The last time bond investors required a similar yield was April 2007, just before the Great Financial Crisis.  

The Freddie Mac 30-year fixed mortgage rate reached 7.03% today, mirroring other industry sources which have seen average rates in the 7.12% to 7.24% over the past couple of weeks. The rising cost of borrowing is closing the door for a large share of Americans looking to buy a home this fall. Rising rates are compounding home prices which seem anchored by memories of sub-3% rates. Sales of new and existing homes are tumbling as we move through the second half of the year, a clear sign that buyers are priced out. 

Looking to the next few months, housing faces the onset of a premature winter freeze. The Federal Reserve signaled at the September meeting that additional rate hikes were likely, an expectation also reinforced in recent remarks by central bank governors. Bond markets are flashing clear warning signs that the threat to economic wellbeing needs a more forceful response. While the Fed’s short-term policy rate does not control long-dated mortgage costs, its trajectory trickles through the financial system and pushes borrowing costs upward.  

For real estate markets, these moves will translate into painful adjustments in the months ahead. Homebuyers, most of whom are seeing their purchasing power erode, will have to scale back their budgets. Sellers, many of whom retreated from the market or resorted to renting their homes, will have to come to terms with a market where list prices no longer match buyers’ financial reality. And multifamily investors who are staring at maturing loans will have to work with lenders through shifting property valuations.