Fed Rate Hike Adds More Pressure as U.S. Mortgage Rates Rise for Four Consecutive Weeks, Approaching 7%, Housing Market Recovery May Be Further Delayed

According to Zhihui Finance APP, the U.S. housing market is once again facing pressure from high interest rates. Data released by Freddie Mac on Thursday showed that as of September 17, the average interest rate on U.S. 30-year fixed mortgages rose to 6.95%, up from 6.76% the previous week, marking the fourth consecutive week of increases and reaching the highest level since January 2025. In contrast, the rate was only 6.26% at the same time last year.

For potential homebuyers who were originally expecting mortgage costs to gradually decline in 2026, mortgage rates approaching 7% again undoubtedly constitute new pressure. Especially after the Federal Reserve just announced a 25 basis point rate hike on Wednesday, market expectations for a significant short-term drop in borrowing costs have further diminished.

On September 16, the Federal Reserve unanimously decided, with 12 votes in favor and 0 against, to raise the federal funds rate target range by 25 basis points to 3.75%-4.00%. This is the first rate hike by the Fed since July 2023. The Federal Reserve stated that U.S. economic activity continues to expand at a solid pace, but inflation remains elevated. This policy action is intended to bring inflation back to the 2% target more promptly.

Double Squeeze of Housing Prices and High Interest Rates: Home Affordability Worsens Again

With mortgage rates approaching 7%, U.S. housing affordability was already under significant pressure.

According to estimates by Intercontinental Exchange Inc., based on the average U.S. home price of $440,000, a typical household now needs to spend about 31% of the median family income on mortgage payments—the highest proportion since July 2025. At the same time, U.S. homebuilder confidence fell to its lowest level in a year this month, further reflecting that high financing costs are suppressing the outlook for the housing market.

Mortgage rates are generally influenced by long-term U.S. Treasury yields. Following this Fed rate hike, the 10-year Treasury yield, an important benchmark for U.S. mortgage pricing, retreated slightly but remained close to 5%. This means that even if Treasury yields fall slightly in the short term, housing financing conditions remain tight.

Zillow Group Chief Economist Mischa Fisher said that the recent rapid rise in interest rates is hitting an already sluggish housing market, with home sales volumes continuing to decline from already low levels year-over-year. However, he believes that if confidence grows that inflation is under control, mortgage rates are more likely to fall in 2027, which could lead to a recovery in the housing market.

U.S. Housing Transactions Remain Sluggish: Pending Home Sales Down 4.7% Year-on-Year in August

The drag from high mortgage rates on real estate transaction activity has already become evident.

Data released Thursday by the National Association of Realtors (NAR) showed that pending home sales in August rose just 0.3% month-over-month, but fell 4.7% year-over-year. Sales increased month-over-month in the South and West but declined in the Northeast and Midwest; year-over-year, all four major regions in the U.S. saw declines.

NAR Chief Economist Lawrence Yun said that despite rising mortgage rates, there were still buyers signing home purchase contracts in August, while the overall U.S. housing market remains sluggish. Job and income growth originally boosted buyers’ purchasing power, but high mortgage rates offset much of these benefits. Currently, the number of housing contracts signed nationwide is still about 30% below pre-pandemic levels.

Previously released data also showed weakness in the housing market. U.S. existing home sales in August fell 2.0% month-over-month to a seasonally adjusted annual rate of 3.98 million, down 1.2% year-over-year; over the same period, the median sales price of existing homes rose 1.6% year-over-year to $429,100.

NAR Sharply Lowers Sales Growth Forecast for This Year

With interest rate trends continually exceeding prior expectations, even previously optimistic real estate analysts have started lowering forecasts for the U.S. housing market in 2026.

At the end of last year, NAR Chief Economist Lawrence Yun predicted that as the average mortgage rate gradually approached 6%, U.S. existing home sales in 2026 could grow by 14%. But as the macroeconomic and geopolitical environment changed, he sharply lowered his forecast for this year’s existing home sales growth to 4% in June, based on the assumption of an average mortgage rate of about 6.5% in 2026.

Now the 30-year mortgage rate has already risen to 6.95%, just a small step from 7%. Yun noted that earlier this year, when mortgage rates briefly dropped to around 6%, it did motivate some previously hesitant potential buyers to reconsider entering the market; however, as rates have climbed back toward 7%, some of those who were considering purchasing homes might once again find housing out of their financial reach.

With the Federal Reserve entering a renewed rate hike cycle and mortgage rates rising for four consecutive weeks, home affordability faces further pressure, and the long-awaited recovery of the U.S. housing market may be delayed even longer.