Which is why mortgage rates creeping back toward the 7% mark are raising concerns among prospective homebuyers and industry watchers alike. For the week ending May 22, the average rate on a regular 30-year fixed mortgage climbed to 6.86%. Home financing costs are on the rise with mortgage rates as the 10-year Treasury yield impacts mortgage rates. That fits poorly with the recent moodiness of Moody’s Ratings, which just downgraded U.S. federal debt.
The bond market was shaken as investors responded to the downgrade with a massive sell-off that sent yields soaring. These policy shifts have led to increased alarm over the national debt — the top factor affecting home borrowing costs right now. Even Wall Street investors are getting jittery at the prospect of a tax-reform-as-a-bill-in-advanced from the Trump White House. They are concerned that it would further increase the nation’s growing debt load.
With borrowing costs continuing to increase, homebuyers are confronted with a substantially more challenging market. Higher mortgage rates and rising housing costs have largely flattened what is usually the bustling spring homebuying rush. The median existing-home sales price increased 1.8% from April 2024, setting an all-time high for the month at $414,000. In April, homes for sale jumped to 1.2 million−20% more than a year ago. In spite of this greater choice, sales of existing homes dropped by 0.5% seasonally adjusted.
The markets are currently in a state of extreme stormy weather. Last month nearly one out of every seven home-purchase contracts died. Economic turmoil, made worse by President Trump’s unpredictable tariff wars, has thrown a monkey wrench into what’s typically the robust spring home buying season.
Signs point to the market stabilizing barring any further disruptions in economic conditions.
“If household uncertainty around jobs, investment portfolios and budgets eases, then home sales could be poised for a rebound in the months ahead. However, the affordability advantage could diminish if mortgage rates continue to rise.” – Kara Ng
Whether the environment has changed for better or for worse, we know that borrowers are facing a challenging environment this year. Historically, over the course of last year, the average 30-year mortgage rate was 6.94%. Another positive is that this is now the 22nd straight month of year-over-year price increases in the housing market.