Washington – Mortgage rates in the United States are on the rise, reaching over 7% this week. This increase is attributed to the Federal Reserve’s reluctance to cut interest rates in the near future. The 30-year fixed-rate mortgage averaged 7.10% in the week ending April 18, up from 6.88% the previous week, according to data released by Freddie Mac. This surge in rates marks a significant milestone as it surpasses the 7% threshold, intensifying America’s housing affordability crisis during the crucial spring homebuying season.

The Federal Reserve’s decision not to cut interest rates is driven by persistent high inflation readings, which have kept the Fed on hold. While the Fed doesn’t directly control mortgage rates, its actions impact them significantly. As rates continue to climb, potential homebuyers are faced with the dilemma of purchasing now before rates increase further or waiting in hopes of a decrease later in the year, according to Sam Khater, Freddie Mac’s chief economist.

The National Association of Realtors reported a sharp decline in US home sales in March, indicating that buyers are hesitant to enter the market amidst challenging conditions. With mortgage rates tracking the benchmark 10-year US Treasury yield, which recently rose to its highest level since November, concerns over inflation persist. This has led forecasters to push back their estimates for the first rate cut, raising the possibility of further rate hikes instead.

The housing market continues to face challenges beyond high mortgage rates, with elevated home prices nationwide adding to the affordability crisis. The median price of an existing home hit a record high of $393,500 last month, marking a 4.8% increase from the previous year. Despite a slight improvement in inventory levels, housing supply still falls short of demand, impacting affordability negatively.

Uncertainty looms over the housing market with the pending NAR settlement expected to alter how homebuyers and sellers interact with real estate agents. The potential changes have already influenced buyer and seller behavior, contributing to a complex and rapidly evolving market landscape. Prospective homebuyers are cautiously optimistic about the settlement’s impact on home prices as they navigate the challenges posed by rising mortgage rates and limited inventory.