The Fed's interest rate hike adds further pressure. US mortgage interest rates have climbed close to 7% for four consecutive weeks, and the recovery of the property market may be further delayed

The Zhitong Finance App learned that the US housing market is once again under pressure from high interest rates. According to data released by Freddie Mac on Thursday, as of September 17, the average interest rate for 30-year fixed mortgages in the US rose to 6.95%, up from 6.76% the previous week, rising for the fourth week in a row and hitting the highest level since January 2025. In comparison, this interest rate was only 6.26% for the same period last year.

For potential buyers who had expected a gradual decline in mortgage costs in 2026, mortgage interest rates once again approaching 7% will undoubtedly put new pressure on them. In particular, after the Federal Reserve just announced a 25 basis point rate hike on Wednesday, the market's expectations that borrowing costs will fall significantly in the short term have cooled down further.

On September 16, the Federal Reserve unanimously decided to raise the federal funds rate target range by 25 basis points to 3.75%-4.00% with 12 votes in favor and 0 against. This is the first time that the Federal Reserve has raised interest rates since July 2023. The Federal Reserve said that US economic activity is still expanding at a steady pace, but inflation is still high. The policy action aims to push inflation back to the 2% target in a more timely manner.

Housing prices and high interest rates are doubly squeezing the burden of buying a home and worsening again

At a time when mortgage interest rates are approaching 7%, the affordability of housing in the US is already under great pressure.

According to estimates by Intercontinental Exchange Inc. based on an average US housing price of 440,000 US dollars, a typical household currently needs to use about 31% of the median household income to pay for a home loan. This ratio is the highest since July 2025. Meanwhile, US homebuilders' confidence fell to its lowest level in a year this month, further reflecting that high financing costs are suppressing the prospects of the housing market.

Mortgage interest rates are usually affected by long-term US bond yields. After the Federal Reserve raised interest rates this time, the 10-year US bond yield, which is an important reference for US mortgage pricing, has declined somewhat, but it is still close to a high of 5%. This means that even if US bond yields fall in the short term, the housing finance environment is still tight.

Mischa Fisher, chief economist at Zillow Group, said that the recent rapid rise in interest rates is impacting an already sluggish housing market, and housing sales have further declined year-on-year from a lower base. However, he believes that if the market's confidence in keeping inflation under control increases, mortgage interest rates are more likely to fall in 2027, thus pushing the recovery of the housing market back on track.

Real estate transactions in the US are still sluggish, and sales of houses for sale fell 4.7% year on year in August

High mortgage interest rates are already showing a drag on real estate transactions.

According to data released by the National Association of Realtors (NAR) on Thursday, sales of homes for sale in August increased by only 0.3% month-on-month, while falling 4.7% year-on-year. Among them, the southern and western regions grew month-on-month, while the northeastern and midwestern regions declined; on a year-on-year basis, all four major regions of the United States experienced declines.

NAR chief economist Lawrence Yun said that despite rising mortgage interest rates, buyers continued to sign housing contracts in August, and the overall US housing market is still sluggish. Employment and income growth originally boosted residents' purchasing power, and high mortgage interest rates offset much of this benefit. Currently, the number of housing contracts signed across the US is still about 30% below pre-COVID-19 levels.

Previously released data also showed that the property market is still weak. Existing home sales in the US fell 2.0% month-on-month in August to an annual rate of 3.98 million units, down 1.2% year on year; the median price of existing homes rose 1.6% year on year to US$4291,000 during the same period.

NAR drastically lowered its sales growth forecast for this year

As interest rate trends continue to exceed previous expectations, even previously optimistic real estate analysts have begun to lower their 2026 US property market forecasts.

At the end of last year, NAR chief economist Lawrence Yun predicted that as average mortgage interest rates gradually approach 6%, existing home sales in the US are expected to increase 14% in 2026. However, due to changes in the macro and geopolitical environment, he drastically lowered his forecast for this year's existing home sales growth to 4% in June. At the time, this forecast was based on the assumption that the average mortgage interest rate in 2026 was about 6.5%.

Interest rates on 30-year mortgages have now risen to 6.95%, which is only one step away from 7%. Yun said that when mortgage interest rates fell to around 6% earlier this year, it did stimulate some potential buyers who had been on the sidelines to reconsider entering the market; however, as interest rates climbed back to 7%, some people who were considering buying a home may once again think that housing is beyond their reach.

Against the backdrop of the Federal Reserve re-entering the interest rate hike cycle and mortgage interest rates rising for four consecutive weeks, the affordability of buying homes is under further pressure, and the long-awaited recovery in the US housing market may continue to be delayed.