Key facts
- The average 30-year fixed-rate mortgage reached 7.4% on Thursday, October 8, 2026.
- This is the highest mortgage rate since November 2023.
- Home prices increased 2.6% year-over-year in July.
- Existing home sales decreased 1.2% in August.
- Economists project a 3.5% year-over-year decline in home sales for the fourth quarter.
The US housing market is facing increased pressure as mortgage rates surge to their highest levels in three years, while home prices continue to climb. The average 30-year fixed-rate mortgage reached 7.4% on Thursday, October 8, 2026, a significant increase from 7.28% last week and the highest since November 2023, according to Freddie Mac.
This unwelcome combination is making homeownership increasingly unaffordable for many Americans. Kara Ng, a senior economist at Zillow, noted that current rates are a "very far distance to push to improve affordability." Last year at this time, the average rate was 6.3%.
Home prices have continued to rise moderately after skyrocketing during the Covid-19 pandemic. The Federal Housing Finance Agency reported a 2.6% nationwide increase in home prices in July compared to the previous year. This sustained price growth, coupled with soaring mortgage rates, has significantly slowed market activity.
Sales of existing homes dropped 1.2% in August from the year before, according to the National Association of Realtors. Zillow economists project a further 3.5% year-over-year decline in home sales for the fourth quarter. Nancy Vanden Houten, lead US economist at Oxford Economics, estimates that 2.5 million to three million people have been priced out of the market.
Investors are also concerned about potential inflation driven by higher energy prices due to the war in Iran and debt taken on by tech companies for AI infrastructure. The yield on the 10-year Treasury note, a benchmark for many loans including mortgages, rose to 5.36% on Thursday, its highest since 2002.
First-time buyers are being sidelined, and even homeowners who might consider selling are hesitant due to the prospect of higher mortgage rates when they seek a new home. New listings of homes for sale fell 3.9% in September from the previous month, according to Zillow.