The US housing market is under pressure again after mortgage rates crossed the 7% mark. The average rate on the most common 30-year fixed mortgage reached 7.17% in mid-September, which was the highest level since January 2025, according to Mortgage News Daily.
The rise in financing costs comes after a period of significantly more favorable conditions. In February, the rate had fallen to around 5.99%, but subsequently inflation concerns, higher oil prices and tension in the bond markets have again raised mortgage costs.
The main pressure comes from the US government bond market. The yield on 10-year bonds, which directly affects the pricing of mortgage loans, crossed the 5% mark. Unlike short-term interest rates, mortgage rates are not set directly by the Federal Reserve, but respond largely to the yield on long-term bonds and the prices of mortgage-backed securities.
There are several reasons for the movement. Markets are assessing the risk of higher inflation, including related to rising energy prices, while rising government debt and the need for greater issuance of US bonds are also putting pressure on yields.
Sales fall below 4 million homes
Expensive loans are already having a visible impact on the real estate market. Sales of existing homes in the US fell 2% in August from the previous month to a seasonally adjusted annual rate of 3.98 million transactions – the lowest level since June 2025. Compared to a year earlier, the decline is 1.2%, according to official data from the National Association of Realtors (NAR).
The paradox is that despite the weakening demand, housing prices continue to rise. The median price of an existing home sold in August reached $429,100, which is an increase of 1.6% on an annual basis.
For single-family homes, the data for the second quarter shows an even higher level - a median price of $434,900, or 1.5% more than in the same period in 2025.
Supply is growing, but buyers cannot afford the loan
Another important signal is the increase in the number of homes that remain on the market. At the end of August, 1.62 million existing homes were listed for sale, up 3.2% from July. This corresponds to 4.9 months of supply at the current sales rate - the highest level of this indicator in more than a decade.
Thus, the American market is gradually moving away from the situation of extremely limited supply, characteristic of previous years. However, greater choice does not solve the main problem - affordability.
At an interest rate above 7%, the monthly payment on the same loan is significantly higher. For example, on a $400,000 30-year mortgage, an increase in the interest rate from 6.89% to 7.17% would increase the monthly principal and interest payment from approximately $2,632 to $2,707, not including taxes, insurance, and other costs.
First-time homebuyers are particularly hard hit, as they don't have equity from a previous property to use for a larger down payment.
“Locked-in“ homeowners are also holding back the market
High interest rates are another problem. Millions of Americans financed their homes during the low-interest mortgage era and now have a loan at a significantly lower rate.
Selling your current home and buying another would mean giving up your old, low-interest mortgage and taking out a new one at about 7%. This reduces the incentive for homeowners to sell and limits the normal movement of households between different segments of the market.
At the same time, the increasing supply is starting to give buyers more bargaining power. NAR Chief Economist Lawrence Yun notes that the greater number of available homes gives buyers a better bargaining position.
Interest rates continued to rise after the publication
The data in the CubaHeadlines publication has already been partially ahead of the market. After reporting 7.17% on September 14, the average 30-year fixed mortgage rate on Mortgage News Daily rose to 7.22% on September 15 and 7.24% on September 16. On September 17, there was a slight retreat to 7.19%, but the level remains more than one percentage point above the previous year.
The differences between the individual indices should be taken into account. For example, Freddie Mac's weekly survey reported 6.76% as of September 10, while Mortgage News Daily's daily index was already showing over 7%. This is not a contradiction, but a result of different methodology and timing of measurement.
The combination of housing prices near historic highs and mortgage financing above 7% has once again put affordability at the center of the problems in the American housing market. Even increasing supply can hardly compensate for the effect of the high monthly payment, especially for middle-income households and first-time home buyers.
Detailed statistics on average property prices in Bulgaria by city and neighborhood can be found at imot.bg