Full Breakdown
Housing Market Stalls as Mortgage Rates Hover Above 7%
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Market Conditions and Declining Activity
Mortgage rates have slipped only slightly, staying in the mid-7% range, and the housing market has entered a pronounced slowdown. Demand for homes is down 18% year-over-year, while pending home sales dropped 7.3% in the most recent month. Housing starts have fallen to levels not seen since the COVID-19 pandemic, and builder confidence this October is the weakest since 2012. The National Association of Home Builders (NAHB) reports that more than one-third of builders observed immigration-enforcement activity in their markets, causing construction delays and discouraging legal workers from reporting to work.
Builder and Lender Outlook
National Association of Home Builders Chairman Bill Owens of Worthington, Ohio, notes that higher costs for construction loans, materials, and diesel are weighing on builders, even as regulatory reforms under the Trump administration ease some pressures. Senior economist Hannah Jones at Realtor.com says the “deep freeze” in buyer activity could persist until affordability improves, citing falling asking prices for an 11th straight month and rising inventory. Mortgage Bankers Association (MBA) deputy chief economist Joel Kan observes that purchase applications fell 18% behind last year’s pace as higher rates price buyers out of the market.
Economic Drivers and Forecasts
Analysts attribute the sustained high rates to increased borrowing by the federal government and large AI firms, as well as ongoing geopolitical tensions that keep energy costs elevated. The Federal Reserve is expected to raise rates again this year, reinforcing the upward pressure on mortgage costs. Fannie Mae has lifted its 2027 mortgage-rate forecast to 7.5% and cut its loan-volume projection for that year by nearly 20%, reflecting expectations of continued market weakness.
Official Statements & Responses
Chief economist Heather Long at Navy Federal emphasizes that “borrowing costs are at some of the highest levels in a quarter century,” underscoring the strain on both buyers and sellers. She adds that the surplus of home sellers over buyers is intensifying pressure on the rental market, with more households turning to rentals as home purchases remain out of reach.
Verbatim Quote
“Borrowing costs are at some of the highest levels in a quarter century,” — Heather Long, chief economist at Navy Federal