U.S. Housing Market Faces Challenges Amid Rising Mortgage Rates
The U.S. housing market experienced a significant decline in September due to the rapid rise in mortgage rates, leading many potential buyers to step back. This situation presents an affordability issue for President Trump and the Republicans, especially with the midterm elections approaching.
Market Decline
Pending home sales, representing agreements to purchase existing homes, dropped by 7.3% from August and 11.3% compared to the previous year, as per data from the National Association of Realtors. This decline aligned with the sudden increase in mortgage rates, which rose from about 6.8% to 7.6% over the month of September, according to Mortgage News Daily.
Higher rates will definitely slow the housing market and force those with much lower rates to stay put. The housing market will be at a standstill for some time to come,said Kevin Thompson, CEO of 9i Capital Group, to Newsweek.
Impact of Housing Affordability
Affordability is a key issue for the November midterm elections. Housing costs concern younger voters, and the economy is a crucial issue for many registered voters. Rising mortgage rates can drastically affect a household’s affordability, even without an increase in home prices.
Existing home prices reached a median of $417,500 in September, a 1.3% increase from a year earlier and the highest September price recorded, according to the National Association of Realtors.
Political Challenges
Trump’s 2024 campaign focused on reducing household expenses, including borrowing costs, promising mortgage rates as low as 2%. However, rates have increased instead. Freddie Mac reported the 30-year mortgage reaching 7.40% by October 8, the highest since November 2023.
This is not good for the party in power as borrowing costs are much higher today, and costs continue to increase across the board,stated Thompson.
Homebuilder sentiment mirrors this negative outlook. The National Association of Home Builders reported its lowest reading in 14 years, with declining sales, expected sales, and buyer traffic.
Housing remains squeezed by supply-side constraints and significant affordability challenges, commented Robert Dietz, NAHB’s chief economist.
Continuing Market Pressures
Completed existing-home sales rose by 1.5% in September, reaching an annual rate of 3.99 million. Yet, they remain 2.2% lower than a year ago, making August and September the slowest sales months of 2026. Housing inventory also climbed by 1.9% to 1.60 million homes, the highest since November 2019.
All of these factors are negatively impacting rates, and the results are some of the highest borrowing interest amounts many home buyers have seen in nearly two decades,said Alex Beene, a financial literacy instructor.
Listing prices show some adjustments, with 20.8% of listings experiencing a price reduction, marking the highest rate since October 2022 and September’s highest since 2018.
Midterm Election Concerns
As Americans vote on November 3, affordability is a key concern. A study by Pew Research Center revealed that 84% of registered voters view the economy as very important to their voting decision, affecting both Republican and Democratic supporters.
A CNBC survey in July found housing to be the top political issue among voters aged 18 to 34. Across all voters, 24% listed housing costs as a top issue.
Mortgage Rate Influences
Mortgage rates are not directly tied to the Federal Reserve’s rates but are influenced by costs in the bond market.
For many Americans, there has been a long-held confusion on exactly why mortgage rates go up or down,Beene explained.
As inflation rises, with September’s Consumer Price Index up 3.7% from a year earlier, mortgage rates have soared to 7.40% by early October.
Future Outlook
The housing market could weaken further as current sales do not fully reflect October’s higher mortgage rates. Without significant drops in rates or home prices, many potential buyers remain sidelined.
The timing of these issues is critical for Trump and congressional Republicans.