While some bright spots like declining home-price increases and increased inventory are helping some U.S. homebuyers, affordability challenges continue to keep many sidelined, with no major improvements on the horizon as tensions in the Middle East renew and inflation concerns linger.
This past week, rates reached a 13-month high at 6.71% for the average 30-year fixed-rate mortgage (FRM), according to the latest Freddie Mac Primary Mortgage Market Survey® released Thursday. This is up from 6.66% last week. The 30-year FRM is up year-over-year from 6.50%. The 15-year FRM averaged 6.04%, up from 5.98% last week and up from last year when it averaged 5.60%.
Bright MLS Chief Economist Dr. Lisa Sturtevant said even with more sellers expected to cut their asking prices this fall, the affordability challenge is daunting heading into fall.
“At the end of summer 2019, the estimated monthly payment on the median-priced home was about 28% of the median monthly household income. In 2026, the median monthly payment accounts for 40% of the current median monthly household income, she said. “In order for us to return to 2019 affordability levels (based on this measure), we would need the median home price to fall by more than 30%, or for mortgage rates to drop to 3%. Neither of these scenarios is expected which means the road back to improved affordability in the homeownership market is going to be slow.”
How geopolitical tensions are affecting mortgage rates
Realtor.com Senior Economist Jiayi Xu noted that mortgage rates have been climbing since the start of the U.S.-Iran conflict in late February and hit a new high for 2026. She explained the correlation.
“The Middle East conflict has put upward pressure on oil prices, fueling inflation and pushing it further from the Fed’s 2% target. When the conflict appeared to be nearing resolution, bond yields declined and mortgage rates followed suit,” she stated. “But the latest escalation in Middle East tensions has driven oil prices higher, reviving inflation concerns and pushing yields and mortgage rates back up.”
In his Jackson Hole speech last Friday, Fed Chairman Kevin Warsh doubled down on the view that inflation has run too high for too long, and that the policy rate remains the Fed’s primary tool to bring it back down, Xu stated, adding that notably, Warsh acknowledged that the Fed must act to tame the inflation, while doubling down that he would not commit to anything. “So the question is no longer whether there will be a rate hike, but when it will happen. After Warsh’s talk, nearly 57% of traders were betting on a rate hike at the September FOMC meeting,” Xu said.
“We don’t expect any real mortgage rate relief this fall. But if inflation isn’t tamed, the pain will be real,” she stated. “Higher inflation would simultaneously erode paychecks and real income growth while keeping mortgage rates elevated for longer. That’s a squeeze on housing from both sides: what people can afford, and what they’re willing to buy into.”
Still, economists said there is some good news for people planning to buy this year.
“Home prices continue to decline, and the share of listings with price cuts is at its highest level this year, a sign that good deals are out there,” Xu said. “Sellers aren’t retreating either. The delisting share is much lower than what we saw last year, while active listings remain higher than year-ago levels.”
Freddie Mac Chief Economist Sam Khater, added, “Purchase demand has remained relatively stable indicating steady interest from buyers adapting to evolving market conditions.”
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