Home sales are slowing again, and the culprit is no mystery – rising mortgage rates fueled by economic uncertainty. On Thursday, the National Association of Realtors reported that existing-home sales fell to a seasonally adjusted annual rate of four million in April, representing a decrease of 0.5% from March and a significant drop of 2.4% compared to the same period last year. This decline underscores a growing challenge within the housing market, signaling a shift in buyer sentiment and a potential cooling trend. Alongside these falling sales figures, the median home price continued its upward trajectory, reaching $414,000 – an increase from the previous month’s $403,700. However, the most concerning aspect of this data is the underlying driver of these price increases: bond yields are surging to decade-high levels. This surge is directly linked to the recent passage of a Trump-backed tax bill, which is projected to dramatically expand the federal deficit by hundreds of billions of dollars. This increased deficit has triggered investor concerns, leading to a flight to safety and a corresponding rise in demand for U.S. Treasury bonds. The impact on mortgage rates has been swift and substantial. According to Mortgage News Daily, the average 30-year fixed mortgage has jumped to 7.08%, the highest level observed in over three months. This dramatic increase translates to a substantial monthly payment of approximately $2,750 for a $414,000 home, excluding essential costs such as property taxes, homeowner’s insurance, and ongoing maintenance expenses.

According to Mortgage News Daily, the average 30-year fixed mortgage has jumped to 7.08%, the highest level observed in over three months. This dramatic increase translates to a substantial monthly payment of approximately $2,750 for a $414,000 home, excluding essential costs such as property taxes, homeowner’s insurance, and ongoing maintenance expenses. Furthermore, securing a mortgage at this rate requires a considerable down payment, typically exceeding $80,000, highlighting the significant barrier to entry for many prospective homebuyers. The combination of rising mortgage rates and high home prices is creating a severe affordability crisis, particularly impacting first-time buyers who are increasingly priced out of the market. Simultaneously, existing homeowners remain largely unaffected by ultra-low, pandemic-era mortgage rates, contributing to a persistent shortage of housing inventory as individuals hesitate to relinquish their favorable rates. NAR Chief Economist Lawrence Yun has voiced serious concerns regarding the deeper implications, noting that "Residential housing mobility, currently at historic lows, signals the troublesome possibility of less economic mobility for society."

This reduced mobility reflects the broader economic headwinds and the challenges individuals face in transitioning to new homes and locations. Adding to the existing uncertainty, President Donald Trump recently indicated he’s considering re-privatizing Fannie Mae (FNMA) and Freddie Mac (FMC), moves that would likely strip these government-sponsored enterprises of their quasi-sovereign status. This action could trigger a credit downgrade, further intensifying pressure on mortgage markets at a time when they are already struggling. The situation isn’t simply a housing issue; it’s a comprehensive affordability crisis exacerbated by Washington’s fiscal policy decisions. The challenges are multifaceted, demanding a coordinated approach to address rising interest rates, housing supply, and broader economic conditions. Understanding the interplay of these factors is crucial for navigating the current market landscape and anticipating future trends. Stay informed about the latest developments impacting the housing market and the broader economy.

📬 Sign up for the Daily Brief Our free, fast, and fun briefing on the global economy, delivered every weekday morning.