### Rising Mortgage Rates Surprise Prospective Homebuyers

Following recent hopes for relief from the Federal Reserve's significant rate cuts, mortgage rates have instead taken an unexpected upward turn. The average rate for a 30-year fixed mortgage has climbed for the third consecutive week, now sitting at 6.5%, reports Freddie Mac. This new rate marks a quarter-point increase from levels observed just two weeks prior.

The anticipation stemmed from the Fed's mid-September decision to reduce its key lending rate by a substantial half percentage point, a move that had economists predicting an easing of high borrowing costs. However, mortgage rates tend to follow the yield on 10-year treasury bonds, which have been influenced by recent economic data that questioned the Fed's progress on inflation control. Notably, the Labor Department's Consumer Price Index posted a 2.4% rise from the previous year, surpassing expectations and the Federal Reserve’s 2% target.

Last week's economic developments were compounded by former Treasury Secretary Larry Summers' criticism of the Fed’s aggressive rate cuts, calling them a "mistake". Additionally, mortgage lenders typically add their own margins on top of the rates, contributing further to the higher borrowing costs. Factors such as credit scores and loan types also play a crucial role in the actual rates consumers receive.

Despite the rate cuts, analysts tell homebuyers they may need to wait approximately 90 days to witness a significant decline in mortgage rates. Historically, rates for a 30-year fixed mortgage in 2019 ranged between 3.75% and 4.5%, dipping to a low of 2.65% in early 2021 due to the pandemic. However, experts predict that rates are unlikely to fall below 6% by the end of this year. Lawrence Yun, chief economist at the National Association of Realtors, mentioned that a 6% rate might become the new normal, with slight chances of it dropping to 5.5% or potentially increasing to 7%.

Homebuyers typically slow their purchasing plans in response to high mortgage rates. Nevertheless, experts advise against halting property searches despite these rates, as real estate prices generally appreciate over time. Those holding off can refinance their loans when rates eventually decline. The housing market, currently experiencing longer listing times and a reduced number of mortgage applications, indicates less competition for available homes. Inventory levels also appear to be improving, with the number of homes for sale last month showing a 6.4% increase from the previous month and a 33.6% rise from a year ago, as per a RE/MAX report.

However, home prices have remained robust, with the median home sales price rising by approximately 50% since early 2020. In August, the median price reached $416,700, a 3.1% increase from the same period last year, according to the National Association of Realtors. Despite high mortgage rates curbing the number of prospective buyers, the strong home prices signal ongoing demand and the value of real estate investments in the long term.