Mortgage Rates Rise Above 7% as Home Prices Stay Stubbornly High

Fresh data from First American indicates that higher borrowing costs are squeezing housing affordability without causing a nationwide drop in home values.

For years, rising mortgage rates have been assumed to automatically push home prices lower, but First American Data & Analytics says the picture is more complicated.

The company’s August 2026 Real House Price Index, which accounts for income trends and mortgage rates to create a real affordability measure, showed real house prices down 1.3% from a year earlier. That pointed to a slight improvement in affordability, even as the average 30-year fixed mortgage rate increased to 6.67%.

On a monthly basis, though, the index climbed 1.2%. By September 2026, mortgage rates had moved above 7%, adding even more pressure for would-be buyers.

First American chief economist Mark Fleming, based in Washington, DC, reviewed eight periods of rising mortgage rates since 1993 and found that national home prices usually kept increasing, although the pace of gains and the affordability impact differed widely.

New data from the S&P CoreLogic Case-Shiller and Federal Housing Finance Agency (FHFA) showed continued home price growth in August, though affordability pressures remain as inflation and mortgage rates continue to weigh on buyers. https://t.co/tawpgNZrLV

— Mortgage Professional America Magazine (@MPAMagazineUS)

What earlier rate spikes show

The gap between home price growth and housing affordability has widened most sharply since the pandemic.

From December 2021 through October 2023, national home prices rose about 14%, while the RHPI jumped more than 70% as higher borrowing costs piled onto already elevated prices.

Earlier rate-hike cycles caused much less damage to affordability, even when prices rose by similar amounts. First American says that same pattern is still visible now, with affordability constraints keeping the US housing market subdued in 2026 and existing-home sales remaining below long-term historical averages.

“An important dynamic for affordability is that household income is expected to rise faster than house prices next year,” he previously said.

“When income growth exceeds house price growth, house-buying power improves – even if mortgage rates don’t decline meaningfully.”

Supply conditions explain much of the market’s resilience. Homeowners who locked in low pandemic-era rates have been hesitant to sell, limiting inventory even as buyer demand eases.

Mike Fratantoni, chief economist and senior vice president of research at the Mortgage Bankers Association in Washington, DC, said in a 2026 forecast interview with Mortgage Professional America that affordability should improve gradually.

“I think the affordability situation is going to get moderately better over the next couple of years. We expect that wages are going to be growing faster than rents, and going to be growing faster than home prices. So that, in combination with mortgage rates staying stable, should make it slightly easier over time for folks to afford that housing payment,” he said.

Broker Samantha Shelton, president at Align Lending in the US, also said she expected more inventory, steadier buyer demand, continued wage growth and a more balanced market over time.

Why the lock-in effect matters for brokers

The reluctance of homeowners to give up low mortgage rates remains a major reason prices have held up despite borrowing-cost pressure. Many pandemic-era owners who secured rates below 4% have avoided selling, which has kept supply tight even as demand softens.

Michael A. Harris, president and CEO of United Mortgage Corporation of America, said the lock-in effect is influencing borrower decisions in ways that may not be best for their long-term finances.

“Rate lock-in continues to influence homeowner decisions, particularly among borrowers who secured mortgage rates below 4%. The challenge is that the decision is often being made based on the interest rate alone, rather than the homeowner’s complete financial picture,” he said.

Harris added that real progress will require better affordability, enough inventory, realistic seller expectations and financing options that match borrowers’ actual needs.

The August 2026 RHPI also showed a wide regional split. Among major metro areas, Syracuse, N.Y. had the largest annual increase at 9.2%, followed by Rochester, N.Y. at 7.7% and Milwaukee at 6.5%.

Baton Rouge, La. posted the steepest decline at 8.9%, while Colorado Springs, Colo. fell 7.5% and Seattle slipped 6.7%. That means whether affordability is truly improving in the US depends heavily on local conditions.

Consumer house-buying power fell 1.1% from July 2026 to August 2026, but increased 2.6% from a year earlier as median household income rose 3.4% since August 2025.

First American’s August 2026 data shows national home price appreciation has slowed to about 1% annually.

Fleming said brokers will need to explain the broader picture carefully to clients considering a purchase.

“Slower appreciation and rising household incomes can help gradually improve affordability, although higher mortgage rates threaten those gains,” he said.

“Higher mortgage rates can put pressure on home prices, but the economy, household incomes and the number of homes for sale all play a role in what happens next.”