US mortgage rates soar to fresh record high

Read more: US inflation tops forecasts

Marty Green, principal with mortgage law firm Polunsky Beitel Green, believes the Fed’s aggressive rate increases are, in no doubt, cooling the real estate market.

“The rapid rise in rates is definitely slowing the pace of sales and throwing cold water on what was a frenzied residential real estate market only a few months ago,” said Green. “Where inventory was the big concern in 2021 and early 2022, the concern today is affordability, with the combination of substantial price increases and rising rates simply pricing more and more Americans out of the market.”

Keller Williams chief economist Ruben Gonzalez expects mortgage rates to climb even further if the central bank continues to ratchet up the federal funds rate to slow inflation

“Housing costs are heavily weighted in both Consumer Price Index (CPI) and Personal Consumption Expenditures Price Index (PCEPI) inflation calculations in the form of owner equivalent rents,” Gonzales said. “In the August CPI report, owner equivalent rents contributed 1.5% of the total 8.3% in prices over the previous 12 months. Housing made the second largest contribution to the 12-month increases in the index behind energy. As energy prices fall, housing will remain a key contributor to inflation.