Mortgage Rates Surge Back Above 7% After Strong Jobs Report

Mortgage rates are rising again, hitting 7.04% for the average 30-year fixed home loan for the week ending Jan. 16, up from 6.93% the prior week, according to Freddie Mac.

“Mortgage rates ticked up for the fifth consecutive week and crossed 7% for the first time since May of 2024,” says Sam Khater, Freddie Mac’s chief economist. “The underlying strength of the economy is contributing to this increase in rates.”

The uptick in rates follows a strong monthly employment report that sent yields higher on the long-term bonds that ultimately determine mortgage rates.

The Labor Department’s report last week showed the economy added 256,000 jobs in December, far more than the consensus expectation of 155,000. A strong labor market tends to drive mortgage rates higher, because it reduces the chances that the Federal Reserve will make future cuts to its benchmark interest rate.

The Fed has cut a full percentage point from its policy rate since launching its pivot to lower rates in September, while mortgage rates have now risen by nearly a full percentage point in the same period.

Financial markets don’t see another Fed rate cut as likely until June, and rate the odds that it will be the only rate cut in 2025 as roughly even.

For prospective homebuyers, mortgage rates will likely remain elevated in the coming months. Sellers can expect a slower market, with fewer offers, as long as rates remain near 7%, reducing buyer purchasing power.

“Mortgage rates continue to have an outsized impact on housing activity as the share of existing homeowners with low-rate debt remains sizable,” says Realtor.com® Chief Economist Danielle Hale. “Existing-home sales climbed higher in recent months following fall’s lower mortgage rates, but we have yet to see the impact of the latest rate surge on home sales.”

Mortgage rates are rising due to a string of employment and inflation reports that have driven bond yields higher, as well as investor concerns about rising government deficits under the incoming Trump administration.

The latest consumer price index report, released on Wednesday, showed that annual inflation rose to 2.9% in December, up from 2.7% the prior month. Still, so-called core inflation, excluding volatile food and energy prices, showed a modest decline, and the mixed inflation data had little immediate impact on bond yields.

Higher rates follow a deep freeze in December

The latest rate increase follows the Realtor.com monthly housing report showing that the residential real estate market experienced the strongest seasonal slowdown in two years last month.

Homes active in December typically spent 70 days on the market before going under contract, the slowest December in five years and the slowest month since January 2023.

The average home lingered on the market for nine days longer than in December 2023. In November, homes spent an average of 62 days on the market. Inventory also plunged 8.6% from November—the largest decrease since January 2023.

The median price of homes for sale in December was down 1.8% from a year earlier, at $402,502. However, the median price per square foot grew by 1.3% on the year, indicating that smaller and more affordable homes continue to grow their share of available homes for sale.

Editor’s note: Due to seasonal disruption from the recent holidays, the Realtor.com economic research team will resume regular publication of its full Weekly Housing Market Update with price, inventory, and sales data starting next week.