Mortgage rates again stayed above 7% this week after core inflation in August came in higher than expected.
The average rate on the 30-year fixed mortgage increased to 7.18% this week, up from 7.12% the week prior, according to Freddie Mac. Rates have exceeded 7% for five straight weeks, and likely will remain above that in the near term as markets anticipate the Federal Reserve’s interest rate decision next week.
Read more: What the latest Fed rate hike plan means for mortgage rates and loans
For homebuyers, the story remains the same: Elevated rates have made it too unaffordable for some, while those who remain on the hunt are staring down high prices and limited inventory.
Any relief is likely not coming soon, experts say.
"There's not a lot of reason to expect any immediate change for the better as far as mortgage rates go," Keith Gumbinger, vice president HSH.com, told Yahoo Finance. "We'll get more clarity after the next Fed meeting; no increase in policy rates is expected, but I think there's yet a chance of another hike yet this year as growth, labor markets and inflation all have remained either stronger or higher than expected for a while now, despite high interest rates."
As mortgage rates continue to push above 7%, homebuyer demand has ebbed.
"High mortgage rates continue to subdue borrower demand, with mortgage applications in the first full week of September falling to lows last seen in 1996," said Bob Broeksmit, president and CEO of the Mortgage Bankers Association, in a press statement. "Persistent affordability and housing inventory pressures are keeping prospective buyers on the sidelines, and most homeowners have little incentive to refinance."
Homeowners also have little reason to list their property for sale and lose their current mortgage rate for one that could be twice as high. That’s made it harder for buyers to find affordable homes.
For instance, there were only 54,000 new contracts pending in the last week, down from 64,000 the previous week, according to Altos Research. That was 14% fewer new sales compared with last year’s Labor Day week, and 32% to 40% fewer sales than in September 2021.
"There’s no getting around it. Supply is limited, demand is limited. There’s just no sign of sales volume increasing," Mike Simonsen, CEO of Altos Research wrote in the Altos blog.
The lack of inventory has also propped up home prices even as demand wavers.
The median home price was $444,990 for the week ending Sept. 11, Altos Research found, 1% higher compared to a year ago. The price of newly listed homes averaged $390,000, unchanged from last year.
Where rates go from here comes down to the Federal Reserve and its fight against inflation.
"Inflation is what’s driving mortgage rates higher," Daryl Fairweather, chief economist at Redfin, told Yahoo Finance. "The Fed is really concerned about inflation and they’re not going to stop hiking until they see that it’s truly under control. They’re not taking a pause or going to start cutting rates until they see that inflation has really been falling."
The latest data on inflation this week showed the inflation rate increased 0.6% in August from the previous month and was up 3.7% on an annual basis, the Department of Labor found. The year-over-year increase was slightly higher than expected and still above the Fed's target of 2%.
All eyes will be on what the Fed says next week at its next rate-setting policy meeting.
"Right now, it's more about what the Fed has to say about their expectations for the path for monetary policy in the future than whether or not another small hike in rates is coming or not," Gumbinger said. "Even if it comes this fall at some point, another quarter-point hike doesn't move the needle very much, since more than five percentage points of hikes are already in place."
Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.