Housing market: Mortgage rates rise for third straight week to highest level since June 2025 while home sales fall for third month in a row

In the recent week, the economy, inflation and its potential impact on Americans' lives took center stage. Rising grocery and gas prices are prompting households and businesses to make cost-conscious decisions. Inflation surged last month due to increased gas prices triggered by renewed Middle Eastern conflict, prompting concerns among voters ahead of midterm elections.

The consumer price index rose 3.4% last month compared to a year ago, the same as July, but showed a significant monthly acceleration with a 0.4% increase from July to August. Persistent inflation, a challenge for the Federal Reserve and voters, has soured opinions on the Trump administration's economic management. US diesel prices breached $6 a gallon, driven by the war with Iran, impacting transportation costs for numerous goods.

Wholesale prices also rose as higher oil and gas costs persisted, with annual wholesale inflation peaking at 5.9% this year after the Iran conflict raised energy costs. US home sales weakened to their slowest pace in over a year last month as rising mortgage rates and home prices deterred buyers. Existing home sales declined 2% from July to a rate of 3.98 million units, marking the third consecutive monthly decline.

Mortgage rates climbed for the third straight week, pushing the average 30-year fixed rate to 6.76%, its highest level in over 14 months. This rate hike adds to borrowing costs for homebuyers, potentially dampening home sales. Unemployment claims dipped slightly, remaining low and relatively stable. Stocks rebounded after oil prices eased, but the market struggled to maintain a positive close.