In 2021, at a 30-year average fix rate of 2.96%, a total cost of a $400,000 mortgage would cost $604,180. At the current 7.7%, it would cost $1,027,529.

Two weeks ago, mortgage rates have surged, with the average rate for a 30-year fixed mortgage reaching 7.22%, the highest since early November. This increase is partly due to the rise in the yield on the 10-year Treasury, driven by a robust employment report from ADP. Federal Reserve Chairman Jerome Powell's remarks suggesting further interest rate hikes also contributed to the upward trend.

Within just one week, the 30-year fixed mortgage rate has climbed by 31 basis points, resulting in a significant impact on monthly payments for homebuyers. For example, a $400,000 mortgage now requires a monthly payment of $2,720 compared to $2,637.

The higher mortgage rates have created a situation known as the "golden handcuff effect" for sellers. Many homeowners currently enjoy historically low interest rates below 4% or even 3%, making them reluctant to sell and lose the advantage of their low-rate mortgage. This sentiment has contributed to a shortage of homes for sale, with new listings this year lagging behind last year's pace by 20%.

The combination of rising mortgage rates and homeowners' reluctance to give up their low-rate mortgages has resulted in a challenging housing market, impacting both buyers and sellers.

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