30-year mortgage rates just broke above 7% — first time since January 2025. The 10-year Treasury breached 5% Monday, a level unseen since late 2023.

Existing home sales fell 2% in August to a 3.98M annualized rate — the lowest since June 2025. Zillow just slashed its 2026 sales forecast from +4.3% growth to +1.3%, now projecting Q4 down 3.5%.

The Fed is expected to raise the federal-funds rate Wednesday — the first hike in three years. If markets read it as the Fed getting serious on inflation, yields could fall. If it reads as panic over sticky inflation and swelling deficits, yields — and mortgage rates — go higher still.

Builders are already exposed: rate buydowns just got more expensive, squeezing margins and cutting incentive to build. Sellers are blinking first — inventory is climbing back to pre-pandemic levels as owners tire of waiting.

7% didn’t kill the housing market alone. A Fed hike into a stagnant market with weak wage growth might.