In short: Mortgage rates have resumed their climb after a hot inflation reading and a stronger-than-expected jobs report. Affordability is still better than a year ago, but each tick higher erodes those gains — and with inflation outpacing income growth, would-be buyers are effectively getting poorer.

Mortgage rates rose on resilient jobs and accelerating inflation

Rates rose after two reports gave evidence of heat rising in the economy. The May employment report showed 172,000 jobs added, roughly double many economists’ expectations, with unemployment holding at 4.3%. Upward revisions to March and April added a combined 93,000, lifting the three-month average to 188,000 and quieting the alarm bells set off by April’s weak 48,000 three-month average print. 

Days later, the May CPI report showed inflation accelerating to 4.2% year-over-year, up from 3.8% in April and the highest reading since 2023, with energy costs the primary driver and core inflation at 2.9%. 

Together, the data reinforce a “higher-for-longer” view: markets have largely abandoned hopes for rate cuts this year, Treasury yields rose, and mortgage rates restarted their ascent.

What’s the impact on housing?

Mortgage rates and the typical monthly payment are still lower than a year ago, and the share of listings affordable to a median-income household remains above last year’s — but the higher rates climb, the faster those affordability gains evaporate. With inflation rising faster than incomes, any savings on housing are getting eaten by the cost of everything else, leaving the typical buyer net poorer. 

Those headwinds show up in May’s market report, where both home sales and new listings fell from a year earlier. Much of the optimism heading into 2026 has faded, with sales now expected to stay flat for the year.