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Rise in interest rates expected to slow down home sales: "The housing market is in a downturn right now"

30-year mortgage rate passes 6%
30-year-fixed mortgages surge over 6%, the biggest one week jump in 35 years 02:55

With the Fed raising interest rates again, average long-term mortgage rates saw their biggest one week jump in 35 years. The average rate on the popular 30-year fixed mortgage rose to 6% — the highest it has been since the 2008 recession. 

But the sudden rise in interest rates is cooling off the housing market. In St. Louis, for example, pending sales of homes were down nearly 10% in May, compared to the same month last year. 

Those who can still afford to buy a home can expect to see a price increase, as the typical new mortgage payment has risen 52% over the last six months, according to information that Zonda, a real estate research company, provided to Fortune this week.

Nationally, some markets are even seeing home prices starting to drop. 

Cheryl Leslie is house hunting in Fort Worth, Texas, and is hoping to see prices drop so she can move closer to her grandkids. 

"I'm looking now so that when the price has come down just a tad, I'll be able to know exactly what I need and what I want and where to go," she told CBS News' Kris Van Cleave. 

Mortgage applications are down more than 15% compared to 2021, dropping 5% in May alone.  

This is prompting nearly 1 in 5 to drop their price, according to real estate brokerage Redfin — which announced layoffs this week due to the slowing housing market. 

"The housing market is in a downturn right now. It's cyclical, and it just doesn't support the number of employees we had before," Chief Economist of Redfin, Daryl Fairweather, said.  

Analysts believe that this is just the start and prices in some areas of the country will continue to drop. 

"We will see house price growth to level off here, and we'll see some price declines in some of the more juiced up markets across the country. And in my mind, that's a correction when house prices start to go lower," said Mark Zandi, chief economist of Moody's Analytics. 

Realtor Tina Yassin has been trying to sell a home in Arlington, Texas, for 28 days. The home saw a price drop but still hasn't attracted buyers. 

"This home, I imagine that, six months ago, would have sold," realtor Tina Yassin said. "Would not have been on the market two weeks later." 

Yassin said the demand drop depends on the market and area. In areas like Dallas-Fort Worth, prices are steady — but most realtors are telling sellers not to expect bidding wars, especially on homes that need some work. Meanwhile, markets like Toledo, Ohio, Rochester, New York and even Chicago and Los Angeles, have seen prices drop. 

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