R
ising borrowing costs are threatening a potential rebound in the housing market. After mortgage rates fell to a two-year low in September, they have since risen back toward 7 percent, potentially cutting momentum short. This volatility, combined with a high-stakes election, is causing some potential sellers to hold off on listing their properties until conditions improve.

    Weekly mortgage applications declined throughout October as borrowing costs increased, but rebounded last week, according to the Mortgage Bankers Association. The Federal Reserve's decision to lower interest rates in September has been offset by rising yields on 10-year Treasuries, making deep cuts in the future unlikely.

    The rise in borrowing costs is limiting affordability and discouraging would-be sellers from putting properties on the market. Homeowners locked into low mortgage rates are also reluctant to sell, tightening the housing supply. Experts believe that a sub-5.5 percent mortgage rate is needed to stimulate the market, which seems unlikely unless there's an economic downturn.

    However, even slight drops in borrowing costs could help the housing market. When rates fell to 6 percent in September, buyers eventually closed homes this month, with pending sales up nearly 10 percent from a year prior. The bright spot for buyers is that the current high inventory of homes gives them an advantage over sellers. But high borrowing costs are taking bites out of their budget, leading some house hunters to consider smaller properties or homes in need of repairs.