It shouldn't have been like this.

Real estate agents, mortgage brokers and economists expected a busy fall home-buying season as inventory levels improved and buyers – buoyed by the Federal Reserve's massive interest rate cut – retreated to take advantage of mortgage rates that were at a two-year low.

But after a vanishingly short honeymoon period, interest rates began to rise. They have risen for five straight weeks and have trended above 7% in recent days, a level that some market watchers say will deter potential buyers. Real estate contract activity showed signs of life in September when mortgage rates were lower, but home sales this year are on track to hit multi-decade lows.

A combination of factors has pushed mortgage rates up quickly. Treasury yields, which are closely tracked by mortgage rates, have risen dramatically in recent weeks amid strong economic data and pre-election unrest. Economic uncertainty surrounding next week's election could complicate their path back down.

“This increase in mortgage rates in recent weeks was probably very surprising to Fed officials,” said Chen Zhao, who leads Redfin’s economic research team. “I think it was a surprise to everyone.”

The Fed does not directly control mortgage rates. Instead, interest rates move primarily based on expectations about the direction of interest rates in the future. Last month, a series of hot economic data on almost everything from consumer spending to inflation, wages and hiring called into question how much further the Fed would need to cut interest rates to support the economy in the coming months.

In other words, all of these positive signs for the economy are dots in the negative column for falling interest rates – including home loans.

Read more: How the Federal Reserve's interest rate decision affects mortgage rates

At the same time, Treasury yields began to rise dramatically as traders began to price in a possible election victory by former President Donald Trump, whose proposed policies of tariffs and tax cuts are seen as bad for bonds – tariffs generally affect inflation, which is a An increase would require interest rates to rise, while tax cuts would likely force the US to issue more debt. This can drive interest rates higher if there is not more demand to meet the increased supply.

Economic data released this week has clouded the picture even further. Treasury yields briefly fell Friday morning in response to a weak jobs report, raising the possibility that mortgage rates would fall in response. But the reaction was short-lived. In the morning they were higher again.

The story continues