You know you’ve started on the road to austere adulthood when something as seemingly mundane as mortgage rates can prompt a painful, cringeworthy, or even bitter response. That was exactly my reaction as I discovered that mortgage rates climbed to 7.49%, the highest level since 2000, for little other reason than the economic implications of such a benchmark. Indeed, I don’t currently have a mortgage, nor am I looking to enter one any time soon. Yet, it remains a point of interest (no pun intended).

The elevated state of mortgage rates reflects that the Federal Reserve’s rate-hike campaign has yet to be fully digested by financial systems. The fact is housing is one of the most rate-sensitive industries in the U.S. It should be troubling, then, that housing is already setting toilet-bowl records so close to recent rate hikes.

If you recall, the Fed raised rates as recently as a few weeks ago, at its July 25-26 policy meeting. The 25-basis-point hike pushed the Fed fund rate to 5.5%, the highest level in decades.

While it’s easy to discount rising mortgage rates as an unfortunate side effect from the fight against inflation, I believe this would be declaring a premature victory.

Interest rates are the bedrock upon which numerous important industries lie. The fact that housing is just starting to show signs of weakness means a further, wider and more malicious slowdown is likely imminent.

And to be clear, housing is weakening, regardless of the perpetually rose-colored tint of your favorite housing economist’s glasses.

“But Shrey, new home sales climbed again in July to an annualized pace of 714,000 homes, the fastest pace of growth for new homes since February of last year, how could housing be weakening?” You, the doe-eyed housing bull asks with glowing sincerity.

Well, there’s a housing affordability crisis in the U.S.

Housing Data Points to Rising Inequality in Real Estate

There’s a widening gap between the purchasing power of typical 9-5 working-class families and, for lack of a more charming term, Scrooge McDucks. This is apparent if you do a bit of digging below the surface.

While new home sales are up 32% this year, existing home sales are down 17%, a function of homeowners refusing to sell and lose their low mortgage rates.

So, what do they do? Nothing. Homeowners are happy to keep paying down their pandemic-era mortgages while leaving the selling to homebuilders. This has forced potential homebuyers into the relatively smaller, shinier, new home market.

Now, let me ask you, perpetual real estate bull, what kind of people would buy new homes at record-high mortgage rates with little chance to refinance in the near term? The rich kind.

In June, a third of all U.S. homebuyers paid in cash, the highest level since 2014.

Meanwhile, mortgage applications for a home purchase hit a 28-year low last week.

If the picture wasn’t clear enough, let me be crystal: The perceived strength in housing is the result of wealthy homebuyers propping up the industry. The average home seller is having a tough time even finding a buyer with mortgage rates past 7%, while the typical buyer has either left the market all together or is being buried under painstakingly high monthly payments.

The atypical buyer, however, is on cloud nine. The affluent content creator, artificial intelligence engineer, or Nvidia (NASDAQ:NVDA) stockholder need only decide between beach-front condo or downtown loft.

Mortgage Rates Inflame Recession Concerns

When I see the growing sentiment toward a soft landing, I worry that investors are missing the point… and the economic data

The Nasdaq Composite is up a staggering 34% this year in what’s been a notably strong year for stocks. But wealthy Americans still dominate stock ownership.

And those wealthy Americans are buying up real estate.

As much as economists love to tout the “resilient consumer,” they’re actually complimenting wealthy Americans taking advantage of the slowdown in home price growth. Otherwise, they’re knocking an “‘irresponsible’ U.S. consumer who refuses to spend less, conditioned to spend more from the halcyon days of pandemic savings excess,” wrote InvestorPlace Contributing Editor Jeff Remsburg.

Despite the strength of stocks so far this year, the state of the average consumer isn’t one of prosperity.

Credit card debt passed $1 trillion for the first time ever last month, mortgage rates are liable to continue rising, and the return of student loan payments is just weeks away.

Economists expected a U.S. recession in the second half of the year in no small part due to the aggressive pace of the Fed’s monetary changes. Yet, just two months into Q3, it seems like most market commentators have changed their tunes.

While it may take longer than expected, Fed Chair Jerome Powell’s projection of “some pain ahead,” in my humble view, is more than likely still on the way.

Climbing mortgage rates aren’t some innocuous blip. They’re a red alarm… to a recession, a stock market crash, and/or housing downturn.

On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.