As mortgage rates inch closer to 7%, hundreds of thousands of inflation-weary homebuyers across the U.S. are backing out of deals.Nationwide, the number of newly pending contracts to buy a home plunged from 58,000 to 55,000 during the week ending Feb. 17, Altos Research found. That’s its first decline since the start of the year, a notable reversal from what appeared to be a slowly recovering housing market ahead of the spring.The downturn in pending contracts came as mortgage rates rebounded after a brief brush with 6% earlier this month, pushing droves of homebuyers back to the sidelines – especially rate sensitive first-time buyers.“The growth in new pendings looks like it slowed just a touch this week, which could illustrate that this recovery stalls when mortgage rates are at 7%, but resumes when they’re closer to 6%,” Mike Simonsen, president and founder of Altos Research, told Yahoo Finance. “It’s not yet a trend, but a signal that we can see people waiting to see if mortgage rates go back down in three weeks and they are better off.”Newly pending home contracts slid 6% for the week ending Feb. 17, according to Altos Research. That’s the first drop since the start of the year, an early signal of affordability challenges after mortgage rates spiked. (Credit: Altos Research)Higher rates stall would-be homebuyersMortgage rates had been trending lower since mid-November, with the average 30-year fixed loan falling nearly a full percentage point to 6.09% during the first week of February.The drop gave “as many as 3 million more mortgage-ready consumers the ability to qualify for a $400,000 loan,” Sam Khater, chief economist at Freddie Mac said in a statement, but that improvement seems to have been short-lived.Buyer demand stalled as new economic data cited an uptick in inflation last month, triggering mortgage rates to climb nearly half a percentage point to 6.50% within three weeks – hitting its highest point since the start of the year. The result: homes became less affordable.A realtor’s lock box hangs on a door as prospective buyers depart an open house for sale in Alexandria, Virginia. (Credit: Jonathan Ernst, REUTERS)The volume of purchase applications for a mortgage plunged 18% in the week ending Feb. 17, the Mortgage Bankers Association survey found; overall activity was 41% lower compared to a year ago.Story continuesShould rates continue to push higher, any small gains on pending sales activity gained so far this year – usually an early indicator of housing health – could also crumble, Simonsen said.“Home sales and our pending numbers slowed way down toward the second half of last year, especially when mortgage rates climbed and homebuyers stopped cold,” Simonsen said. “It seems like pending home sales had reached a bottom last year, but a big spike in mortgage rates can be absolutely impactful on people and slow down the market — and if rates jump over 7% pending home sales could start falling again like last year.”The cost of buying Prospective buyers Laura (L) and Nick Partee visit an open house for sale in Alexandria, Virginia. (Credit: Jonathan Ernst, REUTERS)Though home prices have been declining in many markets across the U.S., it hasn’t been enough to recover demand.As of Feb. 17, there were 23% fewer single-family homes in the contract pending stage compared to last year, when there were 395,000 under contract. According to Altos Research, that’s slightly better than December, when there were 35% fewer homes under contract compared to the year prior.The reluctance of some buyers to return to the market is understandable.Mortgage rates have more than doubled from a year ago, with the difference between a 3% and 6% mortgage adding hundreds of dollars more to a typical mortgage payment.According to Realtor.com, at last week’s rate of 6.32% the buyer of a median-priced home was looking at a $1,985 monthly mortgage payment, up 42% from last year. That figure is now higher, as rates surged closer to 7% this week.According to Jeff Reynolds, broker at Compass and founder of UrbanCondoSpaces.com, the uptick in rates this month alone has wiped out at least 10% of some folks’ purchasing power.“Affordability is top of mind but so is the economy as a whole,” Reynolds told Yahoo Finance. “Buyers are concerned about a recession, job loss and inflation. I think the biggest concern is buying into a market that would continue to go down. In my 18 year career, I have never seen rate moves like we are seeing now.”Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter @__gabriellacruz.Click here for the latest economic news and economic indicators to help you in your investing decisionsRead the latest financial and business news from Yahoo FinanceDownload the Yahoo Finance app for Apple or AndroidFollow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube.