If you've been waiting for mortgage rates to come down before buying or selling a home, the last six months have probably been frustrating.
On February 23, the national average for a 30-year mortgage briefly fell below 6%, reaching 5.99%.
As of September 3, that average has climbed to 6.88%.
So, what happened? And perhaps more importantly for buyers and sellers in Placer County, what could cause mortgage rates to move up or down from here?
The Fed Doesn't Directly Control Mortgage Rates
This is probably one of the biggest misconceptions about interest rates.
Since February, the Federal Reserve has met four times and has not raised its short-term interest rate once. It kept rates unchanged at every meeting.
Yet during that same period, mortgage rates climbed from about 6% to nearly 7%.
That's because the Federal Reserve doesn't directly set mortgage rates.
Mortgage rates are much more closely tied to the bond market, particularly longer-term Treasury yields, and what investors expect to happen with inflation and the economy in the future.
Why Have Mortgage Rates Gone Up?
A lot has happened since mortgage rates briefly dipped below 6% in February.
The conflict with Iran pushed oil and energy prices higher, creating new concerns about inflation. Higher energy costs can eventually affect transportation, manufacturing and the prices consumers pay for many goods and services.
The economy has also remained relatively strong, while the federal government continues to borrow large amounts of money.
Combined, these factors have pushed longer-term bond yields higher, and mortgage rates have followed.
It's a good example of why a Federal Reserve announcement doesn't necessarily translate directly into lower mortgage rates. The Fed can leave short-term rates unchanged while mortgage rates move significantly in either direction.
What Could Happen With Mortgage Rates?
There are factors that could push rates in either direction.
Mortgage rates could come down if inflation continues to improve, the economy slows, or we see a lasting resolution to the conflict with Iran that helps bring oil and energy prices lower.
Rates could stay elevated or move higher if the conflict with Iran continues or escalates, energy prices rise, inflation picks back up, or the economy remains stronger than expected.
Unfortunately, no one knows exactly when significantly lower mortgage rates will arrive.
What Does This Mean for Placer County Buyers and Sellers?
I know the uncertainty surrounding rates has been frustrating for both buyers and sellers who have been waiting for lower borrowing costs.
But there is another important part of the equation: our local housing market isn't moving in one direction.
I've seen some price ranges and neighborhoods shift noticeably in the buyer's favor, while others remain firmly in a seller's market.
Conditions can even vary significantly between nearby communities. The market for homes in Rocklin may look different from the market in Loomis, Granite Bay, Lincoln or Auburn. Conditions can also vary considerably within different neighborhoods and price ranges in the same city.
That's why it's especially important right now to understand the market surrounding the individual home.
For sellers, that means looking closely at competing listings, recent sales, pricing, inventory and buyer activity before deciding how to position a home for sale.
For buyers, those same conditions can help determine how much negotiating power you may have. In some situations, buyers may have room to negotiate on price, credits or other terms. In others, a desirable and properly priced home may still attract significant competition.
Every Situation Is Different
Whether you're thinking about buying, selling, or simply trying to decide whether now is the right time to make a move, there is a lot more to consider than just the mortgage rate.
The opportunities and challenges can be very different from one neighborhood, price range and property to another.
If you're curious about what your home might be worth, what the market looks like in your neighborhood, or what opportunities might be available as a buyer, I'm always happy to help.
Patrick Hake
Broker Associate
eXp Realty of California
License #01349088
Call or text: (916) 316-5626
www.OwnPlacer.com/patrick-hake.php
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