Interest Rates Trend Up!

We live in a time with more accessibility to data and info in real estate than ever before. That inherently brings a lot more noise and confusion, making it harder to know what to believe. Our goal is to be a trusted advisor and bring you perspective and clarity so you can make the most informed decision.
Mortgage rates are continuing to trend upward, the chart below is a look back to June 2022. Interest rates the last 6 months of last year started to trend up in the fall because there was news saying maybe we aren’t out of the woods yet. Inflation was persisting a little longer, more fear in the market, and interest rates started to tick up.
Rates peaked back in November last year; however, we started to get to get good news relative to inflation. Maybe things aren’t as bad as we thought, and subsequently rates started to trend down the past 90 days. What happened in the last few weeks was a signal that maybe we just aren’t out of the woods yet. Consumer spending and inflation data was a little hotter than we thought. We are in a time right now that good news is bad news, and bad news is good news. Consumer spending is a good thing, but it is ultimately bad for inflation.
Let’s break this down relative to the 10-year treasury. You always want to watch the 10-year treasury to understand what’s happening with inflation.
So what’s happening today?
For the last 50 years the 30-year mortgage rate has moved in unison with the 10-year treasury rate. If you look at the chart below, you see an in tandem relationship with wherever the 10-year treasure rate goes, the 30-year fixed mortgage has followed. The average spread between the two is 1.72%. Historically, if you were to take the 10-year treasury and add 1.72%, you should be in the neighborhood of a 30-year fixed rate mortgage.
If we take the average spread above (1.72%) and we compared it to the last couple months, starting in January, that spread has jumped up to an average of 2.70%. Today, if you take the 10-year treasury (3.95%) and had 2.90%, you get the average daily rate of the 30-year mortgage of 6.88%.
The above spread is generally a measure of overall consumer fear (economically, business, etc.). We want to be able to help you by removing any fear so you can make the best possible decision. There are likely two perspectives right now, relative to interest rates. Either, you believe rates are going to go higher than they are today. Or, you believe rates have either bottomed out or may go lower as we go throughout the year.
If you believe rates are going to go higher, than you'd certainly want to act now if you’re looking to buy and lock in a more preferrable rate. If you believe rates are going lower, most consumers are likely thinking the same thing and will want to wait until rates go lower.
Question to that is, what do you think everyone else in the market is going to do if rates go lower?
When they see interest rates start to turn and go lower, they’re going to jump in. As we move into the spring market, we expect supply to remain constricted (even with a decrease in mortgage application due to the rise in interest rate), there may be a window of opportunity for the long-term homeowner to buy now and refinance down the road.
In the chart below for February, we have gone from the beginning of the month being at 5.99% to 6.88% at the end of the month, almost a one percent jump. No one has a crystal ball; we are certainly in a volatile market and it’s nearly impossible to predict where rates are going to go. That said, many experts are saying we are going to be in a more favorable rate environment toward the middle to the end of the year, likely in the neighborhood of 6%. The question is timing and what’s coming around the corner with inflation over the next few weeks and months.
We do not expect home prices to come down due to this rise in interest rates, simply for the fact there is not enough supply out in the market. Price is always going to be determined by supply and demand. In most markets if a home is priced right, is in good working condition, and has good visibility…it is going to sell in a relatively short period of time.
We hope this has given you some perspective and clarity on today's housing market and how the data is trending as we head into spring. Each local market has it’s own unique set of market conditions, it's important to know that, and you’ll need a trusted advisor to help you navigate it.
If you or you anyone in your circle of friends, family, or colleagues could use my real estate expertise, we would greatly appreciate the opportunity to connect and be a part of that conversation.

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