What the Heck is Going On with Mortgage Interest Rates and Real Estate?

For the past three months, it has felt like the real estate market has been holding its breath. With interest rates fluctuating, an intensely polarized election season, and plenty of economic uncertainty, homebuyers have been reluctant to jump in. And from a broad perspective, it makes sense: real estate, like all markets, values stability and clarity. When volatility rises, or the future looks unclear, many buyers sit it out. Over my 20 years in real estate, I’ve seen this happen time and again—yet this is often a major missed opportunity for would-be homebuyers. More on that below.

Thankfully, as of today, we know a lot more than we did just a few months ago. 

As your trusted real estate professional, I want you to know exactly what I’m seeing and where I think things are headed. If you’re considering making a move, you may need to prepare for more than just a new address. 😊 

Let’s dive in.

Understanding the Mortgage Rate Situation

After nearly four years of consistent rate hikes, the Federal Reserve has finally begun lowering rates, aiming to ease economic strain. Better late than never, right? I digress..

With recent cuts of a half-point in September, followed by a quarter point in November, the Fed is still leaving the door wide open for a final cut before year’s end - which I would fully expect.

But why haven’t mortgage rates dropped as quickly?

While the Fed’s moves influence interest rates, they don’t directly control fixed mortgage rates. Mortgage rates tend to follow the 10-year Treasury yield, which reflects overall economic sentiment. Recently, a surge in the stock market, driven by investor confidence after the election, pushed bond yields up to a four-month high of 4.479%. As bond yields rise, so do mortgage rates, indicating reduced demand for bonds. This is a temporary reaction to major shifts in presidential politics.

So again, what does this mean for mortgage rates?

While mortgage rates may not fall overnight, the Fed’s shift signals that rates are likely to keep trending down. In my experience, lower rates almost always boost homebuying demand, and with many buyers waiting for favorable conditions, we could see 2025 begin with a bang in real estate.

What This Means for Buyers and Sellers

For buyers, the window to get a decent deal is closing.

Those waiting for mortgage rates to drop further will almost certainly find themselves facing higher home prices and tougher negotiating conditions. In my opinion, between now and December 31st is your best chance to take advantage of relatively calm buyer activity. Once we hit the new year, the scales could quickly tip back in sellers’ favor.

And for sellers, the landscape is just as dynamic. With inventory at historically low levels, listing your property now could give you a competitive advantage with less competition in your area. Waiting until next year might mean contending with a wave of new listings, which could dilute demand for your home as buyers flood back into the market. But time will tell… I believe we’re moving into a season where sellers - once again - reign supreme.

My Advice

If you’re a buyer, waiting for lower mortgage rates might seem wise, but it will almost certainly cost you in other ways. Think of it this way: holding off for lower rates is like waiting for perfect weather to shop for a convertible. By then, everyone wants one. Locking in a property before January may be your best chance to avoid the weight of a more competitive market.

For sellers, now is the time to capitalize on limited inventory and motivated buyers. If you’ve been waiting for your moment, welcome. Let’s talk about how to take full advantage.

As always, I’m here to help with your specific situation. If you have questions about what this means for your home sale or search, let’s grab coffee and discuss!