Dar-Mardan-Realtor-CPA
New member
It's clear that the U.S. inflation rate has been on a steady downward trajectory over the past year, dropping from 8.5% in July 2022 to 2.97% in July 2023. This trend is pushing us closer to the Federal Reserve's goal of maintaining inflation around 2 - 2.5%.
This decrease in inflation is great news for both consumers and the real estate market. Here's why:
When inflation lowers and becomes stable, the Federal Reserve is less likely to keep increasing interest rates. This in turn impacts mortgage rates, which are closely tied to the 10-year Treasury yield. As of July 20, 2023, the 10-year Treasury yield stands at 3.847%. But surprisingly, mortgage rates are still between 6.5% and 7%.
Normally, a 30-year mortgage rate should only be about 1.5% higher than the 10-year Treasury yield. Adjustable-rate mortgages (ARMs), which are usually at or slightly above the 10-year Treasury yield, also provide short-term relief of 1 to 5 years. But because of market risks, lenders have been charging about 3% more than the 10-year Treasury yield.
As inflation stabilizes and the Federal Reserve stops raising interest rates, mortgage rates will likely fall. ARM rates could drop to around 4%, and 30-year fixed mortgage rates could fall to about 5.5%.
This means housing will become more affordable. One of the biggest hurdles in today's housing market is affordability, so a drop in mortgage rates will make it easier for more people to qualify for loans to buy homes.
About the Author
Dar Mardan, a seasoned realtor at Pacific Sotheby's International Realty, is your guide to all things real estate in sunny Orange County. With an emphasis on informed decisions and an array of knowledge spanning real estate, tax strategies, trusts, and more, Dar turns learning into an adventure. Alongside his talented wife, Vida, they offer a comprehensive, personalized approach to serve clients' real estate needs. Trust Dar and Vida to turn your real estate dreams into an extraordinary reality!
This decrease in inflation is great news for both consumers and the real estate market. Here's why:
When inflation lowers and becomes stable, the Federal Reserve is less likely to keep increasing interest rates. This in turn impacts mortgage rates, which are closely tied to the 10-year Treasury yield. As of July 20, 2023, the 10-year Treasury yield stands at 3.847%. But surprisingly, mortgage rates are still between 6.5% and 7%.
Normally, a 30-year mortgage rate should only be about 1.5% higher than the 10-year Treasury yield. Adjustable-rate mortgages (ARMs), which are usually at or slightly above the 10-year Treasury yield, also provide short-term relief of 1 to 5 years. But because of market risks, lenders have been charging about 3% more than the 10-year Treasury yield.
As inflation stabilizes and the Federal Reserve stops raising interest rates, mortgage rates will likely fall. ARM rates could drop to around 4%, and 30-year fixed mortgage rates could fall to about 5.5%.
This means housing will become more affordable. One of the biggest hurdles in today's housing market is affordability, so a drop in mortgage rates will make it easier for more people to qualify for loans to buy homes.
About the Author
Dar Mardan, a seasoned realtor at Pacific Sotheby's International Realty, is your guide to all things real estate in sunny Orange County. With an emphasis on informed decisions and an array of knowledge spanning real estate, tax strategies, trusts, and more, Dar turns learning into an adventure. Alongside his talented wife, Vida, they offer a comprehensive, personalized approach to serve clients' real estate needs. Trust Dar and Vida to turn your real estate dreams into an extraordinary reality!
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