Hi Reader,

Mortgage rates improved again last week. According to Mortgage News Daily, the average 30-year fixed mortgage rate ended the week at 7.27%, down from 7.33% the previous week. Freddie Mac's weekly survey put the average at 7.24%, compared with 7.23% the prior week.

Why did rates dip?

October turned out to be an extraordinary month for the bond market. The yield on the 10-year Treasury, which is a key benchmark for mortgage rates, fell 0.364 percentage point during the month to finish at 4.928%. That's the largest monthly decline since December 2023, as seen in this one month chart:

And the reason had more to do with investors getting nervous than with the economy getting weaker.

A massive $6.3 billion cryptocurrency heist involving Binance spooked investors who were already concerned about the enormous amounts of money being poured into artificial intelligence. Disappointing earnings from Intel and Amazon added to those worries, setting off a selloff in technology stocks, as seen in this chart:​

As investors pulled money out of riskier assets, they sought the relative safety of government bonds, particularly U.S. Treasurys. That increased demand pushed bond prices higher and yields lower. Because mortgage rates tend to follow the direction of the 10-year Treasury, this helped create some welcome relief for borrowers.

What about the Fed?

​The Federal Reserve held interest rates steady last Wednesday, as expected, but the decision wasn't unanimous. Two Fed officials favored another rate hike.

The Fed's statement described an economy that remains surprisingly resilient. Consumer spending is holding up, business investment is strong, and employment has kept pace with the workforce. But inflation remains elevated, and the Fed isn't signaling that its work is finished.

In fact, markets are now pricing in another rate hike in December - 77% chance of rate hike.

So while Treasury yields have declined substantially, that doesn't mean we're necessarily entering a sustained period of falling mortgage rates. Investors are still weighing inflation, economic strength, and the prospect of higher short-term interest rates.

This week, investors will be watching Tuesday's midterm elections and Wednesday's Treasury borrowing plans, particularly whether the government intends to shift more borrowing toward short-term debt rather than longer-term bonds.

Summary

The factors that pushed mortgage rates up are still there - inflation, rising government debt, mainly. But the tech stock plunge sent investors diversifying more into bonds and therefore Treasurys, decreasing yields. Will this trend continue or is it temporary? We shall see. Only time will tell. But it is welcome relief for buyers.

What's happening in real estate?

Inventory is also improving. Compass chief economist Mike Simonsen estimates that national housing inventory has returned to pre-pandemic levels, with even traditionally inventory-starved markets in the Northeast and Midwest beginning to see some relief.

For buyers, that could mean more choices and potentially more negotiating leverage, although conditions will vary considerably by market.

Meanwhile, rents are moving in the opposite direction. According to Apartment List, the national median rent rose 0.1% year over year in October, the first annual increase in more than three years:

And what does 2027 look like?

​Goldman Sachs Research released its outlook for housing next year, and affordability remains the big story.

Compounding this is that higher mortgage rates are expected to have an effect on building, as borrowing costs increased:

So, while rents are up and inventory is up, which both point to more reasons to help people become homeowners and escape ever-rising rents into fixed rate mortgages, Goldman Sachs warns of a slowdown in building units.

How I can help your buyers

With rates moving around as much as they have lately, I think it's especially important that buyers understand their financing options and are prepared before they find a property.

I provide fast, thorough, fully underwritten pre-approvals, so buyers know where they stand and can make offers with confidence.

I also work through different financing strategies and rate scenarios with buyers, helping them understand how changes in rates affect their purchasing power and monthly payments. That way, they're prepared to act when the right property comes along, rather than scrambling to figure out their financing.

If you have buyers who are uncertain about what they can afford, concerned about rates, or simply need a stronger pre-approval to compete, I'd love to help.

I hope your week is off to a great start!

-Nicole

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Nicole Hamilton Bernheimer | NMLS #2354049

nicole@homeownering.com, 917-650-0167

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