"How are rates, you ask?"

Conventional wisdom suggests that mortgage rates will remain above 6% throughout this year, based on the assumption that the 10-year Treasury yield will stay within the 3.6% to 4.9% range, which is historically a strong indicator for mortgage rate trends. However...given the recent market volatility, largely driven by shifting Federal Reserve policy expectations, inflationary pressures, and global economic uncertainty, the probability of larger swings in the 10-year yield is increasing.

Key Factors That Could Drive Bigger Moves in the 10-Year Yield:

?? Fed Rate Policy Uncertainty – While the market expects rate cuts in 2024, sticky inflation or stronger-than-expected economic data could delay or reduce the extent of those cuts, pushing yields higher.

?? Labor Market Resilience – A stronger job market might keep demand high, preventing mortgage rates from dropping significantly. Conversely, a weakening labor market could accelerate rate cuts and bring mortgage rates lower.

?? Global Economic & Geopolitical Risks – Tensions in global markets, bond demand from foreign investors, or unexpected financial instability could always cause sudden yield movements.

?? Federal Reserve Balance Sheet Adjustments – The pace at which the Fed reduces its balance sheet could impact long-term bond yields, influencing mortgage rates.

For Buyers & Investors: What This Means in Today’s Market

If the 10-year yield moves above 5%, mortgage rates could push towards 7%+ again, reducing affordability. On the other hand, if economic data weakens or the Fed pivots aggressively, we could see mortgage rates drop below 6%faster than expected.

Ultimately, the usual "it depends" response is going to make an appearance. Let's look at a few categories of buyer:

?? Long-Term Investors: Those taking a 5-10+ year outlook should focus on fundamentals, not short-term rates. Interest rates fluctuate, but real estate remains one of the strongest long-term wealth-building tools. Strong cash flow, solid location fundamentals, and sustainable demand should drive decision-making over short-term rate movements.

?? First-Time Homebuyers: If you’re in the market for your first home, focus on affordability and locking in a stable payment rather than timing the absolute lowest rate. Marry the house, date the rate—you can always refinance if rates drop in the future.

?? Move-Up & Luxury Buyers: With higher rates, inventory is still constrained, but price stability remains. This could be a good time to buy strategically if you’re planning a long-term hold.

?? Investors in Build-to-Rent & Multi-Unit: Higher borrowing costs will likely impact underwriting, but demand for rentals remains high due to affordability pressures. Investors should be calculating deal spreads carefully but recognizing that rents will continue to rise in most high-growth markets.

?? Vacation Home Buyers: With mortgage rates still elevated, second-home financing has become more expensive. However, opportunities absolutely exist in markets with softened demand, particularly in areas where pandemic-driven pricing has leveled out. If buying a vacation home, consider:? ? Short-term rental potential & regulations in the area? ? Seasonal demand fluctuations & carrying costs? ? Long-term appreciation vs. rental income strategy? ? All-in costs, including property management & maintenance ? How frequently you will utilize the space.

For those who can buy in cash or structure a favorable loan, this is looking like an opportunity to purchase in premium locations at less competition than in previous years.

All of that said, keep in mind there is no crystal ball and we are all simply following the market and interpreting the current state. This is simply my perspective based on broad market data as of February 4, 2025. The economic landscape is fluid, and the best investment decisions will always be data-driven, market-specific, and tailored to individual goals.

?? What’s your strategy in this market? Are you buying, holding, buying, waiting for a shift, or buying?