Look, what happened with the Treasury market this past week is worth paying attention to if you're thinking about a mortgage. According to Zillow Research, the 30-year Treasury yield climbed to levels we hadn't seen in nearly two decades, though it pulled back some after the Treasury Department announced they'd be buying back more government bonds. The short version is that mortgage rates got a little relief from that announcement, but don't get too excited.
Here's what I tell my clients when they ask me about rate movements. The Treasury buyback announcement pushed yields down mechanically, sure, but the real forces driving rates higher are still very much in play. We're talking about the government's budget situation, what's happening with energy prices worldwide, and all the companies taking on debt to fund their artificial intelligence investments. These structural issues aren't going away anytime soon, which means there's probably a floor under how low rates will actually go.
Zillow is forecasting that mortgage rates will drift down as we move through the rest of the year, but we're only talking about modest declines. They're expecting rates to settle around 6.5% by the end of the year at best. What that means for homebuyers is important. If you were shopping in the fall or winter of last year, you probably had better buying power than you do right now. People who put off their home search are looking at higher monthly payments on similar properties today.
The bigger picture here is that the affordability situation is a real headwind for the market. Zillow is predicting that the second half of the year could see weaker sales activity overall, with some regions potentially seeing flat or even declining transaction volumes. This is a good reminder to folks that trying to time the housing market is nearly impossible, because rates can move in different directions and what looks like a bad time to buy today could look better or worse next month.
What I am seeing locally here in the Bay Area and out in the East Bay and Fremont is that clients are getting more serious about their timelines because they understand rates probably aren't going to drop dramatically anytime soon. The window for locking in a rate might not stay open indefinitely, and that's pushing some fence-sitters to make decisions sooner rather than later.
