Look, I want to walk you through what Zillow Research is telling us about where mortgage rates are heading, because it matters a lot for anyone thinking about buying or selling in our market right now.
According to Zillow Research, geopolitical tensions in the Middle East have brought inflation concerns back to the surface, which is pushing the 10-year Treasury yield back up to levels we haven't seen since May. This is driving the 30-year mortgage rate to its highest point in nearly a year. The research team at Zillow is forecasting that rates will ease gradually over time, but they're expecting them to settle around 6.4% by the end of 2026.
Here's what makes this tricky for homebuyers. Yes, mortgage rates are still lower than they were a year ago, which has been helpful. But if rates do hit that 6.4% level by the end of next year, that would actually be slightly higher than what buyers were seeing in the fall and winter of 2025. That means any comparisons you're trying to make to historical sales and inventory from a year ago won't look as favorable anymore.
The pinch is getting felt in household budgets too. When gas prices climb, it eats away at what families have available to save for a down payment. It also makes people hesitant to take on the long-term commitment of buying a home. Now, this affects different buyers differently. Luxury home buyers aren't as squeezed by rising gas prices, and their growing investment portfolios often cushion the blow from higher household costs. Meanwhile, according to the research, the starter home market in June showed inventory building up even though first-time buyers actually had more negotiating power and less competition.
What I am seeing locally in the Bay Area and East Bay is that these national trends are playing out right in front of us. The pressure on affordability is real, especially for buyers trying to get into their first home when rates stay elevated and gas prices cut into their savings. If you're thinking about your real estate moves, now is a good time to talk honestly about what rates might do to your monthly payment and your overall comfort level.
