Today’s mortgage rates are top-of-mind for many homebuyers right now. As a result, if you’re thinking about buying for the first time or selling your current house to move into a home that better fits your needs, you may be asking yourself these two questions: 

1. Why Are Mortgage Rates So High?
2. When Will Rates Go Back Down?

Here’s context you need to help answer those questions.

1. Why Are Mortgage Rates So High? 

The 30-year fixed-rate mortgage is largely influenced by the supply and demand for mortgage-backed securities (MBS). According to Investopedia: 

“Mortgage-backed securities (MBS) are investment products similar to bonds. Each MBS consists of a bundle of home loans and other real estate debt bought from the banks that issued them . . . The investor who buys a mortgage-backed security is essentially lending money to home buyers.”

Demand for MBS helps determine the spread between the 10-Year Treasury Yield and the 30-year fixed mortgage rate. Historically, the average spread between the two is 1.72 (see chart below):

Last Friday morning, the mortgage rate was 6.85%. That means the spread was 3.2%, which is almost 1.5% over the norm. If the spread was at its historical average, mortgage rates would be 5.37% (3.65% 10-Year Treasury Yield + 1.72 spread).

This large spread is very unusual. As George Ratiu, Chief Economist at Keeping Current Matters (KCM), explains:

“The only times the spread approached or exceeded 300 basis points were during periods of high inflation or economic volatility, like those seen in the early 1980s or the Great Financial Crisis of 2008-09."

The graph below uses historical data to help illustrate this point by showing the few times the spread has increased to 300 basis points or more:

The graph shows how the spread has come down after each peak. The good news is, that means there’s room for mortgage rates to improve today.

So, what’s causing the larger spread and making mortgage rates so high today?

The demand for MBS is heavily influenced by the risks associated with investing in them. Today, that risk is impacted by broader market conditions like inflation and fear of a potential recession, the Fed’s interest rate hikes to try to bring down inflation, headlines that create unnecessarily negative narratives about home prices, and more.

Simply put: when there’s less risk, demand for MBS is high, so mortgage rates will be lower. On the other hand, if there’s more risk with MBS, demand for MBS will be low, and we’ll see higher mortgage rates as a result. Currently, demand for MBS is low, so mortgage rates are high.

2. When Will Rates Go Back Down?

Odeta Kushi, Deputy Chief Economist at First American, answers that question in a recent blog:

“It’s reasonable to assume that the spread and, therefore, mortgage rates will retreat in the second half of the year if the Fed takes its foot off the monetary tightening pedal and provides investors with more certainty. However, it’s unlikely that the spread will return to its historical average of 170 basis points, as some risks are here to stay.”

Bottom Line

The spread will shrink when the fear investors feel is eased. That’ll mean we should see mortgage rates moderate as the year goes on. However, when it comes to forecasting mortgage rates, no one can know for sure exactly what will happen.

Exploring San Antonio, TX Real Estate: Understanding the Mortgage Rate Landscape with Grell Realty Group and The Grell Team

San Antonio, Texas, with its vibrant culture, booming economy, and diverse real estate market, presents an enticing landscape for potential homebuyers and real estate investors. However, it is essential to understand the factors influencing the mortgage rates in San Antonio. In this comprehensive blog post, we will delve into the San Antonio real estate market, the reasons behind the high mortgage rates, and how partnering with Grell Realty Group and The Grell Team can help you navigate this dynamic market successfully. 

1. San Antonio, TX: An Attractive Real Estate Market:
San Antonio is a city brimming with opportunities. Its strong job market, flourishing economy, and a rich blend of history and modernity make it an ideal place to call home. From bustling urban neighborhoods to tranquil suburban communities, San Antonio offers a diverse range of real estate options to cater to different preferences and budgets. Whether you're looking for a family-friendly suburb, a trendy downtown loft, or a spacious ranch property, San Antonio has something for everyone.

2. Factors Influencing Mortgage Rates in San Antonio:
Understanding the mortgage rate landscape is crucial for potential homebuyers and investors. Several factors contribute to the high mortgage rates in San Antonio, including:

a. National Economic Conditions: Mortgage rates are influenced by broader economic factors, such as inflation rates, employment figures, and the overall health of the national economy. When these factors fluctuate, it can impact mortgage rates in San Antonio.

b. Local Housing Demand: The high demand for housing in San Antonio, driven by population growth and a thriving job market, can lead to increased competition among buyers. This heightened demand can contribute to higher mortgage rates as lenders adjust to the market dynamics.

c. Mortgage Market Trends: Mortgage rates are also influenced by market trends, including changes in the Federal Reserve's monetary policy, bond yields, and investor sentiment. These factors can cause mortgage rates to fluctuate both nationally and locally.

3. Grell Realty Group and The Grell Team: Your Trusted San Antonio Realtors:
Navigating the San Antonio real estate market can be complex, especially when it comes to mortgage rates. That's where Grell Realty Group and The Grell Team come in. With their extensive knowledge of the local market, they are well-equipped to guide you through the mortgage rate landscape and help you make informed decisions.

4. Expert Guidance and Market Insights:
Grell Realty Group and The Grell Team have a deep understanding of San Antonio's real estate market trends, including mortgage rate fluctuations. By partnering with them, you gain access to their expert guidance, market insights, and comprehensive analysis. They will keep you informed about the current mortgage rate environment and provide strategies to maximize your investment potential.

5. Tailored Solutions for Homebuyers and Investors:
Whether you're a first-time homebuyer or an experienced investor, Grell Realty Group and The Grell Team offer personalized solutions to meet your specific needs. They will work closely with you to understand your financial goals, budget constraints, and long-term plans. With their extensive network of lenders, they can connect you with professionals who can assist you in securing competitive mortgage rates that align with your financial objectives.

6. The Importance of SEO and Google Keywords:
To ensure this valuable information reaches a wider audience, implementing SEO (Search Engine Optimization) strategies is essential. By incorporating relevant Google keywords throughout the blog post, such as "San Antonio real estate," "high mortgage rates," and "Grell Realty Group," it increases the likelihood of the content being discovered by those seeking information on these topics.

Conclusion:
San Antonio, Texas, with its thriving real estate market, presents a wealth of opportunities for homebuyers and investors alike. While high mortgage rates may pose challenges, partnering with Grell Realty Group and The Grell Team empowers you with the knowledge and expertise needed to navigate this dynamic landscape successfully. With their guidance, you can unlock the potential of the San Antonio real estate market and make informed decisions to achieve your homeownership or investment goals.