Mortgage Rates Keep Moving: What Northern Illinois Homebuyers Need to Know
If keeping up with mortgage rates lately feels like watching a moving target, Sheila Wade and Aubra Palermo would probably agree with you.
“Every day we hear rates are up, then later that day we hear rates are down.”
That was part of the conversation Sheila and Aubra recently had on The Listed Podcast, and it is something buyers across Freeport, Rockford and Northern Illinois are hearing constantly right now.
Rates move. Predictions change. The Federal Reserve makes an announcement, markets react, and then sometimes mortgage rates do something completely different than buyers expected.
Now, there could be even less of a roadmap for where interest rates are headed next.
The Fed May Be Giving Markets Less of a Heads-Up
A recent Realtor.com article, “Why the Fed Refuses To Give Homebuyers a Road Map for Interest Rates,” looked at comments from Federal Reserve Governor Christopher Waller about pulling back on what is known as “forward guidance.”
In simple terms, the Federal Reserve may become less willing to tell markets ahead of time where it believes interest rate policy is headed.
Waller’s argument is that while forward guidance can be useful, it can also cause financial markets to react before the Fed actually makes a decision. If economic conditions change after that guidance is given, it can make things even more complicated for policymakers. Fed Chair Kevin Warsh has also favored a less guidance-heavy approach.
For homebuyers, that could mean even more uncertainty when it comes to trying to predict where mortgage rates will go next.
And that is something Sheila and Aubra have already watched play out.
“For quite some time the Federal Reserve will say they are lowering interest rates and then we’ll see the banks actually raise their rates.”
From a buyer’s perspective, that can be confusing. If the Fed is talking about lowering rates, shouldn’t mortgage rates come down too?
Not necessarily.
Mortgage Rates Don’t Move Directly With the Fed
The Federal Reserve does not directly set the interest rate on a 30-year mortgage.
Mortgage rates are influenced by a much broader mix of factors, including inflation, Treasury yields, economic conditions and what investors believe the Federal Reserve is likely to do in the future.
That means mortgage rates can begin moving before the Fed ever makes an announcement. They can also move in a different direction from the federal funds rate.
The numbers this year are a good example.
When the Realtor.com article was published on July 6, the 30-year fixed mortgage rate was 6.43%, compared with 5.98% at the end of February.
As of September 3, Freddie Mac reported the national weekly average for a 30-year fixed-rate mortgage at 6.71%. The previous week, it had been 6.66%.
That is a lot of movement in a relatively short period of time, and it is exactly why trying to predict the perfect week or month to buy can become frustrating very quickly.
Realtor.com’s senior economist Jake Krimmel made a similar point, advising homebuyers to focus more on their own financial position, improving their credit when possible and comparing lenders rather than trying to perfectly time the Federal Reserve.
That is also where Sheila and Aubra believe the conversation needs to come back to the individual buyer.
What Does This Mean for Northern Illinois Homebuyers?
Mortgage rates matter. There is no getting around that.
Your rate affects your monthly payment, your buying power and ultimately the price range that may make sense for you.
But your rate is still only one piece of buying a home.
If you are looking for a home in Freeport, Rockford, Stephenson County, Winnebago County or elsewhere in Northern Illinois, you also need to look at what is happening in the market where you actually want to buy.
What inventory is available in your price range? How much competition are those homes receiving? What are comparable properties actually selling for? And have you found a home that checks the boxes you have been waiting for?
Those are questions a national interest rate headline cannot answer.
A buyer searching in Freeport can be dealing with a very different market than someone looking in Rockford. Stephenson County can look different from Winnebago County, and even within the same community, inventory and competition can change significantly from one price range to another.
That local context is a big part of why Sheila and Aubra continue to caution buyers against making their entire real estate decision based on where someone predicts mortgage rates will be three or six months from now.
If rates come down, that could certainly help your monthly payment. It could also bring more buyers back into the market and create additional competition.
If rates stay where they are, the right home could still become available at a price and payment that work for you.
There are simply too many moving pieces to reduce the decision to one number.
The better conversation is about what you can comfortably afford, what financing options are available to you and what is actually happening in the Northern Illinois housing market when you are ready to make a move.
Because if there is one thing we can probably count on right now, it is that mortgage rates are going to keep giving Sheila and Aubra something to talk about.
Hear More on The Listed Podcast
Sheila Wade and Aubra Palermo discuss mortgage rates, Federal Reserve policy and more of the latest real estate headlines on The Listed Podcast, while bringing those national stories back to what buyers and sellers are actually experiencing here in Northern Illinois.
You can also read the Realtor.com article that sparked this part of the conversation:
Read “Why the Fed Refuses To Give Homebuyers a Road Map for Interest Rates” on Realtor.com
Thinking about buying or selling a home in Freeport, Rockford, Stephenson County, Winnebago County, Ogle County or the surrounding Northern Illinois area? The RE/MAX Unites Golden Girlz Team can help you understand what today’s market looks like for your specific move.
National headlines give us something to talk about. What is happening in your market is what helps us make a plan.