10/05/2026
Market Update
Mortgage rates are rising. Mortgage rates generally follow the 10-year Treasury, which rose 0.82 points during the quarter to 5.28%. That cuts buyers' purchasing power and makes buying a house out of reach for some.
More rate increases are possible. The Fed raised its benchmark rate to 3.75%–4.00% in September and expects at least one more increase this year. Buyers who wait for rates to fall may be waiting a while. Locking a rate when you're ready may be wiser than trying to time it.
I just closed a sale with a buyer who locked in under 7% and rates climbed to over 7% while she was in escrow. Be sure your lock has an option to extend if needed!
Right now, many household budgets are under strain. Gasoline rose 15% to $4.41 a gallon and diesel rose 32% to $6.39, and inflation is still above the Fed's 2% target. Home buyers should leave room in their budgets for higher living costs. In Hawaii, higher fuel and shipping costs tend to show up in everyday prices.
The good news is your down payment funds may have grown. The S&P 500 is up 12.7% year-to-date, so buyers drawing on stock holdings may have more cash than expected.
Real estate investors face a higher bar. Treasuries now yield about 5.3%, the most in over 24 years, with essentially no risk. A rental property needs a cap rate and cash flow that clearly beat that return to justify the effort and risk. But with less investors in the market - it's a better time for those looking to purchase a home to live in.
Job security is mixed. Unemployment is low at 4.2%, but hiring and wage growth have slowed, to 51,000 jobs a month and 3.1% wage growth. Buyers counting on a raise or a job change to qualify should be cautious.
The bottom line: I always say that as soon as your are able, you should buy a home to live in rather than pay rent, why not build equity. Right now there are less buyers looking - so sellers are more negotiable than ever. Yes, interest rates are higher, but it is better to buy now if they are expected to go up again. And, homeowners can always re-finance if and when rates drop again. If you are in a financial position to buy a home, let's look at what is out there for you as an option.
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