A note on mortgage rates, the economy, and home values...

A client asked me some questions this morning, and I thought I would share my answers here as well.

1. Do you still expect rates to go down again? Everything I’m reading says they likely will not, but I have absolutely no knowledge of economics or bonds or anything related to them.

2. If anything else more chaotic happens and the whole economy tanks, will the value of our house, whatever we buy, go down? At which point, with little to no down payment, we would basically immediately go upside down?

My answers:

I do think rates will come down again, but I don’t expect a dramatic drop. It’ll likely be more of a slow-moving train. I’m hoping we return to where rates were in early April, which is about 0.375% better than where we are now.

The whole tariff situation really disrupted both the rates and the stock market, but I fully expect much of that to be walked back in the coming months—maybe even weeks. The bond market is already showing improvement this morning, which is a good sign.

That said, no one really knows what’s going to happen. Timing the market is nearly impossible—even the brightest minds are often stumped by recent moves. This one is especially tricky: if the economy weakens further and enters a recession, mortgage rates may actually improve. That’s because mortgage rates follow the bond market, which tends to be a “safe haven” for investors. If people pull their money out of stocks, they typically move it into bonds, which supports lower mortgage rates.

Also, if a recession hits, the Fed may accelerate rate cuts, which could further improve mortgage rates. Again, there are many moving parts, and timing any of this is extremely difficult.

As for home values, we don’t foresee a drop. There’s still a lot of pent-up demand in the market. Even if a recession does hit, I believe home values will continue to rise—though perhaps more slowly. Just like with the stock market, you only “lose” value if you sell. Many folks who held onto their homes through the last crash (myself included!) are in a great position now.