This week, the Federal Reserve voted to keep its benchmark interest rate unchanged at a target range of 3.50% to 3.75%. While many buyers and sellers were hoping for signs of lower borrowing costs ahead, the Fed’s decision suggests that interest rates may remain elevated as policymakers continue to watch inflation and the broader economy. Read the Federal Reserve’s official statement.
The Fed Does Not Directly Set Mortgage Rates
It is important to understand that the federal funds rate and mortgage rates are not the same. The Fed controls a short-term lending rate used between banks, while mortgage rates are influenced more directly by longer-term Treasury yields, inflation expectations and investor demand for mortgage-backed securities.
As a result, mortgage rates do not always decline when the Fed holds or lowers its benchmark rate. In fact, the average 30-year fixed mortgage rate increased to 6.66% this week, up from 6.58% the week before and the highest level in approximately one year, according to Freddie Mac.
Much of the recent pressure on mortgage rates has come from persistent inflation concerns and rising long-term Treasury yields. Until investors see clearer evidence that inflation is moving sustainably lower, mortgage rates may continue to fluctuate.
What This Means for South Bay Homebuyers
For buyers in Manhattan Beach, Hermosa Beach and the surrounding South Bay communities, waiting for a major drop in mortgage rates may not necessarily produce a better buying opportunity.
If rates eventually decline, more buyers who have been sitting on the sidelines could reenter the market. In neighborhoods with limited inventory—particularly the Manhattan Beach Sand Section—additional demand could quickly create more competition and put upward pressure on prices.
Qualified buyers may want to focus less on perfectly timing the market and more on finding the right property at a price and monthly payment that work for them. Depending on the loan and lender, buyers may also have the opportunity to refinance later if rates improve.
At the higher end of the South Bay market, financing strategies can vary significantly. Jumbo loans, adjustable-rate mortgages, relationship pricing and other portfolio-lending options may offer more competitive terms than the national averages suggest. This is why it is especially important to speak with a knowledgeable lender before beginning or pausing a home search.
What This Means for Sellers
Mortgage rates continue to affect affordability, but well-positioned South Bay properties can still attract serious buyers. This is particularly true for homes with a desirable location, strong presentation and features that are difficult to replicate.
For sellers, accurate pricing is increasingly important. Buyers are carefully evaluating both the purchase price and the cost of financing, so properties priced appropriately from the beginning are better positioned to generate interest and create competition.
Our Perspective
The Fed’s decision reinforces that mortgage rates are unlikely to move in a perfectly predictable direction. Upcoming inflation reports, employment data and movements in the bond market will all help determine where rates go next.
In the Sand Section, we continue to see the importance of looking beyond national headlines. Inventory, location, lot value, walkability, views and access to off-market opportunities can have a greater impact on an individual purchase or sale than a small week-to-week change in mortgage rates.
Whether you are considering buying, selling or simply want to understand how the current rate environment affects your plans, we would be happy to provide a more specific look at the market and your options.
Pratt Beach Properties
Manhattan Beach Sand Section Experts
Over 50 Years of Combined South Bay Real Estate Experience
prattbeachproperties.com
