Why I Don't Think Mortgage Rates Are Coming Down Anytime Soon (And What It Means for East Bay Buyers and Sellers)

I get asked this question almost every week, usually by a seller who's hoping rates drop before they list, or a buyer who's waiting on the sidelines for relief. My honest answer right now is: I don't see it happening soon, and here's the thinking behind that.

It Starts With the Bond Market, Not the Fed

A lot of people assume mortgage rates move whenever the Federal Reserve makes an announcement. That's only partly true. Mortgage rates actually track the 10-year Treasury yield much more closely than the Fed's overnight rate. And right now, that yield is elevated for reasons that go well beyond domestic monetary policy.

The ongoing instability tied to Iran, and the broader pressure it's putting on global oil supply, is keeping inflation expectations higher than they'd otherwise be. When roughly a quarter of the world feels the ripple effects of disrupted energy production, that shows up in the cost to produce and ship almost everything. Inflation expectations like that don't ease just because of a single headline. They ease when there's real, sustained stability.

Why a "Deal" Isn't the Same as Resolution

There was reportedly a framework on the table, peace talks paired with a substantial infrastructure investment, but agreements like that have fallen apart before, sometimes over a single weekend. That kind of fragility matters to bond markets. Investors aren't just pricing in today's headlines, they're pricing in the odds that today's progress unravels next month.

And there's another layer most coverage misses: Israel's own strategic position is a separate variable from US-Iran diplomacy. The tension with Lebanon hasn't resolved either. So even in a scenario where the US and Iran reach something resembling an agreement, the broader region doesn't automatically stabilize. Global investors weighing whether to buy US Treasury bonds are looking at that full picture, not just one negotiation.

Until that risk premium comes down in a durable way, I don't see the demand for 10-year Treasuries increasing enough to meaningfully pull yields, and therefore mortgage rates, lower.

The Domestic Wildcard

Layer on top of that the uncertainty around current administration policy here at home, and you've got a bond market that's being asked to price in a lot of moving pieces at once. If inflation stays elevated long enough, the Fed may not just hold steady, they could be forced to raise the benchmark rate again. That would push mortgage rates higher, not lower.

My view: rates stay sticky unless we see genuine, lasting de-escalation in the Middle East. A short-term headline won't do it. We'd need the underlying tension to actually resolve, and I don't think that happens in the next several months.

What This Actually Looks Like on the Ground in the East Bay

Here's where it gets interesting for those of us working in Walnut Creek and the surrounding East Bay markets. Higher rates haven't crushed demand here the way some predicted, but they have changed its shape.

We're still seeing multiple offers in certain cities and specific neighborhood pockets, often where buyers are flush with liquidity from local tech and AI company growth. At the same time, there are other East Bay cities where comparable properties are sitting on the market far longer than they used to. Same rate environment, completely different outcomes, depending on the socioeconomic profile of the buyer pool. A buyer putting fifty percent down behaves very differently than one stretching for an eighty or ninety percent loan.

That bifurcation is the real story of this market right now. It's not "the East Bay is hot" or "the East Bay is cold." It's both, depending on the zip code, and sometimes depending on the block.

How We're Positioning Sellers in This Environment

Given all of that, our strategy hasn't changed even though the market has. Two things matter more than ever:

Aggressive, realistic pricing. In a market where buyers have more options and are pickier about what they'll pay for, overpricing just means sitting. Pricing a home to reflect today's rate environment, not last year's, is what generates real activity.

The property has to shine. When buyers can afford to be selective, the home needs to earn the offer. That means the photography, the video, the copywriting, and the overall presentation all have to work together to make a property feel like the obvious choice, not just another listing competing on price.

Bottom Line

Until there's real, lasting stability overseas, I expect mortgage rates to stay elevated, and possibly move higher if inflation doesn't ease. That doesn't mean the East Bay market stalls. It means the market gets more selective, more localized, and more dependent on how well a property and its presentation actually perform.

If you're thinking about buying or selling in this environment, let's talk strategy specific to your neighborhood. The right approach right now isn't one-size-fits-all.

Parm Rahi is Broker/Owner of Allure Real Estate, serving Walnut Creek and the greater East Bay.